
Companies Rethink Across-the-Board Pay Raises - protomyth
http://www.wsj.com/articles/companies-rethink-annual-pay-raises-for-all-employees-1471964521?mod=pls_whats_news_us_business_f
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krisdol
This article discusses the benefits of providing few significant raises to
high performing individuals rather than a nominal raise to all.

From the employee's (my) perspective:

* If I get a small nominal pay raise, I might stick around for up to the rest of the year, depending on how recently I started at the company. I don't know if this is a good idea, but sometimes promotions and raises aren't on the same schedule.

* If I get no raise, I'll be leaving ASAP.

* If I get a significant raise, I'm more likely to stay stay until next year's raise.

Having nearly doubled my salary in a short time by "hopping" at good offers,
there's little reason to stick around in companies that value manager bonuses
over employee retention.

~~~
clifanatic
> Having nearly doubled my salary in a short time by "hopping" at good offers

Watch out, though, because there's a catch-22: if you hop too many times, you
can end up being rejected for too many hops.

~~~
lochlan
I have never seen this be a serious consideration in this industry. IMO that
is a fairly "old school" outlook. Anecdotally I have never had a job for more
than two years and it hasn't been an issue for me yet.

An exception to this would be someone who has had a lot of contract work
without a lot of FTE, that is definitely a red flag.

~~~
clifanatic
> I have never seen this be a serious consideration in this industry.

You've been lucky - I've been turned down for positions I was otherwise
qualified for because of "too many job changes" (and yes, they told me so).
I've also seen hiring managers (from the other side) not even consider resumes
with too many jobs of too short a duration. I don't think it's the kiss of
death, as long as you're competent; I've never been out of work, in spite of a
four-year period where I held four different jobs, but it's worth keeping in
the back of your mind.

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acjohnson55
First of all, cost of living goes up gradually, so at the very least, it makes
sense to have your satisfactory performers not literally lose purchasing power
in their base salary year to year. Or if that's not compelling because a
corporation doesn't concern itself with its employees' finances, at the very
least, it should be tracking the market, which is liable to change from year
to year.

When it comes to me, policy is whatever; at the end of the day, no matter how
my comp package is arranged, I'll be looking after my bottom line. If I'm not
happy, I'm confident in my ability to seek a better deal. I'd have to really
believe bonus-based comp is likely to work out in my favor, at least on the
timescale of a few years. Longer than that, it's not appealing, due to the
lack of compounding of bonuses.

But I feel like as a developer, I'm a bit insulated from concerns of the
mainstream labor market. I just worry that for people without a whole lot of
mobility, this is just another step toward institutionalizing wage stagnation.

> Moreover, managers are reluctant to increase base pay further because higher
> payroll costs could result in heftier prices for customers, says Tom
> McMullen, a senior compensation partner with Korn Ferry Hay Group.

That's rich.

~~~
jomamaxx
Maybe they could give an x% baseline inflation increase, and then y% bonus for
quality of work.

~~~
snuxoll
That x% inflation increase is already what most employers have right now. I
get a ~3% raise every year in November, my manager has the ability to +/\- it
to distribute the total allocation based on merit to an extent, but everyone
gets roughly between 2.5-3.5% which keeps up with inflation - this is fairly
standard practice from what I've seen.

~~~
wuliwong
I can't speak for other large corporations but Oracle does not follow this
practice. My experience with small businesses (which employ more Americans
than large corporations) is that they too have not followed a practice of
guaranteeing a minimum wage increase every year to keep pace with inflation.

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banach
The working class should similarly rethink annual pay raises and instead
demand annual cuts in working hours.

~~~
ilostmykeys
love it

~~~
banach
For a development of this idea, see
[https://www.versobooks.com/books/1989-inventing-the-
future](https://www.versobooks.com/books/1989-inventing-the-future)

------
susan_hall
"For most of us, yearly pay raises are a fixture of corporate life"

Was this article written in 1955 and then accidentally drawn out of the
archives and posted in 2016? The annual pay raise died a few decades ago.
There were countless articles about it. You can go back and re-read early
issues of FastCompany, from the 1990s, where they talk about "you" the worker
needs to make themselves essential to the company, because annual raises are
dead and only real promotions bring real money any more.

