Employees That Stay In Companies Longer Get Paid Less

Switching jobs works well when developers are in their 20&#x27;s. But I&#x27;ve found in the 30&#x27;s that a number of factors combine to make it much less attractive:<p>1) Each jump becomes less and less. There&#x27;s an invisible salary cap for software engineers. By the time a software engineer is in their 30&#x27;s, they&#x27;ve jumped a few times and are already close to the maximum.<p>2) There are costs associated with switching jobs. There&#x27;s a risk that the new job could be far worse (team, boss, culture, etc.). And you start at zero reputation and connections at a new company. The lack of reputation often means less flexibility and influence since the others at the company don&#x27;t trust you yet. The rewards are greater than the costs in the 20&#x27;s, but usually not in the 30&#x27;s.<p>3) It also happens to be the time when many get married and have babies. This increases the risk factor.<p>4) For total compensation there seems to be two tiers of companies, the top tech (google, facebook, amazon, etc.) and everyone else. I&#x27;ve noticed the big difference is not the base salary (top tech only pays a few % more). The really big difference is cash bonus + stock (RSU).<p>5) Unfortunately, the interview skills required to get into the top tech companies is biased against older software engineers. For an engineer in their 30&#x27;s college is a long time ago. They could spend time getting algorithm books and studying, but there&#x27;s less free time at this stage in life. So the only big jump that&#x27;s worth it financially (top tech company) is very difficult to do.

This &quot;loyalty penalty&quot; is far from new. It was totally obvious to me, and to many of those around me, over twenty years ago. If you stayed at one company, you&#x27;d fall behind the industry-wide trend. You&#x27;d start to see people who were more junior overall, and clearly less familiar with your product, hired with salaries above yours. If you wanted to keep up with that industry trend, you were <i>forced</i> to keep moving. I even know people who deliberately did &quot;out and back&quot; jumps to leap-frog over others <i>at the same original company</i>.<p>Where I part ways with the author is regarding what goes through employers&#x27; heads to perpetuate this. People who decide compensation seem to be in denial about the fact that people leave, or that their actions have any impact on how often that happens. Their biggest worry seems to be that if they make an adjustment for one person then everyone else will demand one as well . . . as though the cost of making such adjustments even across the board is greater than the cost of having to re-hire half the team every year. As a result they make such adjustments rarely, and try to keep them all hush-hush so nobody finds out, but <i>it never works</i>. People who were hired because they&#x27;re smart tend to figure things out.<p>Obviously, some companies have figured out that plain old-fashioned money is sometimes the key to employee retention. Google has sucked in <i>and kept</i> a lot of people this way, for example. Unfortunately, the current wage inflation has its own down side. Maybe some day we&#x27;ll find a place between these two extremes that doesn&#x27;t either screw employees or stifle innovation by smaller competitors.

For those of us in software development, an important thing to think about is what this does to code. The industry is full of old codebases tended by people who were never involved in the planning and initial design of those systems. Knowledge transfer rarely happens sufficiently to prevent accelerating maintenance headaches.<p>I think that we really need to find different ways of developing software to deal with this reality. A commenter here mentions the London financials community and people job hopping &lt; 12-18 months. I&#x27;ve heard terrible horror stories about some of that code.

HR is really a problem here (at least in the software industry). Pay is usually based on title and how many people you manage, but I think that&#x27;s pathological for managing developers because developers aren&#x27;t interchangeable. You have huge variances in skills and knowledge. The thing is, development skills scale in a way most job skills can&#x27;t. You can have at developer that has 10x more impact than other developers. (It&#x27;s not common, but it certainly happens). But those people are definitely not making 10x more. Or even really 2x more.<p>I think companies really need to realize that they have to compensate their best developers to get them to stay even if they&#x27;re not giving them management responsibilities, because the good ones are going to realize they&#x27;re good and either job hop or freelance. Saying &quot;we can only give you this much because your title is X and we don&#x27;t have an open management position, but we really value you!&quot; is a great way to lose your best people.

