Do you know how your salary compares to your peers?
In the age of hyper-capitalism and mass consumerism, salary has become the indicator of our status, success and even happiness. While the popular saying goes, “money can't buy you happiness”, research suggests that up to a certain income bracket, money actually does have an effect on one’s happiness and emotional well-being.
It has also been found out that relative income is a stronger factor of happiness than actual income, meaning that people who think they have more money compared to others are happier with what they actually have.
Your salary determines your ability to afford the necessities and luxury of life. While having a higher income doesn’t buy you meaningful relationships, it at least ensures that you do not need to stress about money issues or dealing with daily expenses and allows you to plan your life and career ahead.
1. why do we compare salaries?
People compare salaries because it helps them know the suitable compensation they should be receiving based on their specialty, experiences, skills, industry and location. Comparing salary will enable us to assess our career choices and to reasonably mediate our employment contracts.
Our recent 2022 Workmonitor Survey report found that respondents ranked attractive salary and benefits as the most important driver for career and work choices, and are key factors that affect a candidate's decision to accept or reject a job. With this being said, managing employees' salary expectations is crucial for companies in retaining and attracting the best talent.
The “Social Comparison Theory” developed by psychologist Leon Festinger in 1954 found that people who regularly compare themselves to others may find motivation to improve, but they may also experience feelings of dissatisfaction and frustration.
Despite the negative feelings, many of us still instinctively compare ourselves to our peers. This reflexive behaviour is driven by our innate desire to gain an accurate self-evaluation. Which is why we often compare our material wealth and salaries with our peers - either consciously or subconsciously.
Definitely, constantly talking to your peers for comparison is very tiring and some people would rather not inquire about others’ salaries to save themselves the mental hassle or simply because they don’t want to share how much they are earning with someone else. While this is true, not knowing what others are earning may result in you losing out during salary negotiations because you are unaware of the market rate for your specific role.
The practical benefit of comparing salaries and finding out the salary range within the job market rate will give you a benchmark of how much you should be getting paid. Thus, you will be better informed for your salary negotiation and get paid your worth.
2. why you should talk about your salary
Wanting to learn more about salary benchmarks is very important and natural — after all, nobody wants to be undercompensated for their hard work. As a socially active generation in the information age, we will always want to find out what average salary or median salary the market average is for someone else who has similar skill sets, work responsibilities and experience.
There is nothing wrong in discussing salaries with your peers. Comparing salary is okay and acceptable nowadays. Being able to know your colleagues' salaries compared to yours will allow you to understand your value to your company. This is regardless if you want to ask for a pay raise or it is time to find other job opportunities.
6 practical advantages of comparing salaries with peers:
1. allows you to know your market value
2. gives you a benchmark on how much you should be getting
3. helps your colleagues know they worth
4. gives you confidence to negotiate for a higher pay
5. motivates you to achieve the same salary range as your peers
6. ensures that you earn what you deserve
While these are actual benefits of discussing your compensation or salary with others, don’t get too hung up on the number. Sometimes, they can be extreme and you might just want to take the information as a grain of salt. Although using your peers for comparison may be one of the easiest and convenient ways to get information, it may not always be a good indication or basis for comparison. You need to understand that what you do in your role may be vastly different from those with the same job title but are working in a different organisation.
For example, a relationship manager at a retail bank versus another who works at a corporate bank may have different salaries because of their work responsibilities. The same goes for a marketing manager who works in an agency versus another who works in-house. The differences in the salary take into account the different skills and expertise required for the job, such as stakeholder management, network, resource planning and scale of remit.
If possible, women should also discuss with their male acquaintances about their salary to uncover any underlying gender pay gap issues in the organisation. Doing everything you can to ensure that you are rewarded fairly in your role regardless of gender doesn’t only give you a deeper understanding about your career prospects. This also informs your employer that you are knowledgeable and diligent enough to do your own research and to likely prevent any wage discrimination or gender pay differential. Hence, it is also fairly important for women to stay informed of what they can do to close the gender pay gap.
3. why are salaries kept confidential and why is it taboo to talk about it?
At this point, it seems to be an open secret that everyone is discussing their individual salaries with those around them and even with strangers online. Yet, salaries are usually kept confidential as many still feel that it is taboo to talk about salaries.
For most of us, we choose not to disclose our salaries to our friends or family because we want to maintain a level of secrecy about our financial health. Many people believe that salaries could often be perceived as disposable wealth, and may lead to others thinking you have excess money to loan, invest or spend — which you may not be prepared to do.
There are also reasons why employers keep salary data confidential. Every company has their own compensation plan for pay, promotions and raise. Rather than give a fixed wage for everyone in the same position, most companies usually have a salary grade range that they use to determine how much an employee should be paid. For example, employees of the same title can be earning varying salaries based on a number of factors such as experience, competency or growth potential.
There is also some sad truth that oftentimes companies keep the salary information as confidential as possible because some employees are either underpaid or overpaid.
Disclosing the salary differences may result in those who are earning less than their counterparts to be unhappy and feel unfairly compensated, making it harder for companies to retain and attract talent. From the company’s point of view, being transparent about salaries is like opening a can of worms.
While salary transparency creates a level playing field for employees in general, it somehow also pits workers against each other and causes comparison trap for some. Staff who are drawing a lower salary than a colleague in the same position are more likely to push away new tasks or projects, call out other people’s mistakes and sabotage each other’s careers, creating a toxic work culture and environment.
4. is it illegal to discuss salary with co-workers?
Although discussing salaries with co-workers and peers is often regarded as a social taboo, doing so is not illegal and employers cannot take legal action against you.
In fact, discussing salary or having a salary transparency allows you to hold your company accountable for fair pay practices. It ensures that you and your peers are getting paid what you’re worth.
In the past, companies inserted clauses in employee contracts to prevent them from discussing salaries. However, this is not the case anymore as many countries have instituted labour laws or trade unions to protect employee rights.
In any case, be careful of who you are discussing salaries with. Even though you might be open to sharing and comparing, others might find it too intrusive or rude, which might end up souring your friendships and relationships.
5. how and where can I compare salaries?
Here are the best way you can compare your salaries:
- do research using Google and LinkedIn
- use salary information websites (eg., Randstad Salary Calculator, Glassdoor)
- look at job postings
- engage with a specialised recruiter
- compare with your friends or colleagues
A general rule of thumb before applying for any role or negotiating salary with your boss is to do your own research about the role and the company. In today’s world of work, it has become common practice for job seekers to run a quick search on Google, Glassdoor and LinkedIn as their basis for comparison. Doing so helps us to find out more information about the role such as the job responsibilities, company benefits and remunerations offered by the company.
Similarly, if your company is hiring, you can also refer to job postings that are similar to yours to find out how much other employers are paying for good talent.
Definitely, if you have trusted friends who are in the same line of work as you, it is always beneficial to check with them to gain a deeper understanding about their salaries and work responsibilities. But if you don’t feel confident speaking to your friends about salaries, there are other ways for you to find out if you’re fairly paid.
One great way to obtain an independent and unbiased insight about salary benchmarks is by engaging a specialised and knowledgeable recruiters like Randstad.
Ideally, no one should be underpaid for the hard work they put in. Create an account with us to connect with our recruiters to find out whether you’re fairly paid in your role within your current company or if you need help getting a new job.
Alternatively, visit our latest job listings for career opportunities that best match your skills and experiences, and connect with our recruitment specialists to assist you get connected with the best employers in key industries.