Why It Doesn't Matter That Your Coworker Makes More Money Than You Do

Last Updated Sep 16, 2011 5:42 AM EDT

Dear Evil HR Lady,

I have worked for my employer for 6 years, have a relevant industry degree, 18 years industry experience and work remotely only seeing my boss three times a year. We have just had salary reviews. My colleague told me that she is earning more money than me $1000 a year, I didn't ask for this she just told me and I really wish she hadn't as it is now eating me up! My colleague has worked for the organization for 3 years, no relevant qualification, no industry experience and we do exactly the same job just in difference locations. I need to email my boss about this as he is too hard to talk to on the phone and I need to give feedback in the next couple of days. Can you help me find the right words to use to get across how hurt and angry I am about this without dropping my colleague in it.

First take a deep breath. Second, do some math. $1000 more in salary sounds like a lot of money and it sounds like it's patently unfair. However, $1000 more per year isn't even $20 extra per week. After you take out taxes, it is even less.

Not that you should turn down $1000. Heck, if someone offered me $1000 right now I wouldn't say no. (Provided, of course, they didn't want me to do any work for it, of course. I have my limits.) But my point is, $1000 difference in salary between two people doing the same job is not only not a big deal, it's completely normal.

Now, it's always nice to be on the high side of normal salary discrepancies. I totally agree with that. No one wants to think their boss values a coworker more than they are valued, but the reality is, unless you work in a union environment or have a strict salary structure with automatic increases based on length of service or passing a test or something, salaries will vary. If your coworker doesn't work remotely, she may be being rewarded for face time as well (probably subconsciously).

Most companies use salary grades when they assign salaries to certain jobs. First the manager and HR work together to write a job description (and if you need to do this, Compensation Cafe has a fabulous post about how to write job descriptions). Then HR will take and look at the description and compare it to other jobs within the company as well as jobs outside the company. This is called benchmarking. They then say, "this job is a grade 7. Therefore, the midpoint for the salary is $60,000 per year." The manager can then decide what salary to offer a candidate, but it must be around $60,000. It's much easier to get a salary approved for below that than it is to get one approved for more than that. If your salary is right at the midpoint ($60,000) we say you have a compa-ratio of 100 percent It's not at all uncommon to have someone with an 80, or 90 percent compa-ratio, and managers tend to freak out when someone hits 105 percent.

Now that we're done with that super boring explanation (and you're all thoroughly relieved that you don't work in compensation), here's how it works in real life. You've been with the company for a while. During that time period, the midpoint for the job has been adjusted (usually upwards) due to changes in the market. (Although, it wouldn't surprise me one bit if in this crappy job market, companies have moved their midpoints lower.) If the midpoint moved up 2 percent, but you got a 1.5 percent increase, you'll move away from the midpoint.

Additionally, companies often have rules about the maximum percent increase you can receive, even with a promotion. So if you are making an even $60,000 per year as a grade 7 and you get a promotion to a grade 9 job, where the salary midpoint is $70,000 per year, you might think you'll automatically get a $10,000 salary increase. Instead, your company may have a policy prohibiting any increase greater than 10 percent (unless you're best buds with the Sr. VP, but we won't go there), meaning that the maximum increase you can receive is $6,000. But, at the same moment, they can hire someone from the outside, who has less experience than you do and hand her $70,000 even and not even bat an eyelash.

Furthermore, this happens all.the.time. And while this seems unfair (and it is, definitely unfair if you like things to be equal) it makes sense. Why? Because it takes less effort to retain an employee than it does to get a new one. You've been there 18 years. Nobody is worried about you quitting.

I realize that seems completely irrational right now as there are people out there begging for jobs who would love to come on board for less than midpoint, no problem. But, companies prefer to hire those who are already employed and taking a new job is a risk and they feel they must compensate for that risk. Likewise, in order for you to leave, you actually have to do the work to find a new job, and as we can all attest, job hunting is extremely unpleasant. Most people don't do it just for fun-they hate it with a burning passion. Therefore, your boss can pay you less than he can a new hire because the cost to you of leaving is high.

Sometimes, of course, bosses underestimate how unhappy their employees are, and how whacked out their compensation structures are. They also strongly prefer to keep salaries secret, which I hate, but it's the reality we must deal with.

You're upset because someone who you feel is less qualified makes more money than you. (Whether she is less qualified or not, is not strictly based on degrees and years of experience.) This is understandable. However, don't complain because it won't do you any good and could do you some harm. Instead work on building a relationship with your boss and ask him what you need to do to get an increase. Leave your coworker's salary out of the equation.

For further reading:
Have a workplace dilemma? Send your question to EvilHRLady@gmail.com.
Photo by masochismtango, Flickr cc 2.0

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