Let me walk you through how this happens and what someone should do about it.

 

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I'm Jeff Altman, The Big Game Hunter I'm a coach who helps people with workplace
related questions-- job search, hiring more effectively, managing and leading, you
know, things related to the workplace.. This was originally asked in its . . .
specifically about software developers.. Why are new candidates sometimes given a
higher salary than someone doing the exact role who's been with the company
longer great question and and it's funny because corporations try to use the
existing salaries sometimes as leverage to push an outside person down oh we
have a person on staff or people on staff who are appreciably stronger than
you and then they try and talk you down the reason they go to the outside is
because they perceive a skills deficiency the market may have moved and
thus the outside person should be paid more and thus to attract the person
they're gonna have to come up with money. Another reason why the internal person
is paid less is that the system is set up to be a disincentive to staying
within a firm. Let me just give you an example. I'm gonna work with simple math--
a hundred thousand dollar-a-year person, stays with it a firm and they get
a 3% raise they're now a one hundred three thousand dollars the next year
they get a 3% raise. They're making one hundred and six and change they get
another three percent raise and now there were a hundred and nine and change.
They haven't cracked $110. that external person may be making 95 or a
hundred they change jobs. We know they're not going to change jobs for a three
percent raise. I'd say they're making ninety five
thousand. They may change jobs to $105, $110 or more. Let's assume 110 right off the
bat. The person is in an advantage position with regard to wages and each ensuing
increase again let's say three percent is going to push them higher than the
person who showed loyalty firms do this all the time they have this disincentive
in the system decide not to pay people what the market is but to pay people
what they think they can get them for that's true when they hire on the
outside that's true with salary increases on the inside in what I've
said for many years is that if a person changes jobs every two and a half years
they will be significantly more highly paid than if a person shows loyalty just
follow the math it makes obvious sense so why do they do it
Because they need to why don't people leave these firms
well stability and loyalty tend to be the two major reasons and then from
there it becomes fear of change and a host of other things
I'm Jeff Altman. I hope you found this helpful. My website is TheBigGameHunter.us
hunter dot us if you go to the site go exploring because there's a ton there
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ABOUT JEFF ALTMAN, THE BIG GAME HUNTER

Jeff Altman, The Big Game Hunter
Jeff Altman, The Big Game Hunter

Jeff Altman, The Big Game Hunter is a coach who worked as a recruiter for what seems like one hundred years. His work involves career coaching, as well as executive job search coaching, job coaching, and interview coaching. He is the host of “No BS Job Search Advice Radio,” the #1 podcast in iTunes for job search with more than 2100 episodes.

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Why Are New Hires Given Higher Salaries Than Existing Staff? | JobSearchTV.com

 

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4 Responses
  1. TheLuismondo

    I understand your reasoning, but what’s going on at GameStop right now doesn’t make any sense.
    They are paying higher rates to new hires because the market have moved and keep the existing staff angry, which I think impacts on the output quality on way or another, it takes 3 months for a new employee to get up to speed, so the employer is paying more for less. It’s been 6 months on this situation and the fact is that they keep 1 out of ten new hires in les than a month, some don’t even last a day, most of them don’t make it through a week. So they are paying more to employees that don’t even produce 50% of the goal and damage the entire staff mood, no one cares about anything right now, when management try to say anything about why is some one just hanging around instead of working, the answers is the money sign with no remorse or fear.

  2. Plissken

    This is a type of compensation system that works fine for stupid administrative work where a skillset is something a trained monkey can do. This makes absolutely no sense for most engineering work. The ditzes in HR and on the executive boards think they can just find new talent to fill in gaps while letting attrition take care of the rising cost of compensation, but what gets sacrificed is the so-called “tribal knowledge” that goes out the door.

    Time and again when people that have 6 months, a year, several years worth of working through the company’s system and culture, now all of a sudden the company is reliant upon the new person to pick all that up when people leave. Instead of trying to cultivate a work environment that people feel reasonably compensated for in their growth, they incentivize the seasoned employee to look elsewhere? That’s just dumb. Having an entirely new person have to come in, learn the products, engage in potentially completely new design challenges, having to establish relationships with new field applications engineering and sales contacts, having to understand the limitations of the established framework of the company in what dictates where designs need to go… All that is wasted time and money having to get constant new hires oriented the way business needs to be conducted. I don’t understand how anybody interested in cutting cost and lead time to market for the company’s products is convinced that all this waste and turnover is a necessary byproduct of keeping a company going.

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