New Payscale Report Reveals Rising Risk to Top Talent Retention Amid Widespread Misperceptions Around Fair Pay

June 17, 2025 at 09:00 AM EDT

68% of employees believe they’re underpaid, even when their compensation is at or above market rates
Employees who believe they’re paid unfairly are 45% more likely to look for a new role, regardless of their actual compensation
Employees who work for organizations with high levels of pay transparency are 59% less likely to leave

BOSTON, June 17, 2025 (GLOBE NEWSWIRE) -- Payscale Inc., the leading provider of compensation intelligence solutions, today released its 2025 Fair Pay Impact Report, highlighting a growing gap between employee perceptions of fair pay and reality. More than two thirds (68%) of employees report being underpaid, even when earning at or above market rates. As a result, many employers are exposing themselves to an increased risk of losing top talent. Payscale’s analysis shows that employees who think they’re paid unfairly are 45% more likely to look for a new job, regardless of their actual compensation.

The gap between perceptions of fair pay and reality has grown significantly since 2021, when just half (51%) of employees earning at or above market felt underpaid. Despite rising salaries and improved pay transparency, employee misperceptions of unfair pay have surged. This suggests that employers' current communication strategies around compensation are falling short.

Pay transparency is an important factor in combatting pay misperceptions and boosting employee retention. Employees who work for organizations with high levels of pay transparency are 59% less likely to leave relative to non-transparent organizations. Amid a growing wave of pay transparency legislation in states and cities across the US, one in three US employees is now covered by regulations requiring greater pay disclosure. While compliance is essential, the report’s findings suggest there is more work for employers to do internally to communicate transparently about compensation.

“Pay misinformation and ineffective communication are undermining employer efforts to build trust among employees. This pay perception gap poses a real threat to retaining high performers,” said Ruth Thomas, chief compensation strategist, Payscale. “While more employees are covered by pay transparency laws than ever before, compliance alone is not enough. Employers must build transparent compensation strategies rooted in data so they can communicate with confidence, consistency, and clarity to help employees understand what fair pay looks like for their role and prevent regrettable attrition. Employers must treat retention of key talent as an always-on priority, regardless of whether it's an employer or employee market – waiting until the market shifts could put top performers at risk. By the time signs of attrition appear, it may already be too late.”

The research shows most employees don’t know whether they’re being paid fairly. Of those employees who reported being paid unfairly, only a third (32%) are actually below market. Among employees who are paid above market, almost half (47%) believe they are underpaid. This rises to almost two thirds (63%) among employees paid at market. Among job seekers, almost two thirds (65%) have a poor perception of their current pay, further highlighting the critical role that employee perceptions of fair pay play in retention.

Despite the spike in inflation from 2020 through 2022, cumulative wage growth has outpaced inflation since 2019, rising 30% compared to a 27% increase in cumulative inflation. This is true across industries. However, salary increases are not equally applied across all jobs and low wage earners in particular are more likely to be disproportionately impacted by the rising cost of living.

“Even when pay is fair, many employees don’t believe it because perceptions around fair compensation are deeply subjective. These misperceptions are common, and leaders must prioritize building trust to retain their top performing employees,” said Lexi Clarke, chief people officer, Payscale. “That starts with confidence in their pay data, structures, and strategy, and requires clearly communicating the rationale behind pay decisions, understanding the factors that influence compensation, and equipping managers to have better pay conversations. The goal is for employees to not only understand whys behind how their pay is calculated, but ideally how they can increase their compensation and grow within the organization, helping support long-term retention and prevent top talent from walking out the door.”

The 2025 Fair Pay Impact Report analyzes data from more than 325,000 respondents to Payscale’s online salary survey taken between January 1, 2021 and January 1, 2025. The full report and its methodology can be accessed at: https://www.payscale.com/research-and-insights/fair-pay-impact/.

About Payscale

Payscale stands at the forefront of compensation data technology, pioneering an innovative approach that harnesses advanced AI and up-to-date and reliable market data to align employee and employer expectations. With its suite of solutions—Payfactors, Marketpay, and Paycycle—Payscale empowers 65% of Fortune 500 companies to make strategic compensation decisions. Organizations like Panasonic, ZoomInfo, Chipotle, AccentCare, University of Washington, American Airlines, and Rite Aid rely on its unique combination of actionable data and insights, experienced compensation services, and scalable software to drive business success. By partnering with Payscale, businesses can make confident compensation decisions that fuel growth for both their organization and their people.

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Contact: Press@Payscale.com