How to Know If You're Being Paid Enough?
Am I getting paid fairly? Are other people doing the same job earning more than me? These questions can keep you up at night, especially if you're unhappy with your current salary.
However, there's no specific formula that can pinpoint how much you should be earning. Every person's situation is different, and what might be fair pay for one person might not be enough for another. But you can do some things to know if you're earning a reasonable salary.
In this article, we'll look at some factors to consider when assessing whether your pay is fair. Plus, you'll learn how a salary is calculated and which tools can help you determine if you're getting what you deserve.
How is pay calculated?
First, it's essential to understand how pay is calculated. Typically, your salary is based on several factors, including your experience, skills, and qualifications. It can also vary depending on the company you work for and the location.
In the U.S., employers calculate net income by using the following parameters: taxable income, applicable taxes, and post-tax contributions. Taxable income is determined by subtracting pre-tax contributions to benefits from your salary.
After that, the employer withholds applicable local, state, and federal taxes. These taxes can include Social Security, Medicare, and income tax.
There are two types of payroll taxes: FUTA and FICA. The Federal Insurance Contributions Act or FICA includes Social Security and Medicare taxes. The employee contributes 6.2% of their wages to Social Security. For Medicare, the employee pays 1.45% of their wages.
Meanwhile, the Federal Unemployment Tax Act or FUTA is a payroll tax that funds unemployment benefits for workers who lose their jobs. Currently, the FUTA rate is 6% of the initial $7,000 every employee makes annually. However, employees don't have to contribute to this tax as it's only imposed on your employer.
Finally, post-tax contributions to benefits are subtracted from net income. Examples of standard post-tax deductions include retirement savings plans and health insurance premiums.
After all these withholdings have been accounted for, what is left is the employee's take-home pay.
Why is it important to determine if you're paid enough?
47% of U.S. employees say they are underpaid. That is nearly half of the workforce. Therefore, determining if you are being paid fairly is vital to your happiness and success in your career.
If you feel undervalued in your job, it can be hard to stay motivated. A Gallup poll showed that 51% of employees think they're not paid the right amount for their work.
Living with the knowledge that you're underpaid is discouraging. It can lead to all sorts of problems, like:
Disengagement at work
Lack of motivation
Resentment toward your employer
More importantly, it can cause internal stress and anxiety since you'll constantly be thinking about your finances. Workplace stress can lead to health problems, both physically and mentally.
It's essential to make sure you're being paid what you're worth to avoid these negative consequences.
Tools to "calculate" fair pay for the job
So, how can you tell if you are being paid fairly for the work you do? Fortunately, there are many tools to calculate the standard payment for your job type.
The benchmark salary refers to the 50th percentile of earners for a particular position. In other words, half of the people in that position make more money than the benchmark salary, and half make less.
A good starting point is to research the benchmark salary for your position. You can use salary calculators and search for salary surveys specific to your industry and geographic region to find this information.
Payscale is a website that allows users to find out how much they should be paid for the job they are doing. It has a database of over 50 million salaries. The website shows a salary range, average salary, and median salary for each job title.
Suppose you’re on the hunt for an accounting job and want to do research about average payment before going in for an interview. Payscale will show you the average hourly rate, annual compensation, median salary, highest earnings, and lowest average earnings for the position.
Payscale's salary calculator lets you see how your salary stacks up against other employees in your field. You simply have to enter your job title and location.
The calculator will show the average salary for other people in your location doing the same job as you. Then, you can compare your salary against other professionals to determine if you're getting fair compensation.
The Salary Project
The Salary Project has a database of more than 60,000 salaries, which means you're likely to find your job title in the mix. The calculator is specifically helpful for women as it shows you how much other women in your area, role, and industry are earning.
For instance, if you work as a medical coder, you can search for the medical coder's average salary in your area or industry. In addition, the tool will show you what other women are earning in medical coding positions.
Women need to compare their salaries with others in their industry since they may experience discrimination based on gender, leading them to be paid less than their male counterparts. Additionally, women of color often earn even less than white women, so it's crucial for them to be aware of salary disparities to negotiate higher pay.
Salary Wizard Tool
Salary Wizard is a wage calculator by salary.com that allows you to compare your current salary with other professionals' salaries in the database.
Besides compensation, you can also compare employee benefits, such as health insurance, average time off, and bonus amounts. It helps you determine whether you are being paid fairly and are getting the benefits other people in your role are getting.