This article should create a fun discussion, but be aware that it&#x27;s most likely completely bogus. I suspect it suffers from survivor bias: anyone who is in a position to jump ship and get a 20% raise consistently is <i>not</i> average.<p>If you try to change jobs every 2 years and are not great at your current position, you&#x27;ll likely be sorely disappointed.

This is fascinating that there is actually hard evidence for this, but it&#x27;s not surprising to me given my own experiences.<p>When I first started out as an &quot;intermediate&quot; software developer (after a couple years as doing contract work) I was poached twice within a year of taking a position, both times the offers were at least 30% higher, an amount my existing employers where highly unlikely to match (in fact in the second case I knew this because I had already attempted to negotiate a salary increase with them before leaving).<p>These were, as they say, offers I couldn&#x27;t refuse. To financially cripple myself for the sake of loyalty would have been stupid. Moreover I felt it would also be stupid to remain with an organization that clearly had broken retention policies for employees.<p>What&#x27;s somewhat surprising is that this occurred in Vancouver, a city that is notorious for low pay in the tech sector. Nowadays, if I wasn&#x27;t doing my own startup I&#x27;m quite certain I would have received another offer of at least a 50% increase by now.<p>As a potential employer now I&#x27;m trying to figure out how best to ensure that I&#x27;m not making the same mistakes I saw at the places I worked for. Best as I can figure out, at least in Vancouver, this means paying salaries that exceed expectations and typical local numbers and look more like what people would be getting if they looked outside of Vancouver. I think this also means regular raises and bonuses so people don&#x27;t feel like staying is going to hurt them financially.

I&#x27;ve known people who stay for 4 months at a new higher-paying gig and then leave. Because the paycheck and new title didn&#x27;t make up for the toxic culture&#x2F;culture clash that they dove into. Since you see them more than you see your real friends, the people you work with become your extended family of sorts.<p>&quot;If all you get from work is a paycheck, you are underpaid&quot; -Jim Rohn<p>Daniel Pink says it best. The best jobs give you autonomy, mastery, and purpose. Even better, if you create a business that does the same.<p><a href="http://deliveringhappiness.com/the-motivation-trifecta-autonomy-mastery-and-purpose/" rel="nofollow">http:&#x2F;&#x2F;deliveringhappiness.com&#x2F;the-motivation-trifecta-auton...</a>

Top recruiters have known this for a long time and call it marking to market. The article nails what&#x27;s going on but the implementation is a little more nuanced. You don&#x27;t just switch jobs every few years to lock in pay raises.<p>When you&#x27;re in a hot market where labor demand outstrips supply, you should leave multiple times. For example, most people are shocked at how high software salaries are when they actually take a look at GlassDoor. The market is hot, you should be using it to increase your pay. When supply outstrips demand, you should stay at your current company and your above market pay. The other thing is you should get what you can when you come in the door because some companies go multiple years without pay increases and, when they do, they use a percentage of your existing salary (1-3%).<p>If you&#x27;re not leaving, you&#x27;re getting screwed, plain and simple. At Oracle, there were high performers and they came in 5-10 years ago and only received small raises. You&#x27;d see senior developers at 100k after being there for 10 years and then you&#x27;d see a new grad from MIT hired in at 100k. You wouldn&#x27;t really see VPs promoted from within but you&#x27;d see them hired in from the outside all the time. One woman left at 75-80k for maternity leave and got hired back in at 125k for the same position.<p>Moral of the story is be prepared to seek and get your actual market value because it&#x27;s probably higher than you think.

I&#x27;ve been saying this for years now, so its somewhat comforting to see someone else repeat it with a bit more evidence than my personal anecdata.<p>The main reason, in my opinion, is that corporate promotion practices have not responded to the incredible amount of intercompany competition for labor. At my current employer, the promotion process is a 3 month nightmare which requires an incredible amount of an employee&#x27;s (and his&#x2F;her manager&#x27;s) time, including the compilation of a detailed packet which describes the reasons for why the promotion is deserved and involving an approval process through a separate committee. Meanwhile, any software engineer at one of the big guys can walk down the street to one of their competitors, say &quot;I want a job,&quot; and probably have a seat and a 15% raise by the end of lunch time. With pay, benefits, perks, and culture being about the same at any of these companies, its easy to see why a career-focused individual would choose to jump ship every two years.

