In this paper, I examine the relationship between employee pay and firm leverage using novel data that links worker characteristics and matched firms’ accounting data. Even after controlling for worker-level characteristics, I find a significant negative relationship between employee pay and leverage, a finding that aligns with recent studies showing negative relationships between firms’ average employee pay and leverage. This supports the notion that higher leverage plays a significant role in the renegotiation of senior claims rather than serving as a compensating differential ingredient. The negative effect of leverage on wages is more pronounced among the middle managers, high tenure workers, and non-union member workers. Firms expected to have low surpluses to share with their employees and strong union bargaining power also experience more pronouncedly negative wage-leverage relationships.