Why new hires often get paid more than existing employees

https://bloomberry.com/why-new-hires-often-get-paid-more-than-existing-employees/

by altdataseller • 3 years ago

178 187 3 years ago

chpatrick• 3 years ago

Isn't it just because new applicants have a much better bargaining chip - "I'll just start working at another place that will have me" (believable and easy for them) vs "I'll quit and start job hunting" (less believable and much more work) for existing employees.

corethree7• 3 years ago

It's not a better bargaining chip. It's just a more "believable" bargaining chip.

A company loses far more, far more if an existing employee quits, versus losing a potential new hire.

This is just one of the illogical things about life. Either the company is illogical, or employee behavior is illogical in that the threat of quitting with a better bargaining chip is just lower.

buzzerbetrayed• 3 years ago

A company loses far more, far more if an existing employee quits, versus losing a potential new hire.

On an individual level maybe. But it doesn't benefit the company for news to spread that they'll bump your pay a significant amount if you threaten to quit. If the company has 100 employees working for a salary that is 80% of their fair market value, it's worth losing one of those employees to keep the discount on the other 99.

charrondev• 3 years ago

My experience is that as a higher level IC your ability to get that raise from your current place requires you to shop around a bit and have the confidence that you can walk away and find land another job that pays more.

It’s not a bad idea to do a couple interviews before your annual review comes up, even if you don’t have to say in quite so clear terms that you are ready to jump ship. Confidence helps a lot.

kamikaz1k3• 3 years ago

TFA goes over 5 potential reasons, the author cited their insider knowledge. None of those points cover what you said. The closest thing the author said was external experience is valued higher, which rings true to me.

ironmagma3• 3 years ago

because your company can only give 5% maximum raises every year (because it’s tied to inflation, cost of living increase, or another metric), your salary will continue to lag the market average

OK so tie it to the market average instead?

our current team led to us being in a stagnant market position: So we need someone new

The diagnosis here is ego. The thought doesn't even cross their mind that the leadership might be the actual reason, rather than the ICs who really have very little agency.

ok_dad• 3 years ago

The last place I worked hired a new team and fired the old one. Surprise, the same problems remain.

giantg24• 3 years ago

"OK so tie it to the market average instead?"

My company does do market adjustments. We're were still hiring in people for more money than existing people were making. Mostly because the average hadn't shifted much since the new salaries only affected a small population. The new people we were higher were above the average they were using. Eventually they did do some adjustments for the lowest employees, but it was a bit lackluster.

jordinl• 3 years ago

> our current team led to us being in a stagnant market position: So we need someone new
The diagnosis here is ego. The thought doesn't even cross their mind that the leadership might be the actual reason, rather than the ICs who really have very little agency.

Do we work for the same company?

ozr7• 3 years ago

I always figured the explanation was much simpler than this.

As a general thing, someone meeting expectations and performing their current role should expect a nominal raise each year. Cost-of-living sort of thing.

When you hire someone new from the market, you need to figure out the market price and pay that.

There's no particular reason these two should be in lockstep besides, as the author mentions, a vague sense of inequity.

kamikaz1k3• 3 years ago

It’s not a vague sense, and it does cause real painful attritions. I’ve seen it happen many times. I think the author is right in that HR doesn’t do a good job of quantifying the hit, and line level managers are not incentivized to burn their social capital on a flight risk just on principle.

ozr7• 3 years ago

This is true. It's a result of poor management, as you said. Either a lack of incentives or a lack of skill.

If someone leaving represents a substantial risk, then a) that role should be derisked, and b) that individual should be recognized via whatever process the company has (leveling, etc) to keep them on board.

happytoexplain• 3 years ago

Vague? It's pretty concrete. You may make a perfectly logical business-related argument as to why this compensation difference is acceptable, but why would that have any effect on the obvious, intuitive perception that it's unfair from the point of view of a rational human?

Businesses do inequitable-by-definition things all the time. It's part of their DNA. They make measured trades, and often those trades involve mistreating humans, betting that the practical consequences of that will be worth whatever the upside of the trade is. That's why we have so many laws and organizations protecting people from businesses.

ozr7• 3 years ago

Is it inequitable and mistreating an employee to pay them what we agreed to?

ta_11383• 3 years ago

The reason is pretty easy: You understand the value of your workers better than a random employer, because they work here. You know when someone is a bust, and when someone is a star player. If you don't give raises to your best people, they are the ones that quit first, and when people quit, they don't quit one at a time: If I get a major raise by changing youbs, you can bet all the coworkers that I respect will hear about it, and I'll want to take them with me.

I suspect that losing a high percentage of your best employees all at once because you are paying them quite a bit less than what you'd pay a worse replacement is a bad thing you want to avoid.

ozr7• 3 years ago

I agree. High performers should be recognized via whatever process the company has to do so. Leveling, at reviews, etc. The lack of doing that is just shitty management. It doesn't change the basic description of the market above.

caturopath3• 3 years ago

That is not really an explanation. You are just stating how things are in a non-explanatory way.

should expect

Should why, though? You didn't explain why they should have this expectation, rather than any other.

There's no particular reason these two should be in lockstep

There is a pressure to keep these in lock-step: if you are paying lower than market rate, your employees have an incentive to go sell their labor elsewhere for more; if you are paying higher than market rate, you have an incentive to cut their pay (if you lose them over this, you can still replace them for less money). There are many reasons why such a basic price theory analysis is so incomplete as to give the wrong conclusion, but it's a real reason these things would be in lockstep that requires explanation why as to how it is inapplicable or incomplete.

ozr7• 3 years ago

Should why, though? You didn't explain why they should have this expectation, rather than any other.