Very much this.<p>In London, certainly within Financial Tech, it is almost expected that you will job hop every few years, so the employers tend to price this in, with small incremental pay rises, little training, but often reasonable bonuses, to at least keep you there for about three years.<p>We also saw this was more prevalent with our offshore outsourced colleagues - over there anyone with even a modicum of skill would job hop every 6-18 months. Each time to lock in a payrise.<p>Employers will give you the shaft without a heartbeat of second thought; never seen why they should expect more from their &quot;resources&quot;.

The one missing piece here is the age of the employee. Of course this is true when you start out. Does it still hold after you acquire 15 years experience? Isn&#x27;t that when the stagnation and preference towards younger worker bees supposed to happen? The article is kind of useless without that one piece. It does not give the whole picture.

&gt; It’s a fact that employees are underpaid.<p>I just have to comment on that line in the conclusion of the article... When Forbes, Forbes!, states unequivocally that employees are underpaid, it&#x27;s probably time to sit up and take notice.

This is absolutely true. The best opportunity to set your pay is when you get the offer letter, after that it&#x27;s all nickel and dime increases. The next best time to adjust your pay is when you announce you&#x27;re leaving for a better role somewhere else. You have to be your own agent and demand the market rate for your role, skill set, and number of roles you&#x27;re being asked to cover. The only time your,manager might jump your pay without asking is when they realize you are drastically underpaid and could leave any time.

My best raises occurred when I went back to a previous employer after working somewhere else for a few years. Sure, job hop every three of four years, but also consider going back to work for previous explorers.

Having worked for a number of years in the Valley, I can say that the salary part is true. However, now that I work at a large tech company that&#x27;s public, the big thing that&#x27;s missing from this is stock &#x2F; RSUs. After doing my taxes, I realized how much of my compensation came from them and it makes a difference in a couple percentage points for base salary look small. On top of that, companies give refresher stock so that you accrue more of it the longer you stay.<p>After 4 years and earned all of that initial grant, it probably will make more financial sense to move on as the refresher grants don&#x27;t come close to the initial grant. It also is a point where salary disparity might be significantly different (depending on economic conditions).

This is plausible, though I&#x27;d be more confident in the numbers if someone could get data on total earnings over a period. Apart from salaries, those are impacted in either direction by, at least: voluntary termination and&#x2F;or signing bonuses (in the plus column) and periods of unemployment between jobs (in the minus column). I don&#x27;t know if those would change the totals significantly, but it&#x27;s a fairly dangerous assumption to take two different groups and assume 10-year earnings are really [10 x $avg_salary], and therefore that comparing $avg_salary gives the full picture.

Companies (with middle management) work like a family... all things optimized to welcome a new kid or take care of a crying child. As a senior (outside of executives) you are expected to shoulder the responsibility. This setup may look odd in light of this article. The only reason it works and is working fine is the setup feels natural and many have accepted it. Employees who couldn&#x27;t express their concerns in a smart way were seen as misfits. At the same time employees, worth even a tiny bit, who cried smart every 6 months were take care of.<p>There are limits on how many times you get taken care of for crying as the articled mentioned and finding another family is a perfect thing to do when you reach the limit. That new company is all ready to repeat the cycle for you.<p>Unfortunately, in many companies the middle management is a pack of caring elders and the people who didn&#x27;t exercise smart crying. Another reason why it(accept 3% annual raise, don&#x27;t expect more) became a norm. -- from a middle manager

This assumes that you are guaranteed a 10% - 20% raise with every jump, but my experience is that you operate within bands, and once you reach the top of your band, higher offers are rare. If you want to get higher offers you need to have been promoted to the next job level.<p>As an example, if you are a junior software engineer, you can only earn more as a senior software engineer, and again as a project manager, and again as a product &#x2F; line manager.<p>And the only way you get promoted to the next band is by staying for a set amount of time at a company to get promoted. Outright offers from a lower job level to a higher one is rare without demonstrated ability to do the job.<p>So yes over the short term, jumping ship often is more lucrative, but you&#x27;ll hit a glass ceiling and have difficulty breaking through to the next level.

