Salaries are determined by a number of factors. In most companies, pay is influenced by both external and internal comparisons.
Q: Despite having a good salary, I believe I’m not being fairly compensated. Seven years ago, I was hired as a staff accountant making $35,000 per year. Five years later, after several promotions, I was named chief financial officer. My salary is now $120,000.
Although this is obviously a significant increase, I still make less than the other members of our leadership team. I believe this disparity exists because I reached my position in such a short time, while those executives have been here for decades.
In my opinion, pay should not be based on tenure, but on the person’s value to the company. My role is just as important as my colleagues’, so I’m not being paid what I’m worth. Nevertheless, our CEO seems to feel I should be satisfied with my current salary. What do you think?
A: Before addressing your question, we need a quick review of Compensation 101. Although this is hardly a captivating topic, it is one which employees need to understand, because all salaries are determined by a number of factors.
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In most companies, pay is influenced by both external and internal comparisons. To attract and retain desirable employees, salaries must be competitive with those of other businesses. Internally, pay must also be fairly distributed across a wide variety of jobs, considering factors like complexity of work and level of responsibility.
Based on external and internal data, management creates a hierarchy of pay scales which establish the minimum and maximum salary for every position. Each job is placed at the appropriate level in this hierarchy. Within the established ranges, individual salaries are determined by both experience and performance.
As you have correctly assumed, the pay differential in your situation is probably created by length of service. While level of responsibility puts you and your peers in the same salary range, their greater experience places them at a higher point in that range.
Given your rapid rise, your abilities are obviously highly valued. With a better understanding of the pay system, perhaps you can put aside these resentments and appreciate your rather amazing success.
Submit questions to Marie G. McIntyre at yourofficecoach.com.