Because if we agree that I pay you $X/yr, that's just a placeholder for a certain amount of value per year. As inflation rises, the nominal salary I pay has to increase to maintain that value. A CoL raise handles that.

There is a pressure to keep these in lock-step: if you are paying ...

This is all theoretically true, but just not how it works in practice. See: this post and all the comments lamenting it.

dboreham• 3 years ago

There's a whole field called Compensation Analysis devoted to doing the opposite of what you said. Well, truth be told it's mainly devoted to controlling risk for the employer, but as a prerequisite for that goal there are Compensation Analysists in the HR dept of every medium/large company in the US with a big spreadsheet, row for each employee and a row for each "job", and a mapping from one to the other. This spreadsheet highlights when the two are not in lockstep and all things being equal they will bring them back into step. Modulo some edge cases where individual employees are just paid above market "because" (e.g. they have some special knowledge that would be very expensive to recreate but otherwise don't merit a high paying job code).

femto• 3 years ago

Hand in a competing offer

Unless (even if?) the counter-offer is significantly higher, I'd say just take the competing offer. Chances are HR will put a target on your back for being "disloyal".

kamikaz1k3• 3 years ago

Why would “HR” put a target? Your manager wants to retain you. If you don’t think your manager has your interests in mind, then why stick around? HR DGAF IMHO.

jliptzin• 3 years ago

I think they mean that now that you’ve outed yourself as someone who shops around, the next time you try to do it they’ll already have your replacement prepared.

dartharva2• 3 years ago

You are severely overestimating HR's willingness to engage. If they are tardy enough to not be competent in managing basic employee expectations, they sure as hell are not going to maintain a grudge ledger against every candidate to target them.

giantg24• 3 years ago

My company used to blacklist employees that left. If you left the company they would never hire you back. They stopped doing that around 4-5 years ago.

ta_11383• 3 years ago

In my very long career, I have yet to hear a good story of someone taking said counter offer and staying very long, for one reason or another. I think it's a bad idea to offer it at all, as it sends a very clear message of what behavior is rewarded. When other employees learn that you will offer raises to counter offers, expect everyone to start interviewing.

Every manager knows which team members are key to the team's performance. They have to get raises or bonuses to match.

depereo• 3 years ago

Counteroffers are 'stem the skills bleed' at best. People who take counteroffers were annoyed enough to look in the first place, and know they're valued enough elsewhere to get a market rate. I've heard that even if someone accepts a counteroffer and stays they're very unlikely to still be there 12 months later.

The company can use that time to figure out what that person does and make sure when they leave it's not as painful and abrupt.

Aeolun2• 3 years ago

I took the counter offer and stayed for (so far) 3 more years. To be fair, the problem was less the money and more the nature of the work, but even that was adjusted to be more accommodating.

loeg• 3 years ago

I took a counter offer and stayed for another 6-7 years. It worked out well for both parties. I knew they wanted to keep me but were stingy so it was useful to interview elsewhere to give myself some leverage.

atq21192• 3 years ago

I specifically interviewed and got an offer elsewhere precisely because, while I like my job and am very good at it, this dance of offer and counter offer is the only way to get substantial raises or bonuses. So I took the counter offer and am pretty happy about it two years later.

buzer• 3 years ago

I wanted to move aboard when I lived in Finland and interviewed with that in mind. I got offer from UK company, but ended up agreeing to counter offer as then current company intended to open US office and I could move there at that point. Unfortunately that didn't quite pan out as company went bankrupt, but I did end up getting hired by the company that bought the IP and moved to the US after pandemic ended.

So at least for me it didn't pan out terribly though there was some luck involved.

mavelikara• 3 years ago

I once took a counter offer and ended up staying another 8 years.

acuozzo2• 3 years ago

In my very long career, I have yet to hear a good story of someone taking said counter offer and staying very long

I've done so twice and stayed for years afterward in both cases, but this may just be unique to how defense contracting works.

ahepp2• 3 years ago

If you walk into your boss's office and say "match this or I'm gone", you might be earning yourself a reputation (maybe a deserved one?) as a hardball negotiator, and you're probably better off just taking the offer.

I think there's a way to pull it off that doesn't leave anyone feeling taken advantage of or bushwhacked. It probably starts by talking at your annual review about how you're concerned the market rate for your position is higher than what you earn. Then go get an offer and say "gee boss I really love working for this company but X% is a lot of money to leave on the table, is there anything you can do to close this gap".

They need to be convinced that there's an urgent and valid reason to pay you more, but they also need to be convinced that the juice is worth the squeeze. If they think you're just going to go pull the same stunt again in 6 months, or if they think that you're already low morale, they will just call it attrition.

nerdponx6• 3 years ago

I think the idea of having a competing offer is to have a credible threat of leaving.

Another strategy, if you can pull it off, is to have a different kind of credible threat. Maybe you know that you're a high performer and/or have a good professional network and would have no trouble finding a new job. Maybe you have 6 months of savings set aside specifically so you can quit a job if needed. Maybe your spouse also earns good money (or maybe your spouse is the high earner) and you live far enough below your means that you can float for a while with half income.