You know, reading this thoroughly - the statistic is alittle unclear in the title.<p>The real stat is -- Over the course of a 10 year career, if you don&#x27;t stay at any jobs for more than 2 years, then you make 50% more. This becomes a larger number if the career length increases.

I found this absolutely true in my short stint as a software engineer so far (1 1&#x2F;2 years) - I have switched jobs twice, the first switch giving a 50% raise, and the second giving an 80% raise.<p>Companies don&#x27;t seem to be interested in retaining quality talent these days (or developing it), and get used to paying a certain amount for that talent, even if he&#x2F;she is worth a lot more. It is in each person&#x27;s self-interest to then seek out the compensation &amp; promotion the person deserves, assuming all other things being equal.

I feel like the ability to job hop like this will be in fairly small, concentrated geographic areas. In areas that aren&#x27;t as concentrated it&#x27;ll end up being pretty hard to do this.

To me it&#x27;s pretty obvious and it&#x27;s because of a simple, logical dynamic. If you apply for a better role within your firm, your current boss works against you. They may either block your move completely, or delay it. If you apply for a better role in another firm and get an offer, there&#x27;s no way for your current employers to act against your interest.<p>Companies can foster better internal mobility but they can never change this basic dynamic.

My dad figured this out in the 80s. Changed jobs every couple of years for a bigger title and more money. It seems obvious to me anecdotally.

The article alludes to data backing up what they&#x27;re saying, but (as far as I can tell) doesn&#x27;t actually reference any. It is just a collection of anecdotes.<p>I have found that as I&#x27;ve been at companies longer, I&#x27;m more able to make certain things happen and I&#x27;m more capable of making a difference. That ability corresponds to an increase in my pay.

Longest job 2.3 years..<p>This is the best thing about contracting. With every new contract, you get to adjust your rate :)

I know few people who are working for company more than 5 years and are underpaid. But when I asked them, they were more concerned about seniority not about paycheques.

Or maybe just &quot;the kind of employees who get paid less also are the kind of people who have a harder time getting new jobs.&quot; Correlation != causation.

&quot;You don&#x27;t go anywhere and for more money seated in the same seat&quot;.

