Employee struggles to understand pay disparity with peer

Dear Joan:

I am on a team with only one other person, who was previously a contractor, but has since become an employee. He sits next to me and, in a phone conversation with HR, he mentioned that his salary as a contractor was $90,000 per year and that as an employee he would agree to $88,000 per year.

I also have an e-mail from HR that confirms this salary. I have been an employee with this company for three years and I make tens of thousands of dollars less than this person. I do the same job as this person and have more responsibilities than he does.

I am otherwise happy with my job, so I would appreciate any suggestions you have on how to raise this issue. I have already asked for a salary adjustment (without mentioning that I know about my team mate’s salary) months ago, to no avail. So it appears I need to divulge that I know about the inequity, in order to receive similar pay as my coworker.

I would appreciate any advice you have since I really don’t want to get another job but find this disparity too large.

Answer:

This situation is a little tricky, so let’s discuss some of the underlying issues before you pursue the matter with your manager or HR.

First of all, are you certain that your peer is making tens of thousands more? How did you get the e-mail confirming that? HR and your manager will question how you had access to that data. If your coworker showed you the e-mail, he will be in hot water for discussing salary with another co-worker—a practice which is usually discouraged. If you got the information through your own sleuthing, it won’t look good.

If, indeed, your salary is much less than your peer, and you do the same work, the company will have difficulty defending the pay inequity. In anticipation of some plausible reason, it’s important to consider the following:

• Does the $88,000 include benefits? As an independent contractor he probably received no benefits, so he may have been referring to his “compensation package” rather than his salary. Since some compensation packages can be the equivalent of 25 percent of a person’s compensation, he may be receiving $22,000 of his salary in benefits and $66,000 in salary.
• Does he have some special expertise the company needs?
• Are candidates scarce for your area of expertise?
• Does he have added duties or a special contribution you may not be aware of?
• Does the company have a history of making salary grade adjustments when the market value of a position goes up?

Once you have thought through some of these possible explanations, you are ready to talk to your manager. You will need to be calm and professional. Don’t point any fingers and give the company the benefit of the doubt.

For example, you might say, “I’m sure there is either a reasonable explanation for the difference in pay, or the company is looking into making it equitable.” That presumes the company is doing the right thing and allows your manager to save face and go and discuss the situation with HR.

It’s important to reiterate that you are happy with your job and that your intention isn’t to accuse or demand. However, it is fair to tell your manager that such a large disparity seems odd and inequitable to you, given the fact that you both appear to be doing the same work. I would not bring up your salary request from a few months ago, since it will look like you are putting an accusatory finger in his face.

Your manager will likely go and discuss the matter with HR and come back to you with an answer. While a newcomer sometimes does get paid more than existing employees due to market conditions, most companies take care of the inequity by bumping the existing co-worker’s pay. A pay gap this large seems very odd. Unfortunately, even though you like your job, a pay disparity this large would make anyone discontent.  You will have to hear either their explanation—or action plan—before deciding to leave or stay.

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