You don't necessarily need to show firm evidence that these things exist, you just need to make it clear that keeping your salary in line with the market is necessary to keep you from leaving. The trick is that you have to actually leave if it doesn't go your way, otherwise you'll have no credible threat and they won't take you seriously the next time.

A competing offer is like going to a mattress store and asking them to price match. A purchase is a one-time relationship, but employment is onging. It's not really the same thing.

onionisafruit2• 3 years ago

I worked with somebody who applied for the same job on another team without disclosing he already worked at the company. It turns out that’s not something they actually check for. He got an offer for about 15% more than his current salary. I think he should have just accepted that job and gone through the motions of quitting his current position and starting the new one with the same company. Mostly because I wanted to see how that played out. Instead he showed the offer to our manager and asked her to match it. That went to HR and the offer was rescinded. He left a few weeks later.

tomwojcik• 3 years ago

Additionally he should have used a referral /s

jareklupinski2• 3 years ago

brb referring myself for every internal role :P

steveBK123• 3 years ago

This is hilarious and speaks to HR incompetence for not knowing they already worked there before making an offer, if not much earlier in the process.

IOT_Apprentice• 3 years ago

Given the extreme use of awful ATS systems HR is a joke of a department.

sn9• 3 years ago

I've gotten the same recruiter reach out to me twice after already starting at the company.

fbdab1034• 3 years ago

Other than making HR look like total fools, why was the offer rescinded? Presumably the hiring manager still wanted him for the role.

toomuchtodo• 3 years ago

Spite. Even the most industrious hiring manager is no match for an HR department scorned.

onionisafruit2• 3 years ago

I wasn’t clear on the given reason, but there’s no doubt the real reason was to not let that become a president.

jayd16• 3 years ago

Seems like all it would take is the old manager not wanting to lose them. That would get them to kill the offer even if the old manager wouldn't have.

rdtsc2• 3 years ago

Other than making HR look like total fools, why was the offer rescinded?

The answer is in the question :-)

How would a fool react when their foolishness is thrown publicly in their face?

paxys• 3 years ago

Because you can’t allow him to set an example.

inferiorhuman• 3 years ago

About a year after I left megacorp, the manager of a team I'd worked with asked me to come back. He signed off on my salary requirements only for HR to come back and say that even though it was within budget and within the pay grade they couldn't sign off on it because my previous salary was so much lower.

I went back for a few months and quit again, only to get headhunted by one of their direct competitors. I went through the motions but they were disorganized enough I blew them off. Turns out I dodged a bullet as they were acquired by megacorp a few weeks later.

rib3ye• 3 years ago

Why didn’t he quit and accept the offer on the same day?

mapmap• 3 years ago

This is a great story. Thank you for sharing.

Did he omit his current role from his resume? How did he not disclose where he was currently working?

tmsh2• 3 years ago

A smart company is constantly raising its hiring bar (or over time it will not survive). So by nature it’s aiming to hire better than 50% in the role/level. So by definition a new hire should be paid more than someone at the median for that role/level. This is the root reason.

jamestimmins• 3 years ago

"constantly raising its hiring bar" is a nice idea I often hear repeated but rarely see in practice.

In fact, when companies are incredibly successful based on early 10x employees, you're almost guaranteed to see the hiring bar go down over time.

tmsh2• 3 years ago

A 10x engineer does not stay in the same role/level as a company grows. They’re very important though. And it’s a good reminder that roles/levels don’t necessarily matter compared to the relevant work.

All FAANG and other smart companies hire at better than 50% at the role/level in order to constantly evolve.

ta_11383• 3 years ago

I've seen that attempted: I worked at a very well known SV company as it was growing. When we looked at what we were asking to even get an interview, we saw that most of our best workers could never have a prayer of passing our resume requirements when we hired them. But we had so many people applying, we could really ask for the moon and still get enough resumes.

But the fact that on paper we were getting better candidates didn't ever lead to better performance: Past a certain point, not hard to reach if you pay relatively well, the correlation between interview performance, resume and actual performance on the job is basically random. Hell, I've seen a team change managers, and seen the stack rank be basically opposite for both: One guy wanted to give a large bonus to the guy the other one wanted to put on a PiP.

Thinking that, on the interview, your candidate is magically better than your average coworker takes a lot of optimism, or a lot of pessimism about your coworkers.

reactordev2• 3 years ago

Nowhere mentioned did it say that “if you have X experience and Y degree you get Z amount of salary”. It’s always a range. If you’re in a situation where someone with the same job title and same “pedigree” as you is making more money, ask yourself “How can I negotiate more effectively?”

Bob gets paid $40k more because Bob has a personality they like and want to groom him for leadership.

Ben doesn’t socialize and his ego is often confrontational in meetings. Ben is hurt because he’s not getting paid the same as Bob.

It’s sometimes that simple. If you want top pay, negotiate it and deliver that value. Life isn’t fair, salaries are a range, and if you decide to slack off because you aren’t getting “paid what you’re worth” - you’ll be the first one cut.

That said, new talent comes with new ideas - sometimes that’s worth more. Instead of being hurt by someone making more than you in the same position - use it as fuel to go better yourself.

