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Ask HN: Why is it easier to get a raise with a new job?
88 points by a_imho 16 days ago | hide | past | web | favorite | 64 comments
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.



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.


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.


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


I had the exact same situation. When I left they said how much do we have to pay to get you to stay. I literally told them that there is no amount I don't want to work for a company that won't pay me what they think I'm worth. The next job I took I got a 25% pay increase, and the job after that I got another 30% pay increase. At my current company I've gotten a bigger raise every year than I ever would have asked for and occasional bonuses.


Your 2nd company didn't pay you what you are worth so clearly you so choose to work for companies like that.


To his defense he wrote he woulldn't work for companies not paying what they thought he was worth, not what he was worth or what he was thinking he was worth. Basically companies that try to take advantage of him by paying less that what they know they should and could.


The second company in this anecdote folded my entire division after I had been working there a year. I had no idea I could get another 30% increase, it was a happy accident. And maybe before this job I couldn’t have got that pay increase.


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.


> 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.


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.


> 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?


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.


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.

My friend asked the guy that made that 400k post on twitter. Apparently that is total compensation for people at Uber and Lyft.


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)


Do you do contracting for backend or frontend?


devops


What kind of work within devops realm do you usually contract for if you don't mind sharing


The math is correct but this doesn't factor in inflation, so you probably need to change the original salaries down to whatever $40k in todays money was worth in 2009. That leads to 34k*(1.18)^10 = 178k, which seems much more reasonable


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.


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.


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.


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.


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?


We should clearly fire the egg.

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?


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.


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.


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.


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.


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.


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?


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.


This is the best reply.


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.


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.


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


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


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.

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


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.


> 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.


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.


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.


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...


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...


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 :)


nobody likes paying more for the same service.


Good luck I quit.


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


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.


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.


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.


How do you keep the interviews on the DL? The few times I've moved positions it's been a nightmare trying to keep my current boss from figuring it out.


Schedule them at lunch, do them before work, have a doctor's appointment to go to, there are a multitude of excuses you can give.

It's business, they aren't your friends, you don't need to tell them the whole truth.


The difficulty I Found was when there were 5 in short order - they start to notice your absenteeism.


"My dog is having health issues".


By this point, do you really care?


Absolutely, it could fall through. Don't be prepared to jump until you know you're going to land softly.


why keep it secret make it known and maybe they just give you that raise


Then you're a flight risk. Laying that out like that let's them know you've got one foot out the door and the only thing keeping you there is bribery.


Isn't that how business works?


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


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.




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