And of course, at some point there emerged in the USA the odd habit of top
managers, such that to get a pay increase an employee needs to quit and go
elsewhere, or at least has to get a real offer from somewhere else, and only
then will "your" company give you a pay increase, to match that competing
offer.

~~~
chris_wot
Dunno about the U.S. but in Australua they are definitely a fixture.

~~~
gambiting
UK here - agreed. I don't know anyone working at a corporation where annual
raises aren't a thing, they might be small(3-4% if you aren't doing well on
your performance review) but they almost seem mandatory.

~~~
robin_reala
UK as well, pay raises have fluctuated between 1.5% and 15% during my career.
Only one year (2009) did I not receive a raise and that was down to the small
agency I was working for at the time having a mortgage lender as a primary
client. Not the easiest of years for them.

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rileymat2
One thing I missed is any mention of inflation. If you are doing a
satisfactory job not deserving of merit or demerit, wages should still be
adjusted.

~~~
andyfleming
What if the larger economic climate in a country is worsening and increasing
costs for both the business and its employees?

~~~
qdog
I have had some 0% years during the early 2000's. A couple times I've seen
companies slash 5% across everyone to not do layoffs. Just nit happening right
now in the US, enjoy the good times while they last!

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ryandrake
If you want people to not always be looking around to hop to the next salary
tier, then ideally people's salary should be ratcheted yearly to "what they
could get elsewhere", not blindly based on some simplistic formula like
starting * 1.xx^year + performance. Labor is a market just like any other
service, and prices (compensation) are set by what the market can bear.

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dunkelheit
B.F. Skinner has demonstrated in his famous experiments that animals react
much stronger to rewards that are highly unpredictable. Recently this
principle has been applied with much success to the design of addictive online
games. Time to apply the same principle to employee motivation?

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a3n
This probably works for C-levels, but for rank and file up to first and second
level manager it's just more friction in the job search and recruiting areas.
Because now, besides salary, you have to negotiate bonuses.

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st3v3r
Why would bonuses, which are 1) Taxed higher than income most of the time, and
2) Not guaranteed to happen, be more of a motivator than salary?

~~~
dragonwriter
Bonuses aren't taxed higher. They are, when paid separately, subject to a
different (flat) withholding rate, which is often higher than your average
withholding rate and, when paid together, they are subject to a higher
withholding rate than your average withholding rate because regular
withholding rates are shaped by progressive tax structure.

They are actually just regular taxable income, and are _taxed_ exactly the
same as additional non-bonus income.

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sgt101
Since recruiting excellent people costs nothing and is extremely easy this
idea makes sense.

Additionally team and corporate culture are valueless, so retaining these
things is unimportant.

Finally we can observe that consultants and executives are the fundamental
creative loci in our economy.

~~~
empath75
To play devils advocate, I've quit a few jobs who offered small annual raises
because other companies offered me a lot more money to leave.

Honestly a few percent raise a year for a competent programmer is insulting,
assuming you're increasing your skill set all the time.

~~~
duaneb
> Honestly a few percent raise a year for a competent programmer is insulting,
> assuming you're increasing your skill set all the time.

This is wishful thinking. Your skill set (learning new technologies + critical
thinking) is unlikely to improve over time. Furthermore, you're constantly
competing against new graduates in a world where your "skills" are a generic
commodity.

Good luck.

~~~
Pdxred
If your skill set is not improving over time, you are in serious trouble. When
the next lay off bus comes around, they gonna throw you under it.

~~~
duaneb
The only skill you need is to read man pages. I don't think you'll become a
better reader every year. But if you master this, you could change jobs
tomorrow without worry about adapting.

If you're calling technological knowledge a skill, you've already lost.