If you still feel like you deserve Bob pay, talk to your manager about it. Tell them how it makes you feel without getting overly emotional about it. Let them know, that you know, and most good managers will do whatever they can to make it right by you.

saagarjha• 3 years ago

What happens if you don't have a good manager?

reactordev2• 3 years ago

I think the answer to that is quite obvious. If you have a bad manager and you aren’t getting paid what you think you should be paid - there’s only one option.

otteromkram4• 3 years ago

The best way to negotiate is to have a safety net. Either a significant other who will support you or you rely on your own savings if things backfire.

Once you don't have to worry about the "what ifs," negotiation is a cinch.

ahepp2• 3 years ago

Getting to Yes calls this the BATNA: Best Alternative to Negotiated Agreement, and one of the first steps to negotiating is figuring out your BATNA

jareklupinski2• 3 years ago

Reason 6:

The only way you can get a sense of how the world truly works outside your company is by going outside your company

the truly confident teams are the ones who know you'll come back at the end of your https://en.wikipedia.org/wiki/Rumspringa , and throw you a party on your way out

AngeloAnolin• 3 years ago

It's just reality that (most) companies with no transparent in their compensation, existing employees will be put on the salary bracket that will give the company the most leverage - either by being able to dangle a good counter offer (whenever the employee is about to transfer to a different company) or simply saving on salary expense.

Corporations will always mark an employee simply as an entry on their ledger. When the time comes to get new hires on similar work level, they know they need to up their game in terms of how much they can generously pay while still maintaining the bottom line of the organization.

BobbyTables2• 3 years ago

To me, there is zero upside to staying.

The whole counteroffer thing is politically uncomfortable. Even if successful, it means one’s resume will be more monochromatic than if they had left!

If one interviews well and gets a juicy offer, the company can simply “make it back” through lower raises, and HR gets a pat on the back for leveling compensation.

I’ve also noticed that the nature of work stagnates after about 5yrs. Sure, there are little learnings after that, but it’s too easy to fall into a “sustaining” role with very little hope of real growth.

giantg24• 3 years ago

"fall into a “sustaining” role with very little hope of real growth."

Yep, happened to me and now I'm fucked.

nerdponx6• 3 years ago

The only long-term career/financial benefit to staying anywhere ever is experience building/shipping stuff, and goodwill from people who might be positive references down the line. Beyond that, staying anywhere for too long is just leaving money on the table.

Employers of course have the power to change this. Any individual employer even, it's not a Nash equilibrium. If they wanted to, they would. They don't because they don't care. You don't owe your employer any more respect than they show you, which is generally close to "none".

mesarvagya• 3 years ago

This may not hold true for companies that gives your RSUs and you want it to get vested.

pjmlp• 3 years ago

Depends pretty much on the market condition, if one has family, is keen in having less vacations during the year switching companies, not being terminated during the probation time on the new company,....

Job hoping is not a big deal in markets that support it, it isn't always like Silicon Valley everywhere.

red-iron-pine2• 3 years ago

definitely a SV / tech hub thing. if the market supports it, sure, but I'm in a big Canadian city and the offerings just aren't like when I was in the US.

plus I'm tired of the new guy uselessness, and having to learn and navigate around new clusterfucks -- at least at the last gig you knew where those clusterf's were

mtillman2• 3 years ago

We don’t do this. If we hire someone for the same role and level as we already have on the team (ie sr devops) they either get paid the same (CoL index adj)as the existing person or we adjust the existing person up to the new salary. In the event of a fundraise, or equivalent growth of a new round size, we adjust everyone to the new comp that we’d pay an outsider to join for that role. Our opinion is that if you aren’t willing to pay an existing person the same that you’d pay an outsider with the same role & level, just let them go. It’s unkind and unnecessary string them along at a marginal advantage.

SamuelAdams2• 3 years ago

How many people are in your organization? The article specifically mentions this usually happens at larger organizations that are not start ups.

mtillman2• 3 years ago

That’s fair, we’re a small but mighty 75 going on 100. I hope this attitude sets a standard for years to come though.

paiute• 3 years ago

I wish more people thought this way. No wants to think about games with salary. People expect to be paid similar to others like them, it’s pretty simple. Anything less is a ticking time bomb of discontent.

torginus2• 3 years ago

Well congrats on your org for having integrity - but the math is simple, let's say the median employee has been at the company for 2 years, during which his market rate has jumped by 20%.

To hire a new employee at market rate, you have to give your team of lets say 10 employees that much money, which is euqivalent to hiring another 2 people for 'nothing'.

lukeramsden• 3 years ago

If you can’t afford to pay the current employees that raise, you certainly can’t afford new people - the market rate is the market rate.

MrDresden• 3 years ago

There is always the risk that some of those 10 employees with intimate knowledge of the product/infrastructure/etc decide to try to get their pay raised, but get denied and then decide to leave. If the employer is a proper badly run company they will fire those workers (not legally possible thankfully in many places).

This can then immediately poison the water source so to speak for the rest of the team which now realises how they are getting screwed over and/or start realising the nature of the relationship between them and the employer.

They then start accepting offers elsewhere, and one by one the team is no more, with no one available to take care of the product. This in the end has a huge financial impact on the company, which is much greater than the salary they saved by not adjusting those ten employees.

I have experienced two situations like this in my career. The whole team, or close to it, was wiped out with no one knowing how to take care of the software product (in one case the team had been developing and supporting 10x mobile apps). A month after leaving, as I was the last to go, I was contacted by my former manager and asked if I would be willing to come help them out with the mobile product that I had been the lead on, since the new fresh out of college graduates they had replaced us with were having issues.