The Salary Expert Salary Calculator compares your current salary against other salaries in your industry, region, and experience level to help you understand your worth.
If you're a job seeker, you can enter a job title and region to determine a competitive salary range for that position. You can also use the calculator to adjust your current salary to account for the cost of living differences in other cities.
Meanwhile, employers use Salary Expert to benchmark salaries for positions within their company or set compensation ranges for new hires. Since many companies use the tool, you can use it to showcase your research during salary negotiations.
Robert Half's Salary Guide
Robert Half's Salary Guide takes data from employees and employers to project starting salaries for more than 500 positions in eight major U.S. cities. The guide also includes detailed job descriptions, insider tips on negotiating the best salary, and market trends to help you stay ahead of the competition.
The guide projects salaries for positions in marketing, technology, accounting, customer support, human resources, healthcare, and finance.
Meanwhile, the salary guide is also supported by a salary calculator that lets you determine the salaries for over 500 job titles. The calculator's main benefit is that it provides you with a customized report based on your specific job title and location.
Simply enter your job title and city into the search bar to get started. The calculator will then display the average salary for that position in your area and the salaries for the 25th, 50th, and 75th percentile. When negotiating your salary, you can use this information to present your research to the employer.
Since many employers also use this salary guide and calculator, they will likely deem this research credible.
How else to find out if you are paid enough
Besides checking online sources, you can also use some other methods. These methods are ideal for workers in remote locations or those who have lesser-known jobs.
Ask your peers
The National Labor Relations Act protects the workforce's right to discuss their salaries. So, it's not illegal for you to talk to your peers about your salary.
Suppose you work as a project manager and there are five other managers in the same position as you. Compare your salary with them to see if you're being underpaid. You can initiate the conversation by asking your colleagues what they earn and whether they're happy with their salaries.
If you're not getting the same compensation as your peers, approach your boss and explain why you deserve a raise. Be prepared to back up your demand with evidence of how you are adding value in your role.
Women, in particular, should do this due to the presence of the gender wage gap. Most women already feel they're underpaid. Talking to coworkers will help confirm or deny this.
PayScale research shows that women from all ethnicities and backgrounds feel as if they're not paid enough compared to their white male counterparts. Therefore, it's important to discuss your salaries with your peers to determine if you're getting fair compensation.
Another way to check if you're being paid enough is to do self-comparisons. For instance, ask yourself if your responsibilities have increased recently without any raise in your salary?
If yes, you can be reasonably confident that you're being paid less than you deserve. Similarly, you could compare your employee benefits with those of other employees in your company or even with industry standards.
If you find that your benefits are lagging, it's a strong indication that you're not being paid what you're worth.
Of course, there are other signs that you may be underpaid, such as working long hours without overtime pay or feeling like you're stuck in a dead-end job with no room for growth.
If you suspect that you're not being fairly compensated, it's essential to address the issue with your employer. Having an open and honest conversation about your salary and benefits is the first step toward getting what you deserve.
For example, did a colleague mention a health benefit that you don't have? A Fractl survey shows that dental, vision, and health insurance are the most desired employee benefits. Some other highly desired benefits are tuition assistance, work-from-home opportunities, paid parental leave, and flexible working hours.
If you don’t have these benefits while a colleague who works the same job as you does, you need to speak up for yourself. Take the issue up with your manager or human resources to ensure fair treatment.
Check online data
Websites like Payscale, Salary Expert, and salary.com show salary ranges for thousands of jobs. They also show what top companies pay. If you work in one of these companies, but your salary is not even close to what the data shows, consider asking for a raise.
Let's say you're a digital marketer. Check online what other digital markers in your city are making. You can find such data on Payscale and similar websites.
The U.S. Bureau of Labor Statistics reports that real wages have gone down since last year. Inflation is at 7%, which means you need a 7% hike in your salary in order to feel like you have the same amount of money in your pocket.
The average wage hasn't changed significantly in the past decade. So, if you don't ensure you're fairly compensated, you'll be disadvantaged in a working landscape where living costs are constantly increasing.
Fair compensation is your right
Getting paid fairly for your roles and responsibilities is a right that you should feel confident asserting. You can use several tools, online data, self-comparisons, and coworker communication to determine if you're being paid enough.
If not, you should prepare to ask for a raise. Make sure you have concrete reasons to back up your request and have a negotiation strategy in place.
If you believe you're being undervalued at your current workplace, try searching for a new job on a comprehensive platform like Jobcase.