4 Steps to Take If You Are Underpaid

by Kevin Mulligan

In my last article we talked about finding out what your skills and job are worth in the employment marketplace.

Some of you may have been unfortunately surprised to learn that you are underpaid by your employer. Or at least have a pretty good hunch that you are underpaid, depending on which methods you used to gather your salary information.

If that’s you, what do you do? Should you up and quit your job? Not likely — making a rash move in an uncertain economy is unwise.

What Should I Do If I am Underpaid?

Steps to take if you are underpaidBut you shouldn’t sit back either. Here are 4 different methods of dealing with the discovery that your employer hasn’t been paying you enough.

Consider Your Full Compensation Package

Before you walk into your boss’ office to throw a hastily put together resignation letter, take a deep breath.

Now that you’ve done that be sure to consider your full compensation package.

Here’s the deal: no two jobs are paid the same. If you find out that your friend’s co-worker doing the same job you do at another employer is making $15,000 more per year than you, you are probably incensed. But what you may not know is whether or not that employee gets the four weeks vacation you get, or if he spends $300 more per month on his benefits than you, or if he doesn’t get the 5% bonus deposited into his 401k account. In some cases that employee may not even be paid as a W2 employee — meaning they are being paid 1099 wages and having to pay a lot of that income in tax.

Try to gauge the full situation before doing anything hasty.

Consider Your Work Environment

Similar to comparing full compensation packages, also consider the work environment. What your friend may not be telling you is his buddy is well paid because the manager of that group is terrible to work for. Or maybe the entire company works in an ugly industry that has a hard time attracting quality employees.

Meanwhile your boss may know your entire family, you go to happy hour a lot, and get to wear shorts and flip flops around the office. Maybe you have the option to telecommute once a week, or whenever there is inclement weather.

Work environment is definitely a tangible benefit. It can be hard to put a number on it, but sometimes being happy while making less is better than being paid more to work at a job you hate.

Ask for a Raise

First, you can’t just walk into your supervisor’s office and ask for a raise. They’ll be caught off guard and probably a little irritated that you didn’t let them prepare for the conversation. You can imagine what that does for your chances of getting the raise.

Instead, take some time to do your salary research. Then make a list of your work achievements and value added to the company. Set a meeting with your boss to discuss not only how much of a raise you want (in fact, don’t lead with that), but what you’ve done and what goals you have moving forward to assisting the organization. Come at the conversation from a value standpoint rather than a pricing standpoint. Also understand that some organizations only give raises during certain times of they year. It can be beneficial to put the bug in your manager’s ear before the raise or promotion cycle starts, that way you have already let them know your value to the company.

Find a New Job

Unfortunately, sometimes talking to your boss won’t lead to you being paid a fair wage in the future. Maybe the company is on a salary freeze or your boss doesn’t like you. If you decide  is time to make a move, don’t do it halfhearted. The best time to find a new job is when you already have one. But you need to be careful about how you do it. Your work performance will visibly suffer when you have one foot out the door. (And yes, your boss and co-workers will notice you seem to be wearing more suits and taking “late lunches”.)

Final Thoughts

Finding out you are underpaid can be extremely frustrating. Verify your data first and consider other factors that might influence your salary. If you love your job but determine you need a raise, ask for one in the most professional manner possible. If that doesn’t work, it is time to hit the streets looking for your next career step.

Published or updated April 29, 2015.
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{ 7 comments… read them below or add one }

1 Debt Free Teen

I would ad that maybe you can negotiate working part time from home like Tim Ferris mentions in his book. Then continue to negotiate over several months until your work is mostly finished out of the office. This would give you flexibility to pursue side jobs, it might make you like your job more and at least you would be able to work on a flexible schedule.


2 Ryan Guina

Provided your company allows this. Telecommuting is becoming more common, but it still isn’t an option in many workplaces.


3 ImpulseSave

Very sound advice, especially about looking at the whole situation. Would it be possible to ask for an increase in certain benefits rather than a salary increase? This may be helpful if you are on the verge of entering a new tax bracket, for example. Would it be possible to ask for more vacation times or retirement contributions?


4 Ryan Guina

You can always ask for an increase in benefits instead of a pay raise. Not all companies are equipped to handle this, however, as many companies have fixed benefits plans. You may be able to negotiate other things you consider a benefit, such as telecommuting, flex hours, or something similar.

As for entering a new tax bracket, that should never be a reason to avoid a raise. We have a graduated marginal tax system. Basically, your first $8,700 is taxed at 10%, income from $8,700 – $35,350 is taxed at 15%, $35,350 – $85,650 is taxed at 25%, and so on (2012 marginal tax rates for an individual). So if a raise takes you into a new tax bracket, only the amount above that limit is taxed at a higher rate, not all of your income. You can learn more about how to calculate your effective tax rate.


5 Hank

You see a lot of this when people are also considering whether or not to get out of the military as well. They look at the pay only and not the total compensation package which includes healthcare and many other benefits. Great post!


6 Ryan Guina

I think a lot of military members underestimate the value of their benefits, especially the “essentially” free health care, and the tax free housing and food benefits. There really aren’t any equivalent benefits in the civilian sector.


7 Laura

What if I found out that my predecessor made $10 more an hour than I do? I do however get to work from home 1 day per week. I still am frustrated and think I should be making more money.


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