
Ask HN: Why is it easier to get a raise with a new job? - a_imho
Or why is it hard to get a decent raise?
In my experience it is pretty much industry standard to favour new employees versus old ones, but to me it does not make any business sense (apart from showing who is boss).
It cost time and money to cover for turnover and still new employees can be hit and miss. Also, they most probably need some form of training and it will be years until they have the same experience.
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vermooten
I found I was being 12% less than my peers. My boss said yes I'll get you a
pay rise to match. 6 months later, nothing had happened. It then took me 3
weeks to get another job paying 20% more. When I told my employer I had this
offer, all of a sudden the 12% appeared. I said no, too little too late - a
few weeks later they said "Name your price" to stay.

Simple explanation: they saved money. Of course now they have to recruit, and
then the new person needs a lot f time to learn what his company does (it's
complicated). Cost is WAY more than that 12%, but it doesn't show up on the
balance sheet.

So to answer OP's question: because companies don't really value their people.

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apacheCamel
Sorry to be nosy, but did you end up staying? I feel like being screwed over
like that would leave a bad taste in my mouth. Every single topic involving
pay from then on would just be awkward in my opinion. I may be a bad example
because I have a hard time letting stuff like that go, it was very similar to
a reason I left my first job in college.

~~~
odonnellryan
It isn't exactly "screwed over" IMO but it is really poor management.

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byoung2
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.

~~~
vonseel
> 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?

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nfriedly
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
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.

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panda88888
I think there are two main reasons.

1\. Internal process: the budget/process for promotion and pay raises are
probably relatively fixed for mid to large companies, so there isn't much room
for managers to navigate even if he/she champions the salary bump.

2\. More cynically, there is also friction for an employee to leave their
current position (interview, potentially relocate, risk of new job being bad
fit, etc). And this friction manifests as the pay gap between market rate and
salary. As a corollary to this, for an employee with a competing offer, this
friction is removed and the company is forced to re-evaluate the pay. But
there may not be anything the manager can do. See #1.

~~~
a_imho
1\. is cited most of the time, and it is exactly the issue at hand: it is not
set in stone budgeting must be done poorly.

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P_I_Staker
Lots of reasons. People tend not to appreciate what they have. However I think
the main reasons are economic and political. Companies want to keep costs
down. They don't want to pay market rate. Some employees will stay put,
because they're comfortable, and don't want to uproot they're life; so you can
pay them less.

Politically companies "want" to budget raises as a fixed cost and divy up
among employees. So they'll try to negotiate against their budget and fixed,
manageable raises / promotions. Lots of people will play along.

The logic is insane. Suppose I'm the employee, and selling a car; the company
is buying one. I want 10k, the company says, I've only "budgeted" 7k, but will
agree to 8k. Meanwhile I have a buyer willing to pay 12k; company says no
deal, and instead goes out and pays 15k for the same car. This seems to be how
many of these situations unfold. The crazy thing is many employees are willing
to stay for less than they can get on the market; but the company just won't
do it.

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nostrademons
Three main reasons which feed back on each other:

1.) Giving big raises to existing employees often causes morale problems with
their coworkers. People talk, and they get resentful if someone who (in their
view) is working no harder than them is suddenly getting paid $20-30K more. So
giving a big raise to one person usually means you have to give it to all of
them. There are mitigating circumstances if you can point to some external
circumstance that's changed (eg. "Alice got her MBA", "Bob just led this big
project that made us $10M", "Cindy got promoted"), which is why companies are
more likely to give raises under these circumstances. By contrast, a new
employee doesn't have the gossip networks of existing employees, and the
business can often invent a reason why they're being paid more (eg. "David
brings special skills that are crucial for us right now", "Erin was hired in
at a higher level based on her experience at XYZ Corp.")

2.) Usually the company that hires away an employee for much more money has
very different profit margins and revenue growth than the one they were hired
from, and so they can afford to pay more. This is the economy functioning as
normal: employees _should_ jump from companies that are less productive and
less profitable to those that are more productive and more profitable, because
their labor will net both them and the company more.

3.) There's a cognitive bias known as anchoring, where people form a mental
model of how much a person/security/job/product _should_ be worth, and refuse
to update that mental model in the face of gradually changing facts. So if you
get hired in as a junior dev fresh out of college at $60K/year, your boss's
mental model of you will be "that college kid we're paying $60K/year". But
after a couple of years of experience, you will be _way_ more valuable to
everyone else in the market than the new college kids coming out now, and your
salary will reflect that on the open market - but your boss will still think
of you as "that college kid we hired for $60K/year".

The factors feed into each other, eg. anchoring is also why companies don't
adopt new production techniques and go into new emerging markets that generate
higher productivity per #2, higher productivity generates a qualitative
difference per #1 that justifies higher wages, anchoring is the reason why
bosses & coworkers are blind to minor or gradual differences in productivity
per #1, and social customs of the employees often reinforce old production
techniques and prevent them from benefitting from #2.

It may be helpful to think of the rational state of the workforce as _always_
requiring retraining, the rational state of business relationships as _always_
hit-or-miss, and the rational state of the job market as _always_ requiring
turnover. And then individual companies create bubbles within them to satisfy
human needs for security & stability, because our emotions evolved when the
pace of change was significantly slower. Because most people have a bias
toward stability, it creates economic opportunities for those who rationally
choose instability and throw away their old relationships for more
productivity and higher profits.

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crookshanked
This is very interesting, especially #3. Easy to forget that the employer's
view of the employee is unlikely to change even with the addition of value
adding education.

