Are you paid less than you deserve?

Several factors are thought upon while deciding compensation for an employee. They include brand, experience, competence, supply- demand and the nature of industry

I have studied the same degree; I have more percentage; why am I paid less than others who are from so called premium institutes?”. This was the question from Divya, a meritorious student from a local college. “I have a higher qualification; why am I being paid less than those with lesser qualification and with a few years of experience?”. This was the question from Sameera, a bright postgraduate student.

“I have the same B.Tech qualification that others in IT industry people have. Why am I paid less in manufacturing industry?”. This was the question from Sharat, a decent student with a mechanical engineering qualification. “I have more experience in this organisation. But why am I being paid less than some of the recently joined people including freshers?”. This was the question from Prasad who has a BCom qualification and about eight years of experience.

Most Frequently Asked Question

Let us understand a few key aspects that organisations consider while working out a compensation package. These factors could help us at least understand why one is paid less, if not bring about any equality or parity in compensation.

Determinant Factors for Compensation

A variety of factors influence the way organisations decide on the compensation. At a given time, several factors could be playing together while sometimes it could be a simple trade-off between factors. Some of the key factors for compensation decisions include brand, experience, competence, supply- demand, and the nature of industry.

Brand: It is true that a graduate from a top ranked institute will get a better pay offer than the rest. The underlying assumption that organisations make is that the students who entered such top rated institutes must be really more talented because they had gone through a rigorous selection process. They pay them high assuming and expecting a superior performance. However, in the long run, if their performance does not match the expectations, the pay hikes will get tapered off. So, instead of comparing the initial salary offerings, the students from not so high rated institutes need to perform at such a high level that organisations are compelled to pay more in the long run.

Experience: A BPharmacy graduate with three years experience may be paid more than an MPharmacy student with zero experience. Why does it happen? It is important to understand here that for the job that needs to be in the organisation, it may not make much difference if the candidate is more qualified. In fact, the candidate who is only a BPharm but with experience may be more preferred because of his/her familiarity of the job. Organisations will find an experienced person to be productive much faster than a more qualified fresher. Consequently, they end up paying more for experience and not for qualification.

Competence: Despite qualification being the same, some are paid much higher due to their higher competence. Either they are superior in their competence or unique. It surely differentiates them from the rest and thus gives them better pay. Supply-Demand: There are some educational streams where the supply is high compared to demand for talent. In such scenarios, it is natural to experience lower salaries because the companies have a wider choice to select from and they will have better bargaining power. During those times when companies are desperate for talent, then there will be rush to hike the salaries and hire employees faster than their competitors.

Nature of Industry: In addition to the above scenario of talent across industries, the nature of industry will also determine the salaries. If the industry is highly profitable, then the same BTech may get a better pay compared to another industry. Finally, there is no point in feeling let down or jealous about someone higher pay. It is important to remember that it is like a long-term marathon. Even if you had a slightly late start, remember, so long as you have stamina and competence to run longer distances, the gaps get narrowed down.