Am I Underpaid? How to Know and What to Do About It

That nagging feeling that you might be underpaid is often more than just intuition. Many professionals are earning significantly less than market rate for their role, experience, and location. But how do you know for sure? And if you discover you're being paid below market, what should you do about it? This guide will help you identify underpayment and take concrete steps to fix it.

Signs That You Might Be Underpaid

Before diving into data analysis, consider these common indicators that your compensation may be below market:

•Your peers in similar roles earn more: Do you know colleagues or friends in similar positions at other companies who make more? This is often the most reliable indicator.
•Your salary hasn't increased significantly in years: If you haven't received a meaningful raise beyond cost-of-living adjustments despite taking on more responsibility, you're likely falling behind market rate.
•You're taking on additional responsibilities: When your role expands but your compensation doesn't, you're being underpaid relative to your actual job.
•You struggle with financial stress: In your field and location, you should have disposable income and be able to save comfortably. If not, underpayment is likely the issue.
•Entry-level hires are starting near your salary: If new college graduates are starting at 80-90% of what you earn after years of experience, something is wrong with your compensation.
•You hesitate to discuss your salary: Shame or embarrassment about salary often indicates you know it's below where it should be.

How to Benchmark Your Salary

Identifying underpayment requires concrete data. The best approach is to use multiple sources to understand the full market landscape for your role.

Use Our Salary Calculator

Start with our salary calculator, which provides real market data filtered by role, experience level, company size, and location. This gives you a baseline understanding of what someone in your position should earn.

Consult Multiple Salary Databases

No single source is perfectly accurate. Different databases weight factors differently and have varying response demographics. Use multiple sources:

•Glassdoor: Strong user reviews and self-reported salary data, though subject to bias
•PayScale: Aggregated salary data with year-over-year trends
•Levels.fyi: Excellent for tech roles, includes equity and bonus breakdowns
•Bureau of Labor Statistics (BLS): Official government data, often lagging but highly credible
•PayPeeker: Another reliable source for comparative salary data

Research Location-Specific Data

Geographic variation in salary is significant. The market rate for a software engineer in San Francisco differs dramatically from the same role in Austin. When benchmarking, be precise about your location. If your job is remote, identify whether your employer typically pays based on your location or the company headquarters location.

Understanding Percentiles and Salary Ranges

When you look at salary data, you'll encounter percentiles. Understanding these is crucial for accurate self-assessment.

The 50th Percentile (Median)

This is the middle point—50% of people in your role earn more, 50% earn less. This is a useful baseline, but it's not necessarily your target. Early in your career, earning near the median is reasonable. With more experience, you should aim higher.

The 25th and 75th Percentiles

These define the interquartile range. Most professionals fall between the 25th and 75th percentiles. If you're at the 25th percentile with 5+ years of experience, you're likely underpaid. Conversely, if you're at the 75th percentile, you're well compensated, though not necessarily at the top.

The 90th Percentile and Above

These positions are held by top performers, those with advanced degrees, or highly specialized skills. Reaching the 75th percentile is a realistic long-term goal for most professionals; going beyond requires exceptional performance or expertise.

Finding Your Benchmark

Where you should fall depends on your experience level, performance, and specialized skills. A good rule of thumb: aim for the 50th-60th percentile if you're mid-career, 60th-70th if you're senior, and 70th+ if you're a recognized expert or in a senior leadership position. If you're significantly below these targets and haven't recently changed industries, you're likely underpaid.

Comparing Your Total Compensation

Base salary is only part of your compensation. When benchmarking, consider:

•Bonuses and incentives: Annual bonus, performance bonus, or commission
•Equity: Stock options or RSUs (if at a private or public company)
•Benefits: Health insurance quality, 401(k) match, paid time off
•Professional development: Training budget, conference attendance
•Work flexibility: Remote work options, flexible hours (has real monetary value)

Sometimes an employer compensates with strong benefits or flexibility when base salary is lower. However, be careful not to overvalue intangible benefits. A 10% salary cut for "flexibility" rarely makes financial sense.

What to Do If You're Underpaid

Discovering you're underpaid is frustrating, but it's also an opportunity. You have options.

Option 1: Request a Raise

Approach your manager or HR with your market data. Be professional and data-driven. Say something like: "I've researched the market rate for this position in our area, and based on my experience and performance, I believe my compensation should be $X." The best times to request a raise are during annual reviews or after completing significant projects.

Be prepared for pushback. Budget constraints, company policy, or industry standards might limit their flexibility. In such cases, ask what you need to do to reach the market rate by next year, or explore other forms of compensation (bonus, professional development budget, more PTO).

Option 2: Look for Market Rate Jobs at Other Companies

Sometimes the fastest way to achieve market-rate compensation is to change jobs. Research companies in your area or explore remote positions that value your skills. When interviewing, use your market research to set expectations during the compensation discussion. Many job changes result in raises of 10-20%, often because you're finally at market rate.

Check income gap data for software engineers in New York or other roles in your area to understand what you should be targeting.

Option 3: Develop Specialized Skills

If market rate for your exact role is limited, consider developing skills that command higher compensation. This might mean getting a specialized certification, learning a new technology, or developing leadership skills. These investments can quickly close the underpayment gap.

When to Negotiate vs. When to Leave

The decision to negotiate for a raise or seek a new position depends on several factors.

Negotiate If:

•You've been at your company less than 2 years (job hopping has costs)
•You genuinely enjoy your job and company culture
•Your underpayment gap is small (less than 15%)
•Your manager has explicitly stated there's room to negotiate

Consider a Job Change If:

•You've been underpaid for years with minimal raises
•The underpayment gap is significant (20% or more)
•Management has flatly refused to discuss compensation improvements
•You're unhappy with other aspects of your job
•Your industry is growing and external opportunities are plentiful

Taking Action

Discovery that you're underpaid can sting, but it's empowering knowledge. Use our salary calculator today to get precise benchmarking data for your role and location. Then decide your next move: request a raise, upskill for higher-paying roles, or explore new opportunities. Regardless of which path you choose, taking action on underpayment is one of the smartest career investments you can make.