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I've seen it time and time again. An employee wants a 10% raise but management says no and the employee quits. Then after a long search a new hire comes in at 1

I've seen it time and time again. An employee wants a 10% raise but management says no and the employee quits. Then after a long search a new hire comes in at 10% more. Why not just give the existing employee that 10%? I think the reason is that big raises are not sustainable over time. If you keep giving your employees 10% raises every year, eventually you can't afford it. So you keep raises to 2-3% as long as possible and only give larger raises along with promotions, or when hiring a new employee. I was fortunate to find out this pattern early in my career, and I was able to average 18% raises for over a decade by switching jobs nearly every year.

geezerjay 8y ago
> I think the reason is that big raises are not sustainable over time. I would add that new hires are seen as solutions to a problem that desperately needs a solution, unlike old employees who are just there doing their work. A company looking for a new hire is not in the same negotiating position as a company that isn't.
IMTDb 8y ago
The other option is that after some time you notice that you actually do not need a new hire. Or that the new hire matches the needed position more than the guy that left. Or that instead of a senior dev, you hire a junior one instead. Everyone talks about the case where it would have been better to just give the raise to the existing employee, but there are TONS of situations where the company ends up winning instead, and those are never talked about.
- smileysteve 8y ago
  In the situation with the jr dev, it works for 2-3 years, until they leave because they're not getting raises, and all of a sudden they realize that they don't know everything (a typical stage in becoming a mid-level) and now have nobody to learn from. Or, when they are getting older and realize they probably aren't long for the company because nobody has their family, values, lifestyle.
P_I_Staker 8y ago
Basically, it's to rip off loyal employees. A huge percentage will just stay. It's not about paying you the money, they'll have to start paying everyone what they're worth. They'd rather just pay the extra 10% to take it of the table.
erikpukinskis 8y ago
The alternative would be to actually measure how much employees are worth, and pay them that amount minus overhead. However, most employers have no idea how much each employee is worth, especially in engineering. The equation is basically “coder? Ok, add $50k. special coder? Ok, add another $50k. We can’t do too many of those though.” It’s like, utterly out of touch with the actual business value that people create. Instead, companies should actually track changes to their business, and then map those back to the person-quarters that unlocked that business. That’s work though. And it maybe opens you up to political infighting over those attributions. But I suspect people would be more chill about it if they were getting paid what they are worth. And, side bonus: you’d find a bunch of people who weren’t contributing much for their pay and save a lot of money by firing them. Other side bonus: you’d probably eliminate gender and race based pay gaps in your company and drastically increase diversity, with many of the top female and minority workers joining you because you’ll actually pay what they’re worth, not what someone like them is “traditionally” assessed for. In the end, all of that is probably too scary for most companies. We’d rather just follow some arbitrary rules and know wer’re going to get paid, and put the whole reaponsibility for solvency on the executive team, than to take responsibility for ourselves making a real, traceable contribution to the business.
- hopler 8y ago
  An apple pie is delicious. I believe it's 17% because of the sugar, 36% because of the butter, 12% from the egg, and 45% from the apple. See the problem with your proposal?
  - jakobegger 8y ago
    We should clearly fire the egg.
- byoung2 8y ago
  One big problem with your approach is when one person's value depends on another. Say I build the app but marketing doesn't sell it?
vonseel 8y ago
> I was able to average 18% raises for over a decade by switching jobs nearly every year. Hmm. For those curious, assuming I still understand how to do basic math like this and a few relatively low starting salaries for year one: 40k*(1.18^10) = 209k 60k*(1.18^10) = 314k 80k*(1.18^10) = 418k Are you one of these software engineers I hear about making 400k? I suppose I would find 150k-200k as more believable since your bio states you are a "remote software engineer". Or maybe you over-estimated the annual raises?
- nfriedly 8y ago
  I'm also a remote software engineer, and my guess is that you're starting too high. My first job (on-site in Ohio) paid something like $7.50/hr (so ~$15k annually), and I'm now at $165k base 14 years later. That puts me in the same ballpark of 18% annually.
  - byoung2 8y ago
    I started at $30k in 2004 and by 2017 I made $200k. It is about 18% on average. The biggest jumps in a single year was 2009 going from $55k to $80k in a 3 month period, 2011 going from $80k to $110k, and 2013 going from $117k to $140k by using a counteroffer.
- salaryFoo 8y ago
  As another data-point: My day-rates as a long-term contractor which have some decent year-on-year increases from switching clients 2012 £200 (first time programming for money) 2013 £300 (new client) 2014 £425 (new client) 2015 - took a year off - 2016 £500 (new client) 2017 £650 (same client) 2018 £800 (new client)
  - apta 8y ago
    Do you do contracting for backend or frontend?
    - salaryFoo 8y ago
a_imho 8y ago
I think the reason is that big raises are not sustainable over time. The argument is turnover costs at least as much but probably more.

geezerjay 8y ago

> I think the reason is that big raises are not sustainable over time. I would add that new hires are seen as solutions to a problem that desperately needs a solution, unlike old employees who are just there doing their work. A company looking for a new hire is not in the same negotiating position as a company that isn't.

