Perception vs. Reality: Why Employees Think They're Underpaid (Even When They’re Not)
At PRJ Consulting, we help organizations design compensation strategies rooted in fairness, data, and clear communication. But even well-structured pay programs can fall short when employees don’t understand how pay decisions are made—or worse, when misinformation fills in the gaps.
According to Payscale’s 2025 Fair Pay Impact Report, 68% of employees who believe they’re paid below market are actually being paid fairly—either at or above market value. This is a significant shift from 2021, when only 51% of those who felt underpaid were misaligned in their perception. In other words, the number of employees misjudging their compensation has grown—despite improved economic conditions and wider access to compensation data.
Conversely, only 32% of employees who believe they’re underpaid are actually earning below market, a decrease from 49% in 2021, when many employers were deferring or freezing raises during the pandemic (source).
This widening perception gap between what employees earn and what they believe they should earn is more than a miscommunication issue—it’s a growing risk to morale, retention, and employer brand.
What’s Driving the Disconnect?
From our perspective—and supported by the research—there are two core issues:
1. Misinformation spreads faster than clarity.
Employees now have access to more pay information than ever before, but often it’s context-free or not role-specific. Public salary sites or viral social posts can easily distort expectations. Even the most fair and data-informed pay practices can feel “unfair” when compared to misleading benchmarks.
2. Communication about pay is still underdeveloped.
While many organizations have invested in better compensation strategy, fewer have invested in the communication tools and manager training needed to explain that strategy. According to HR Dive, employees who feel underpaid—regardless of the truth—are 45% more likely to look for a new job. Trust erodes when managers can’t clearly articulate how pay decisions are made.
And it’s not just about employee attitudes—Payscale found that organizations with transparent pay practices are 59% less likely to lose top talent (source).
What Can Employers Do?
As compensation consultants, we encourage clients to take a multi-layered approach:
Audit your communication—not just your compensation.
It’s not enough to align with the market. You have to bring employees along with you and help them understand how and why.Train managers to have pay conversations with confidence.
Front-line leaders are the bridge between your strategy and your people. They need more than numbers—they need talking points, clarity, and support.Provide real, role-specific context alongside data.
When employees understand how their pay compares to similar roles, in their geography, at their level, trust improves—even if the number isn’t exactly what they hoped for.
At PRJ, we believe fairness isn’t a feeling—it’s a practice. A fair compensation strategy starts with solid data, but it comes to life through trust and transparency. If your employees don’t feel confident in how pay decisions are made, we can help you close the gap between perception and reality.