I charged them a fine hourly amount for a minimum of one day, came in and fixed the issue within 20 minute.

Those fresh grads didn't know the products, the codebase, the tooling nor the space that the products were in. And within two years, all of them had jumped ship for new employment.

from-nibly• 3 years ago

if people were interchangeable cogs yeah sure, but they aren't. Not in some feel good "everyone is special" kind of way, but even if you had hypertwins (both genetically and experiencially identical) where they only difference was one was working for you for a year and the other wasn't. the one with experience AT YOUR COMPANY is worth a whole years salary more, because you'd have to train that new one for a year to get them operating at the same level.

But it's even worse than losing the salary though, because you can often find some money somewhere to replace that cost. You CANNOT do that with time, ever.

627467• 3 years ago

In my experience, pays issues only get solved during hiring negotiations. That's it. During hiring (as author mentions) you have several people aligned to hire you at almost any cost. But after being hired - at most - you have only your manager. And for promotion you're competing against everyone, all departments.

beachy• 3 years ago

This leaves out the most obvious reason - it's better financially for the company.

If every employee was highly mobile, aware of their own value and motivated to be always on the hunt for new opportunities, then yes, companies would need to have some system for making sure new starter salaries were in line with existing employees.

But they are not. Bob is highly introverted and it took him years to make the workplace bonds he now has with his colleagues. He doesn't want to start over. At Carols previous startup, the CEO turned out to be a psychopath. She values the stable leadership at this company. Tim is an idealistic junior. He know his friends earn more but he's drunk the Koolaid and he believes in the company's mission. And Mary likes this company because it means her family can live next to her parents.

For any number of reasons, it's just not necessary for the company to pay market rate to every existing employee. Inevitably some will leave to get higher pay - they will be balanced out by new people coming in, also at market rate.

SamuelAdams2• 3 years ago

In short, there’s a lot more corporate bureaucracy in giving a raise than there is to giving a higher offer to a new hire.

As an IC, it’s hard to sympathize with this argument. This is corporate bureaucracy that a company *chose* to create. How they got here is a matter of debate, but this doesn’t feel like a good justification for not rewarding loyal, high level performers.

This argument always stuck me as a weak appeal to (an ambiguous) authority.

Aeolun2• 3 years ago

While that is true. It's also not helpful. You are working for a company with a corporate bureaucracy. It's not going to disappear just because you think it's unfair, so you have to get your raise within the bounds of that system.

habitue• 3 years ago

You're both right, this is an is vs. ought problem

hapless3• 3 years ago

It is a fact of life. You don't have to like it, or embrace it, but it remains true.

It is generally easier to get a raise than to get promoted. It is generally easier to get a new job than to get a raise.

On balance, if you want to maximise earnings as an IC, you are gonna change jobs more often than you get an above-inflation raise.

blastro• 3 years ago

Kudos to my company, who will reset comp if new employees are brought in at a higher rate

human2• 3 years ago

Do you think hiring takes longer at your company because of this policy?

zeroonetwothree2• 3 years ago

The author misses a key reason, which is the winner’s curse. I’m going to take the job that offers me the most money, which means it’s likely I ended up near the top of their salary band (maybe I did well on the interview or they like me for some reason or random luck). That means I will be likely paid more than other employees at my level.

nerdponx6• 3 years ago

That only applies to applicants who have competing offers, with substantial variation between offers in terms of compensation. That happens to very few people.

ne0flex• 3 years ago

At my current firm, I found out that my co-worker, a new hire (22-year about a year out of college) was making $3k more than me, who is 10 years older than him. Spoke with my boss about this and they gave me a 30% bump. The HR reasoning was that they thought I was 'happy' with my current salary and that I had loyalty to the company because I've been with them for 5 years. A former coworker went to get an offer from another firm and tried to use that as leverage for a salary increase and ended up getting fired.

selcuka2• 3 years ago

A former coworker went to get an offer from another firm and tried to use that as leverage for a salary increase and ended up getting fired.

This is normally what HR does. I'm surprised that they didn't do the same to you. They probably needed you more than the other person, or even with a 30% raise you were still cheaper than a new hire.

torginus2• 3 years ago

I've also had the 'oh I didn't know you wanted to make more money!' discussion with my manager, and it seems just so non-genuine.

Sparkyte• 3 years ago

Because often the annual % doesn't meet the rate of inflation which a new wage must be derived by. However where I work now I will be willing to give 10 years or more to. I'm loyal since they've been with me through all of the worst of things.

neilv2• 3 years ago

Reason 2: [...] In short, there’s a lot more corporate bureaucracy in giving a raise than there is to giving a higher offer to a new hire.

The reason is that this is an accident of corporate bureaucracy?

Or is the root reason that companies consciously believe they save money if they cap raises low, regardless of the degree to which this causes regretted attrition?

nerdponx6• 3 years ago

Right, this article reads like a bureaucrat trying to shift blame to forces beyond what they control, when in reality it's very much in their control.

regretted

It's not regretted if 1) employees are considered fungible, and/or 2) it's expected and planned for. One of both of those things tends to apply in most workplaces.

LanceH2• 3 years ago

While this probably doesn’t apply for small startups with no formal compensation structure, large companies often have strict policies around the how much of a raise they can give to any employee.

I know every company will say this, but every single one I've run across has someone who can sign off on something and change it.

