Ungoverned Pay Decisions Are Costing Enterprises Tens of Millions of Dollars a Year, New Data Shows
Syndio’s new research puts a number on what everyday hiring, promotion, and merit decisions cost when they go ungoverned
Enterprise organizations lose tens of millions of dollars per year to compensation decisions, according to new research released by Syndio, the Decision Intelligence for Pay company. The findings are detailed in a new report, “The Hidden Cost of Ungoverned Pay Decisions,” based on a proprietary model that isolates the financial impact of decisions made across hiring, promotions, and merit adjustments.
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“Pay decisions are some of the highest-stakes calls a company makes, and most are still made one at a time, with no system connecting them back to strategy, this research quantifies that cost.”
What ungoverned pay decisions cost at scale
The research surfaces a cost that starts small, compounds fast, and shows up in more than one direction.
- The cost starts with offers. Approximately 30% of new-hire offers land about 8% above the internal range. That premium compounds into more than $42,000 in excess payroll over five years as every subsequent increase builds on the original decision. Multiply that across thousands of offers, promotions and merit decisions, and the cost grows with every pay cycle.
- Underpaying costs more, and faster. About 1 in 10 new hires comes in below what the role and market call for, but leave before the mismatch is ever corrected. Replacing them costs 50% to 200% of salary, according to SHRM1. On a $100,000 hire, that turns an $8,000 underpayment into a $50,000-plus replacement cost — more than six times the original savings.
- The largest exposure has no ceiling. A pattern of misaligned pay decisions can surface as legal claims, regulatory inquiries, or reputational damage. These are costs that aren’t bounded by a single figure and don’t average out.
“Pay decisions are some of the highest-stakes calls a company makes, and most are still made one at a time, with no system connecting them back to strategy,” said Maria Colacurcio, CEO of Syndio. “This research quantifies that cost and gives HR and finance leaders a way to calculate their own exposure. It’s the start of a broader body of work Syndio is building around pay governance.”
As an illustrative example, for a 10,000-person company, correcting accumulated inequities, compression, and market misalignment can consume up to 1% of payroll, or $12 million every year. Syndio’s new research shows the range of factors that result in this unmanaged cost for organizations.
The research behind pay governance
The report was led by Shonna Waters, PhD, SVP of Executive Engagement & Insights at Syndio and an organizational psychologist and researcher who has spent her career studying how people and systems intersect inside organizations.
“Organizations have historically measured pay outcomes after decisions have already been made,” said Dr. Waters. “This research examines the decision itself as the unit of analysis, and identifies where the cost hides. It’s the first time we’ve had a model clear enough to help organizations manage pay with the same discipline they apply to other major capital investments.”
“The Hidden Cost of Ungoverned Pay Decisions” is the first research report from Dr. Waters since joining Syndio, and the first of many the company plans to contribute to the emerging science of pay governance.
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