~~~
hellisothers
Aspects of #1 are interesting because it offers a path to making it easier to
get a raise/promotion if you can creat the optics that enable the promotion.
Any thoughts on how to accomplish that?

~~~
nostrademons
Advanced degree, leading a highly visible project, generating significant
sales or new business relationships, getting external recognition for your
work and reflecting it back on your employer. All of which are strategies that
are successfully employed by many professionals to get large increases in
compensation.

Even more interesting is how to profit from these incentives as someone who
_doesn 't_ work for the company. Many highly-visible startup acquisitions
happen because a mid-level executive is trying to create highly-visible
external accomplishments that justify them being raised up a compensation
level.

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rafiki6
Because for many employers, they live under the false pretense that not giving
you a raise is saving them money. Granted, it works most if the time. Most
people stick around out of complacency or even inability to get a new job.
This makes it so that the employer has absolutely no incentive to proactively
give raises. You really must force their hands. This is why I don't believe in
the stigma around job hopping. It makes no sense why anyone believes that
being loyal to a company is in their best interest. Every 2-3 years make sure
you are putting yourself on the market to test how much you're worth.

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akmittal
This gap is way too big here in India. Here you get yearly hike of 8-10% while
by getting a new job you can get as much as 60-100% hike easily. Maybe here
starting salaries are too low, You have to job hop to reach a good salary.

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segmondy
Game theory. Calling your bluff, most people won't leave if the boss says no.

~~~
a_imho
It would be a very elaborate bluff to interview at another company, receive a
bigger offer and not sign it.

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tedmcory77
I’d say it’s related to how HR is measured. They typically get their “big
wins” by bringing in “rockstars”, not giving raises.

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samfisher83
Maybe its the same reason why Phone, Cable, power, real estate companies give
better offers to new customers. Once they have you they think you will fall
into a routine and not look for a new jobs. You will have to go do interviews
find a good fit etc.

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ThrustVectoring
Equity compensation is both the cause and solution to this, I think. Newer
employees are favored on a cash salary basis, but older ones have lower option
strikes and/or larger equity grants.

Roughly speaking, any new equity grant from a company your parents haven't
heard of is worth $0 when you join. If your employer is successful, these
grants become worth actual money, and _that_ is your effective raise. If not,
then you can and should job hop instead for a cash salary increase.

On the flip side, since the new equity grants are worth approximately $0 at
signing, employers have to match the actually valuable equity that candidates
are receiving with cash salary instead.

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JMTQp8lwXL
> any new equity grant from a company your parents haven't heard of is worth
> $0 when you join.

There are companies that give sizable equity grants that your parents have
never heard of. Equity you could see on a public market that's worth more than
$0.

~~~
ThrustVectoring
oh of course publicly traded equity has value, just "parents have heard of
them" is roughly the threshold for _private_ companies whose stock is
illiquid.

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a-saleh
I would say it is about incentives.

If hiring manager is 'graded's on number of people hired, usually has a decent
budget that might dissappear every new fiscal year, and they want to hire you,
they will be willing to negotiate :)

On the other hand, your manager might operate on assumptions that you either
won't leave because of your pay and if you'd leave you would have left even
after you receive a raise.

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anotheryou
I got an offer for 150% of my current salary and a senior title. I declined
because it didn't match where I want my career to develop.

any way to leverage this in my current job? I'd have to disclose that I was
flirting with others...

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who-knows95
well, you should be going to interviews anyway right? i would just mention
that you do interviews with competitors to see what level of skill and
employment they would offer.

you aren't holding them over a barrel, but just make it known you know your
worth?

sorry if my advice isn't as formed as it should be.

[https://www.forbes.com/sites/jacquelynsmith/2012/10/26/the-d...](https://www.forbes.com/sites/jacquelynsmith/2012/10/26/the-
dos-and-donts-of-job-searching-while-youre-still-employed/)

~~~
anotheryou
Sure I should, but if I say something about it I'd have to double-coat it in
sugar so they don't start looking for a replacement or stop investing in me.

I might move away and look for a new job. If I don't I can tell them the I'll
stay in town but started checking my market value and need an adjustment :)

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Cypher
nobody likes paying more for the same service.

~~~
peteradio
Good luck I quit.

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toomuchtodo
You must be prepared to follow through. Always Be Interviewing. Give notice,
move, level up, rinse, repeat.

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potta_coffee
How often can you do this without it being a problem? I'm trying to make it
past a year at current job, it definitely requires discipline to see it
through. I don't want to be a job hopper but there are always shiny new
opportunities.

~~~
beagle3
When the economy is good, less than 1 year at a job seems excessive hopping.

When the economy is worse and employers can choose, even 3 years look like
"job hopping individual, will jump ship as soon as economy turns around and he
can get $1 more somewhere else".

Just decide if you optimize for comfort or money, and make sure you have a few
months buffer for the bad times.

~~~
potta_coffee
I don't really hop, but I don't have a great track record because one job
wasn't a good fit, then I freelanced / contracted for a while, etc, then
landed at another job that wasn't what they promised it would be in the
interview, etc.

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CloudNetworking
Because you have more leverage: No "raise", no work. At your current company
"No raise" _only_ means an increased risk of you leaving.

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okaycan
There is more inertia to move to a different job than stay. Companies know
that and thus have to compensate you for that added inertia.

