Most people have a gut feeling they're underpaid. But gut feelings don't get you a raise. Data does. The problem is that most professionals never actually check — they assume their employer is paying them fairly, accept the annual 2–3% increase, and don't ask whether the market has moved past them.
It often has. Salary compression is one of the most persistent structural problems in employment: companies optimise their spend on new hires (where the market sets the price) while existing employees drift below market year by year. By the time the gap becomes obvious, it can be substantial.
This guide covers exactly how to know whether you're underpaid — using real signals, market data, and a clear framework for interpreting what you find.
The core method: benchmark against the market
The most direct way to know if you're underpaid is to compare your current salary against what the market pays for your specific role, location, and experience level. Not what you think you're worth. Not what your colleague earns. What the market — the distribution of employers actively paying for people with your skills and experience — actually pays.
This sounds straightforward, but most people don't do it because they don't know where to get reliable data. The most useful sources for European markets are:
- Our free salary checker — gives you a market percentile for your role and location based on verified public salary data, structured surveys, and aggregated job market signals. Takes 30 seconds.
- ONS ASHE (UK) — the Annual Survey of Hours and Earnings, published annually by the Office for National Statistics. The most statistically rigorous public dataset for UK salaries by occupation.
- Eurostat SES — the EU Structure of Earnings Survey, covering all major European economies. Published every 4 years; the 2022 release is the most recent by occupation.
- Levels.fyi Europe — self-reported salary data with strong coverage of tech roles, particularly useful for software engineering and product management benchmarks.
- LinkedIn Salary Insights — aggregated from LinkedIn profiles and job applications. Broader coverage across functions than Levels.fyi.
A single data point from one of these sources is directional. Two or three that converge on a similar range is actionable.
Understanding your percentile
Market benchmarking tools typically express your position as a percentile — where your salary falls within the distribution of pay for comparable roles. The percentile is more meaningful than a simple above/below comparison because it tells you the magnitude of any gap.
- Below the 25th percentile: You are earning less than three-quarters of people in comparable roles. This is a significant gap, and it almost certainly reflects either a below-market employer, a lack of negotiation history, or both. Worth addressing urgently.
- 25th–40th percentile: Below market, but not severely. A raise conversation is warranted. The gap is large enough to matter but small enough that an internal correction might be achievable.
- 40th–60th percentile: Around market rate. You're in the range of what most employers pay for your role. This doesn't mean you can't negotiate — but the argument is more about future trajectory and scope growth than market correction.
- Above the 60th percentile: Above market. You're well-compensated relative to your peers. Your leverage in any negotiation is strong.
Five signals that suggest you're underpaid
Beyond market data tools, there are observable signals in your professional life that can indicate a pay gap before you've formally benchmarked. None of these is definitive on its own — but multiple signals together point in a clear direction.
1. You haven't had a real raise in two or more years
A cost-of-living adjustment of 2–3% is not a raise. It's the employer approximating inflation. If your salary has been adjusted only at inflation rates for two or more years — while your responsibilities have grown, your skills have deepened, and the market for your role has moved — the gap between your pay and what a new hire would cost has probably widened.
Compensation that doesn't grow faster than inflation for extended periods is a structural underpayment problem. Companies that don't correct it aren't doing so by accident — it's an optimisation decision.
2. Recruiters are regularly pitching you roles at significantly higher salaries
Recruiters have a built-in incentive to pitch realistic offers — they get paid on placements, and they won't waste their time on candidates they can't close. When a recruiter reaches out and mentions a role at 25% above your current salary, they're not flattering you. They're telling you what the market thinks you're worth.
Keep notes on inbound recruiter conversations — the company type, the role, and the salary range mentioned. Three separate inbound approaches all offering materially above your current pay is market intelligence. Use it.
3. You know or suspect newer colleagues earn more than you
Salary compression is the phenomenon where existing employees' pay drifts below what new hires earn, because hiring is market-priced and retention adjustments are infrequent. It's extremely common and structurally built into most compensation systems.
You may not know your colleagues' exact salaries — but you can make reasonable inferences. If you're aware that a newer hire in a similar role negotiated a starting salary above yours, or if your company has been public about salary bands that suggest compression, you have a signal worth acting on.
In the UK, the Equal Pay Act means asking a colleague their salary is protected activity in certain circumstances. In other European countries, salary disclosure norms vary. But even indirect signals — job postings for similar roles, conversations with trusted peers — are useful.
4. Your role has grown but your pay hasn't
Job descriptions evolve. When you joined, you were responsible for X. Two years later, you're responsible for X, Y, and Z — but your salary reflects the original scope. This is one of the most common forms of underpayment: title hasn't changed, role has expanded, pay hasn't followed.
The clearest version of this is doing the work of a more senior role without the title or the pay. This might manifest as managing a team without a people manager title, owning a function that was previously more senior, or picking up strategic responsibilities that weren't in your original scope.
Document the gap between your current responsibilities and your original job description. That scope differential is a negotiating asset.
5. You're consistently overperforming without upward compensation movement
If your last two or three performance reviews have rated you at "meets expectations plus" or above, and your compensation hasn't moved meaningfully, something is broken in the feedback loop. Strong performance ratings at most companies should translate to above-standard compensation adjustments — that's the mechanism by which the system theoretically works.
When it doesn't, it's worth asking why. Sometimes it's budget constraints (real but often temporary). Sometimes it's a manager who doesn't advocate. Sometimes it's simply that you've never explicitly asked. Understanding which of these applies determines your next move.
Why the gap keeps growing if you don't act
Salary underpayment compounds. A £5,000 gap this year is a £5,000 gap that becomes the base for next year's percentage increase. Over five years, with standard 3% annual reviews applied to the lower base, the gap widens without anyone needing to make a specific decision to underpay you further.
The compounding math works in both directions: closing the gap sooner is more valuable than closing it later. Every year you remain below market, you're also missing out on the compounding growth that would have occurred off a higher base.
What to do when you know you're underpaid
Once you have the data, the path depends on how large the gap is.
Gap under 10–12%: An internal raise conversation is your first move. Come with your market percentile, your contributions, and a specific number. Your manager can likely approve or advocate for an increase at this scale without major escalation. See our full guide on how to ask for a raise.
Gap of 15–25%: Internal negotiation is still worth trying, but be realistic that companies rarely approve single-step increases of this magnitude. A phased approach — part now, part at a defined review — is more likely to succeed. A competing offer dramatically strengthens your position here.
Gap over 25%: This level of compression is usually only correctable by going to market. The company's compensation band may have a ceiling that doesn't accommodate the correction internally. Testing external options gives you real data and real leverage. You don't have to take the job — but having an offer changes the conversation.
The one thing that makes everything else easier
Every negotiation, every raise conversation, every job search is easier when you start with accurate market data. Without it, you're arguing from feeling. With it, you're arguing from fact.
Check your market rate now — it takes 30 seconds. See your percentile, see the gap if there is one, and start from a position of information rather than uncertainty.