"Everyone starts with 2 weeks of PTO per year." -- I've started with 3 or 4, amazingly -- actually entered into the systems, not an informal agreement to allow me to take it. I've found PTO to be the easiest thing to negotiate at the end of the hiring process for a senior+ position.

"Band 6 has a maximum salary of xxxx" -- I've been hired above that.

And these are big companies with formal rules. They all have formal rules for breaking their formal rules, and the person telling you it's a firm rule knows it.

All of this lends itself to new hires getting paid more, of course.

rand8466332• 3 years ago

Wonder if the person in op story could have negotiated better and won against HR…

alexwasserman• 3 years ago

I had a previous boss who had a personal rule that he always wanted to only hire the best and would pay for it. If every hire didn't involve paying above band and having to get an exception the hire wasn't good enough. He fought and won every time.

This was a very big, very formal company. All rules are guidelines if you know how to request exceptions.

caseysoftware2• 3 years ago

A few years ago, I figured out that in dealing with companies (beyond the earliest startup stages), you can ask a few questions that work pretty consistently:

- What's the average for this role?

Explanation: Odds are, they've only given ranges up until now. This helps lock them down to a smaller range and should be closer to what the actual team looks like.

- How do I compare to the average candidate?

Explanation: If you're below average, they wouldn't be talking with you. Therefore, you are likely above average and now have a new floor instead of the generic range. Further, now they're likely going to describe what unique aspects you bring to the table and why you fit the role.

No matter how many times you say "I'm great for this role!" it's 100x more powerful for THEM to say "you're great for the role because of A, B, and C!"

And hopefully now you fit A, B, and C into your talking points and questions to the team, hiring manager, etc.

winrid• 3 years ago

This is true, but it's easy for them to weasel out of those questions.

yieldcrv• 3 years ago

I’ve been able to do that when I said I went to certain schools, worked at certain companies and changed my picture

My answers to assessments are the same

I’ve not been able to garner that respect with my actual background, look, and same level of skill

thinking about putting a filter on my webcam and just rolling with it, inventing this fictional person

rcbdev• 3 years ago

I tend to ask big companies what the maximum budget allotted for this position is if the negotiation gets too annoying.

Usually works - I think it's because they're setting an upper bound so it forces them to go easy on the lowballing.

jimmydddd• 3 years ago

An engineer friend of mine once hired me as a consultant for a company he had just started working for. When I got there, I noticed he had a company car, a great office (this was 1990's) and a bunch of other perks. I asked him about it and he said throughout his 20 year career he had watched folks joining companies he was at ask for and get great perks. So he decided to try it this time and it worked. :-)

tesdinger• 3 years ago

I get 30 days of private time off on my first job out of university. I live in Germany, here at least 20 days off are required by law for a five day work week.

LanceH2• 3 years ago

Negotiating to move the position to Germany is probably out of the question.

BenFranklin1002• 3 years ago

Here is a tip about getting raises at work: ask for them. Here’s another tip for growth while staying within the same company: ask for a new/higher level role. Managers are people, not all are mind readers, and in many instances, rightfully try to stay out of your private life and may not know what you presently want career-wise. Communication is key.

At our company we implement annual ‘performance reviews’, which are really 1-1 career path discussions where we try to align a person’s desired career trajectory along company objectives. I’ve found this to be a useful exercise in gaining a better understanding of where a person is in their life and career, especially with those who don’t like to volunteer information. This is also a good venue to keep salaries up with market wages.

sumedh• 3 years ago

Here is a tip about getting raises at work: ask for them.

HR normally will say no, then you find another job and tell your manager that you are going to resign, manager talks to HR and HR gives you a small bump. Then you have to decide whether you stay or leave.

BenFranklin1002• 3 years ago

HR is not the place to ask for a raise. Your manager is. The manager will then make the case to upper management. HR is the place you go to ask questions about your benefits package, not career path.

rqtwteye• 3 years ago

That would get resolved quickly if salaries were transparent. They are are already transparent for the employer so a functioning market would require transparency also for employees.

otteromkram4• 3 years ago

I love how there are zero citations or other references, and the author doesn't provide any qualifications, yet everyone seems to believe this nonsense.

Bloomberg used to be a decent media outlet, but maybe that's chsnged. This feels like an AI-generated article (probably with some light editing).

Finally, if it was actually written by a human, way to stem future job prospects. Calling a prior company out by name and making the two salaries easy to figure out ($40k more == 40% more == $100k for the author and $140k for the coworker) are not bright moves for a burgeoning writer.

number62• 3 years ago

Bloomberg used to be a decent media outlet, but maybe that's chsnged

This happend to me too, I just noticed it because the site has a Wordpress favicon. Its not Bloomberg but Bloomberry - don't know if this is intentional but nice hijack

AznHisoka• 3 years ago

How did you mistake it for Bloomberg when the logo on top was clearly different?

human2• 3 years ago

As a manager, I often need to hire someone fast and will end up having to go above market to get good talent to make the move. I can’t afford to increase everyone else’s salary by the same amount. I will do it because I want to add help quickly to the team to avoid burnouts. It’s such a tough spot to be in. On top of all that, it’s hard to judge the level of experience compared to current employeed before the person gets onboarded.

selcuka2• 3 years ago

The article mentions a few reasons, but I believe the most important reason is the fact that they can reduce the average salary they pay by doing this.

