Can a manager earn less than his/her direct report?

Yes, this can happen.

And no, it does not automatically mean it is unfair.

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Take Katia and Paulo.

Paulo is Katia’s supervisor and Katia earns more than Paulo.

Possible reasons why this happens:

◾ Katia has a 'hot job' (demand for skilled talent currently outstrips the labor supply).

◾ Katia’s role is paid competitively at market rate and is aligned to her peers (note in some cases, there may not be internal peers for certain roles).

◾ Katia herself has a unique skillset that sets her apart from other candidates.

◾ Paulo’s role is easy to source (plenty of supply) and its market rate is less than Katia’s role.

◾ Katia’s job was impacted by mandatory government increases, and Paulo’s was not.

◾ Increasing Paulo’s pay will create misalignment with his peers’ compensation.

◾ Finding a ‘cheaper’ resource for Katia’s role is unlikely to reduce the associated pay (and will incur additional hiring costs).

◾ Katia’s role may be business critical, while Paulo’s might not be.

The answer lies in understanding ‘value’ and job pricing, not simply hierarchy.

‘Managing’ does not always equate to higher pay.

Market demand (vs supply), business needs and unique qualifications will influence pay rates.