Job hopping worked for me, the only time I&#x27;ve done so.<p>Back in 2011, a friend of mine offered an opportunity to switch from where I was working (a small community college in Southern California) to eBay in San Jose.<p>The jump in pay was pretty good (I believe I was making about $70K at the college at the time and the new job at eBay was starting me off at $90K, along with some RSUs and a bonus potential). (Sidebar: the pay was actually better initially when they first called me at $105K, but then they called me the next day and told me they had made a mistake and dropped it down to $90K...even though that really ticked me off, I ended up accepting anyway because it was still a pretty awesome opportunity for a small-town guy like myself to work for a big company like eBay).<p>I&#x27;m pretty risk averse so while I was there I was looking at a number of things, such as benefits (health &#x2F; retirement), longevity &#x2F; raise opportunities in the future, rent prices, work enjoyment etc. (looking at some of the comments people have made related to doing stuff in your 20&#x27;s versus your 30&#x27;s...I&#x27;m in my mid-20&#x27;s but I probably act as risk-averse as a 40 year old). Even more so now that I&#x27;m married with a little one (and a bun in the oven).<p>Even though in $$ I was making considerably more, once I included the increased cost of rent in to live in San Jose (versus Imperial County, CA), I actually didn&#x27;t seem to be making a whole lot more. Plus, I didn&#x27;t quite feel like I had the same amount of responsibility &#x2F; enjoyment out of the work I was doing compared to the projects I was able to direct &#x2F; build at my old job.<p>So shortly after starting at eBay, when I found out my old job was getting upgraded into a management position (primarily due to the inability to upgrade a &quot;regular&quot; position to a higher salary) I opted to go back, even though my new salary would be a bit less than the eBay one ($80K) overall it&#x27;d be a decent jump since my overall costs were the same.<p>Since then, I&#x27;ve been able to complete all of those projects I came back to finish, along with a slew of new ones that have come up since then, but at the same time, I&#x27;ve had to start letting go of some of my development duties and replace them with management ones (mainly because my staff are non-developers...I&#x27;m really the only one handling online services and my other staff handle printing, publications&#x2F;copying, and mail duties for the campus). It&#x27;s been enjoyable, but at the same time I still want to become a better developer and it gets harder to do that at work now (and as someone else has mentioned, free time starts dwindling too).<p>Recently, after staying at the same salary for about two years, the management pay scale at the college was revamped, and as a newer manager I was able to receive a sizable increase because of it to my current salary of about $89K. For where I live that sort of salary is hard to find (i.e. it&#x27;s damn near impossible).<p>Fast-forwarding to today, I like to keep my eye out for jobs (either in Craigslist or in the Who&#x27;s Hiring threads each) in the Bay Area or closer, in San Diego, that would offer the &quot;full package&quot;: a great location, environment &#x2F; team, salary and while I&#x27;ve seen a few good options, it seems the most difficult thing to get across in an email or resume is demonstrating how much of an asset I could be as an employee.<p>I&#x27;m not really complaining (things are definitely in the good-great range currently) but I&#x27;m always looking for additional opportunities to continue learning and become better at writing software (and being able to focus on that full-time again would definitely be great, and I could still bring my additional skills as an entrepreneur&#x2F;manager to the table).<p>In the meantime, I went ahead and scraped our local Chamber of Commerce websites and sent out some old-fashioned snail mail letters to local businesses asking if there were any pain points or tasks that take up a lot of employee time that could potentially be automated or solved with software. I figure if I can get some interesting projects out of that it would be worth it and give me an enjoyable coding project to work on that solved a problem. So far, I&#x27;ve only received one response from a local liquid fertilizer &#x2F; trucking company so after finishing this message I&#x27;m going to go take a closer look at the info that business provided me on Friday to see what I can do for them :-).<p>P.S. I&#x27;m always willing to go and try out for a company...and luckily, I just happen to be on vacation for the next two weeks <i>hint</i> <i>hint</i>.

because people who don&#x27;t ask for a raise have more chances of getting a job, for longer.<p>ask for a raise, expect to get fired.

The conclusion of the article- that the easiest way to ensure you secure large raises every few years is to job hop, is probably true. But I think it takes a very defeatist attitude towards negotiating raises with present employers:<p>&quot;In 2014, the average employee is going to earn less than a 1% raise and there is very little that we can do to change management’s decision. &quot;<p>Most good managers know that it costs much more to find a new employee than to retain an experienced one- it takes a lot of time and effort to find a suitable candidate, and then to train them. I believe that given an opportunity, they&#x27;d rather pay up a larger raise than originally budgeted, to keep a good performer, than to have to find a replacement. But this rarely happens.<p>Why? I blame poor communication and avoidance. Most employees are loath to negotiate with their employers, and they&#x27;re usually not very good at it when they do. Negotiating is hard- it can be scary, uncomfortable and awkward to &quot;demand&quot; hire pay from your manager. It&#x27;s easier to just think &quot;there&#x27;s nothing I can do to change their minds, so I&#x27;ll just have to go find a new job elsewhere&quot;. That path allows you to avoid negotiating and still be offered a 10%-20% raise.<p>What would happen if, before any employee decided to leave for a new job, they met with their manager to discuss the situation? And really thoroughly discuss it- meaning a well prepared case for a solid raise: An outline of the employees successes during the year, details of how they&#x27;ve contributed to the company&#x27;s bottom line (even in a tangential way), hard stats on what the current job market pays for a someone with their experience, and a soft&#x2F;gentle reminder of the costs of finding&#x2F;training a replacement. All done in a calm and professional way.<p>Would every single manager just hand them a 20% raise and an apology? No. But managers are business minded, and are usually evaluated based on the costs and revenues associated with their team. I&#x27;d like to think that given a convincing argument like the one above, a good number of them would respond logically and offer larger, more reasonable raises.<p>Ideally a high performing employee shouldn&#x27;t have to do that- management should recognize their contributions and the costs of find a replacement. But that&#x27;s not reality. Pushing for a 10-20% raise for employees at the annual budget meeting would be met with responses that a manager is prematurely trying to solve a problem that hasn&#x27;t yet presented itself.<p>So I believe the best solution is for employees to have those difficult negotiation meetings before they decide to jump ship. It won&#x27;t work every time, but it&#x27;d work more than not having those discussions at all.