A new hire will obviously seek the market average, so there is not much you can do about that. However, existing employees will not renegotiate their salaries every month, so the company will end up paying less than the market average per person. If the company raises everyone's salaries to align with the market average, they will be paying substantially more.

bawolff• 3 years ago

Feels like they are missing the obvious one - new employees have more leverage than existing employees.

If they are hiring that means they need that person. They also have to get them over the bump of joining. Old employees they just have to pay enough to stay. Staying involves doing nothing, switching jobs involves making decisions and taking risks. It always costs more to change something then it does to let it ride on inertia.

throwxzx• 3 years ago

This is why you should never stay with a company for more than a year

hapless3• 3 years ago

This whole thing is bad advice

* New hires get paid more because they are worth more to the employer. Point blank. You don't have to pay existing employees more to keep them working there. "A bird in hand is worth two in the bush" was meant to be a parable but it turns out to be rather more literal

* Never accept the counter-offer. If you have gone as far as interviewing outside, you are already checked out, and you are already branded as disloyal. It's time to make your exit! If you ask for a counter-offer, it should be a move to squeeze more out of your offers, not a real attempt to "stay" where you have already decided to leave

* Arguing about a raise is almost always a waste of time. If you are not happy with your 3% COLA, will 5% really mollify you? LOOK FOR NEW WORK

silisili• 3 years ago

Disagreed on point 2. I was at a company more than a decade, and the only sizeable raises I got were counteroffer matches. I liked my job and company, and it made me feel valuable.

And if you say 'well if you were valuable you shouldn't have had to', you're absolutely right, but it's the way things work. My first manager told me I was underpaid, that he couldn't fix it unless I had another offer in hand as he was capped by the company at 4% raises. So I did, and he did. And I did it 4 more times, in total 4xing my pay.

I did leave eventually, but that had nothing to do with pay.

ironmagma3• 3 years ago

If you are not happy with your 3% COLA, will 5% really mollify you?

Most of the jobs I had didn't even have a COLA. So yes 5% would be fine.

New hires get paid more because they are worth more to the employer

Anyone who manages a company should put their money where their mouth is and fire their whole team, and hire a new one. Those new hires are worth far more than the existing team was. Except, we all know it's BS, and existing employees are what keep a company in existence.

hapless3• 3 years ago

I mean, they ARE putting their money where their mouth is

They pay existing employees less, and new employees, more. If a whole team quits, a replacement will be more expensive. That's the state of the game!

unmole• 3 years ago

Never accept the counter-offer. If you have gone as far as interviewing outside, you are already checked out, and you are already branded as disloyal. It's time to make your exit! If you ask for a counter-offer, it should be a move to squeeze more out of your offers, not a real attempt to "stay" where you have already decided to leave

I quit because I felt I constricted in my role. I was given the option of switching to a different role within the company and went on to have the most professionally rewarding and satisfying years of my career.

acuozzo2• 3 years ago

Never accept the counter-offer.

Even when you're the product (e.g., you're employed by a contracting company) and the demand in your industry is far greater than the supply?

n_ary• 3 years ago

This problem is extra hard in my side of EU. In here, talking about one’s pay is somehow considered a big taboo so no one talks and many get underpaid. The key to the game is always negotiate higher number in the beginning or go to one of the employers using union(e.g. IG Metall) which might not have a position you want. This is usually very prevalent in startups and they can cite their size and budget and continue underpaying someone. Usually, unless your employer has a formal open scale or was part of Union tariff, knowing who was being paid what is nearly impossible.

jredwards• 3 years ago

I'm deep in the sausage making. This reasoning is mostly spot on, though I've never heard anyone directly admit to his first reason. At the end of the day, it's not that hard for me to get a req for a new hire bumped up, but giving an existing employee a raise turns out to be almost impossible excepting a yearly cost of living adjustment that absolutely will not keep up with inflation.

grumpy_coder• 3 years ago

I think the article does miss that a raise for exactly one employee is fairly easy each year. Two, maybe three is normal. But I have nearly a hundred, so virtually everyone is falling behind eventually, even the ones that do get a raise one year in five.

slyall• 3 years ago

One company I was with had a rule that former employees couldn't be re-hired for 18 months after they left. This was to stop employees getting pay rises by via the hiring process rather than the standard review process.

At another we had somebody from the helpdesk join our team, he rapidly skilled up but the company had a rule that max pay-rise was 20% annually and he was on half what everyone else was on. Problem was escalated until an exception was approved by senior manager and he got a big 1-off payrise.

Rainymood• 3 years ago

So, effectively, there was... no rule.

TheCoelacanth• 3 years ago

There's always a way to make an exception to any rule. The question is how high you have to go to find someone who is allowed to make an exception.

shdh• 3 years ago

I applied for a company, nailed the interviews, received an offer Friday and they told me they wanted a decision by EOD Tuesday. I asked for a one day extension I could compare another offer I was receiving tomorrow, and the HR recruiter began trying to manipulate me with reasoning as to why he could not extend it. I ended up declining the offer because of how the interactions went.

deathanatos• 3 years ago

Calling these "reasons" is a farce. "Salary raises are capped every year, and hiring budgets > budgets for raises"? "HR teams don’t realize the long-term implications of paying new employees more than tenured employees"? "Employers overvalue experience collected elsewhere"? That's not a reason — that's gross incompetence. An experienced (i.e., retained) employee is one who knows the codebase, the in-and-outs of the process, where things are, what tools do what, and what people are responsible for what. That's — at minimum — 6 months of knowledge and "training"¹ that the new hire lacks, and will require 6 months to spin up on. The real insightful stuff — deep expertise, real ideas about systemic improvements? That's another 6 months, if not a year. To let that slip away and unnecessarily need to replace it is a 6-figure error, each time it occurs.