IMTDb 8y ago

The other option is that after some time you notice that you actually do not need a new hire. Or that the new hire matches the needed position more than the guy that left. Or that instead of a senior dev, you hire a junior one instead. Everyone talks about the case where it would have been better to just give the raise to the existing employee, but there are TONS of situations where the company ends up winning instead, and those are never talked about.

smileysteve 8y ago
In the situation with the jr dev, it works for 2-3 years, until they leave because they're not getting raises, and all of a sudden they realize that they don't know everything (a typical stage in becoming a mid-level) and now have nobody to learn from. Or, when they are getting older and realize they probably aren't long for the company because nobody has their family, values, lifestyle.

P_I_Staker 8y ago

Basically, it's to rip off loyal employees. A huge percentage will just stay. It's not about paying you the money, they'll have to start paying everyone what they're worth. They'd rather just pay the extra 10% to take it of the table.

erikpukinskis 8y ago

The alternative would be to actually measure how much employees are worth, and pay them that amount minus overhead. However, most employers have no idea how much each employee is worth, especially in engineering. The equation is basically “coder? Ok, add $50k. special coder? Ok, add another $50k. We can’t do too many of those though.” It’s like, utterly out of touch with the actual business value that people create. Instead, companies should actually track changes to their business, and then map those back to the person-quarters that unlocked that business. That’s work though. And it maybe opens you up to political infighting over those attributions. But I suspect people would be more chill about it if they were getting paid what they are worth. And, side bonus: you’d find a bunch of people who weren’t contributing much for their pay and save a lot of money by firing them. Other side bonus: you’d probably eliminate gender and race based pay gaps in your company and drastically increase diversity, with many of the top female and minority workers joining you because you’ll actually pay what they’re worth, not what someone like them is “traditionally” assessed for. In the end, all of that is probably too scary for most companies. We’d rather just follow some arbitrary rules and know wer’re going to get paid, and put the whole reaponsibility for solvency on the executive team, than to take responsibility for ourselves making a real, traceable contribution to the business.

hopler 8y ago
An apple pie is delicious. I believe it's 17% because of the sugar, 36% because of the butter, 12% from the egg, and 45% from the apple. See the problem with your proposal?
- jakobegger 8y ago
  We should clearly fire the egg.
byoung2 8y ago
One big problem with your approach is when one person's value depends on another. Say I build the app but marketing doesn't sell it?

vonseel 8y ago

> I was able to average 18% raises for over a decade by switching jobs nearly every year. Hmm. For those curious, assuming I still understand how to do basic math like this and a few relatively low starting salaries for year one: 40k*(1.18^10) = 209k 60k*(1.18^10) = 314k 80k*(1.18^10) = 418k Are you one of these software engineers I hear about making 400k? I suppose I would find 150k-200k as more believable since your bio states you are a "remote software engineer". Or maybe you over-estimated the annual raises?

nfriedly 8y ago
I'm also a remote software engineer, and my guess is that you're starting too high. My first job (on-site in Ohio) paid something like $7.50/hr (so ~$15k annually), and I'm now at $165k base 14 years later. That puts me in the same ballpark of 18% annually.
- byoung2 8y ago
  I started at $30k in 2004 and by 2017 I made $200k. It is about 18% on average. The biggest jumps in a single year was 2009 going from $55k to $80k in a 3 month period, 2011 going from $80k to $110k, and 2013 going from $117k to $140k by using a counteroffer.
salaryFoo 8y ago
As another data-point: My day-rates as a long-term contractor which have some decent year-on-year increases from switching clients 2012 £200 (first time programming for money) 2013 £300 (new client) 2014 £425 (new client) 2015 - took a year off - 2016 £500 (new client) 2017 £650 (same client) 2018 £800 (new client)
- apta 8y ago
  Do you do contracting for backend or frontend?
  - salaryFoo 8y ago

a_imho 8y ago

I think the reason is that big raises are not sustainable over time. The argument is turnover costs at least as much but probably more.