And H1Bs are cheap.

TL;DR - this is explained by: 1. Sociopathic corporate philosophies 2. Risk-mitigation against lack of competence and&#x2F;or integrity of the parties involved in the transaction (HR, low-level manager, employee).<p>My initial response to this was cynical and pithy: if corporations were people, they would be sociopaths (in far larger proportions than the actual human population). In this case, they seem to have zero regard for fairness, but rather only how they can use others to maximize the benefit to themselves.<p>Upon further reflection though, it is more complicated, and there are many factors and actors in play.<p>There is a misguided but universally accepted belief that corporations&#x27; supreme obligation is to maximize shareholder returns, and that it would be immoral to NOT take any lawful action that would increase profits. The net effect of this is equivalent to having a single sociopathic business owner who will do anything to maximize their own profits without regard for fairness except when a deficit of fairness begins to negatively impact this end. The effects of this philosophy impact decision makers directly and indirectly throughout the organization, and this phenomenon is one of the results. Being fair or rational in treatment of employees is not mandatory or even the primary driver of decisions.<p>One way this manifests itself is that management justifies its large salaries and bonuses by minimizing costs, of which employees are often a significant portion. Thus, incentive structures throughout the organization will likely reflect this. It doesn&#x27;t hurt that executives are likely to be sociopaths to some degree, and this just helps them justify their natural inclinations.<p>Even in a hypothetical case where all levels of decision makers in a company are benevolent and fair minded, there still remains the difficult problem of determining fair salaries for each employee. Developers aren&#x27;t truly fungible, but they are difficult to value (especially by those further removed from that role). So, in a sense it is rational to treat them as fungible unless you have a reliably accurate means of differentiating. If an HR person is 100% certain they don&#x27;t know what is fair outside of averages, it would be a rational decision to let an employee&#x27;s market price be determined by a public auction process among other companies (aka job hopping), rather than granting a request for a large raise outside the normal range.<p>Of course, this end could be mostly satisfied merely by matching an offer made by another company (aka job shopping) without requiring the employee to leave and return later. However, that is a very low-friction and low-risk proposition for the employee compared to an actual job hop, so inevitably would see much larger participation if accommodated universally. As HR has no way of knowing what the market rate is for all of its employees, it would also have no way of knowing how much this policy would increase the company&#x27;s costs if it implemented it and every employee utilized it. If a worst-case scenario would cause substantial destruction profits, this would be a high-risk change to implement, and likely would need other coordinated actions to ensure acceptable long-term profitability and approval from shareholders.<p>Additionally, there is the risk that the employee had no desire to actually accept the other offer, or even colluded to be given a non-genuine offer (from a friend, for instance) under the condition they had zero intention of accepting the offer. Only once the employee terminates employment and spends a substantial amount of time at another company have they proven the offer was genuine, and that their previous salary truly wasn&#x27;t sufficient to keep them. That is, without a high level of trust in the employee regarding the offer. It also helps if a trusted party (manager, co-workers, etc) confirms their exceptional value to the company, both in justifying the raise and in indicating there won&#x27;t be cascading impacts upon the rest of employee salaries.<p>Diverting from this policy requires additional risk and lower profits, mitigated only by a high degree of integrity and competency in all involved in evaluating fair compensation and the long term cost&#x2F;benefit of granting a raise vs. hiring someone else. The larger the organization, the less likely it would be a rational decision for upper management to assume this to be the norm. Integrity and competency are impossible to objectively quantify or measure, so for those who manage by metrics, I can see how this would pose a problem.

nowadays where got such thing as loyalty?<p>every man for themselves already