Reason 5 is where we start being intellectually honest with ourselves: "Retaining employees is a problem very few want to solve because of inertia" … tough cookies? This is literally the job of management, and that it's become so acceptable in the corporate world for management to just abdicate it is infuriating. Yet ICs are supposed to Get Stuff Done, but that's real hard to do when products are ghost-towns because the people who built it have just moved on, because they couldn't get a raise.

Why does management think they can build literally anything while effectively firing via attrition their best people?

This has personally been the hardest part of attempting to build a career. Bloomberg doesn't get it. My father's generation got rewarded for the work they put into a job. I should ask him sometime what he thinks a "decent", nominal %'age for a raise is. But I have no doubt that he thinks it is a positive number, whereas employers appear to have different ideas.

¹in quotes because I've seen exactly 2 companies do this sort of training; the rest it was "you just try to make do on your own". One no longer does the training, and IMO, is suffering because of it, and one is a FAANG.

mike503• 3 years ago

To me it's the same bs as giving new customers better incentives vs. rewarding loyal existing customers.

bomewish• 3 years ago

The piece gives a lot of superficial reasons, but they just push back the level of explanation.

Reading between the lines, the ultimate reason seems to be something like “because they can.”

SadCordDrone• 3 years ago

Because HR departments are full of morons. Very easy explaination but not politi

ukoki• 3 years ago

When choosing how to reward existing employees, companies have to choose a point between two extremes:

Increase salary too quickly and you leave money on the table by wasting raises on employees who would stay for less

Increase salary too slowly and you cripple your business with unsustainable turnover

This is simply a disagreement about where the “sweetspot” lies that generates the most profit for the company.

The general opinion on reddit / hacker news is that big companies choose a balance that doesn’t reward employees enough. But that’s not surprising because users on these platforms are mostly employees.

jc_811• 3 years ago

There’s an easy explanation I haven’t seen anyone touch on. When you’re an existing employee, the company has more power. When you are a candidate, you have more power

sokoloff• 3 years ago

It's very easy to follow the chain of evidence from Employer: "how about $X?" "No, I need $X * 1.15 or I won't join." "OK, how about X * 1.15?" "Done."

It's much harder to follow the chain from Employee: "I'm resigning and my last day will be Y." Exit interview: "Reason for leaving?" "Professional growth." "OK, glad it wasn't pay."

That combination leads employers to believe that "compensation is obviously important, but isn't the reason that most of our employees leave". People who are leaving aren't going to tell you the entire, crystal-clear truth because there's usually nothing in it for them. Maybe if they really like their co-workers and think there's a tiny chance you'll adjust will they tell you that they're leaving over comp.

NoPicklez• 3 years ago

From my perspective in my industry it is because the skills have been hard to find and the need to hire has fluctuated to different degrees. Sometimes the company is desperate, other times not.

When finding talent in a competitive market, particularly if a company find themselves desperate they often find they need to go above market averages in order to attain people.

It's not that they don't value you, it's simply the entry cost the company has found themselves needing to pay at that point in time.

If it an unfortunate reality for those already at the company, that those hired years after you may have found the position during a competitive period in the market, mixed with greater needs of the company.

Having said that, in my experience when REM has been subpar the company has performed a REM review and increased salaries. Occurred once or twice in nearly a decade.

getpost• 3 years ago

In my startup experience (in the 1980s) as a recent CS graduate, there were 2 disheartening situations:

1) An intern was paid 25% more than me. The disparity was even greater, since he was paid on a hourly basis, and I was salaried, working 60 hr+ weeks. It was baffling, the intern wasn't a family relation, and had no special skills. In fact, I had to onboard him. But, for whatever reason, he got an absurdly high wage. I suppose the hiring manager (who later went on to be an early Microsoft VP) wanted to be magnanimous and help a college student, but why not also be magnanimous with your regular employees who are busting their butts?

2) Starting salaries for new grads were increasing faster than salaries for existing employees, and salaries for existing employees weren't adjusted accordingly. Existing employees got stock options on more favorable terms though (having started earlier).

SergeAx• 3 years ago

but by then, I felt too offended

The situation is essentially this: someone from the market just got a better deal. Maybe because of the current market situation, maybe because they are just good negotiator. How on Earth does it entitle everyone else to the pay raise? And if you think so, do you also think that when the next hire accepts an offer with less comp - everyone else should have a pay cut too?

someone who had the same job title and the same experience

There's no such thing as the same experience. Every human being is unique, and every experience is unique too.

Anyway, getting offended without even talking to your manager, let alone just plain asking for the raise, is sooo counterproductive.

hn1986• 3 years ago

where do people get location-specific, accurate salary numbers? especially for places not in SF/NYC?

the-Black-Dread• 3 years ago

One of thing that I feel and worked well for me is to keep having open conversations with your manager about pay before the comp cycle.

And make sure to tell him that your know the market rate. TBH managers also some time are not aware of the market rate. They usually compare your pay with theirs when they were at your stage.

Why new hires often get paid more than existing employees

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