Employers are giving way more money to new hires

Employers are giving way more money to new hires compared to their existing employees.

This is pretty surprising considering the cost of replacing someone is high. Companies have to:

1. Absorb hiring costs
2. Search in a competitive market for talent
3. Distract team members for another round of interviews
4. Deal with onboarding costs and lack of productivity for the first three months of new hire

So why does this happen?

Here are two possible reasons:

Possible Reason #1: Retention efforts take time

Solid retention efforts and policies are the types of initiatives that are hard to measure and work over a long period, like 5 to 10 years.

And those are often things that can’t be prioritized because of the hypergrowth nature of the tech industry. Investors want to see results now.

Some companies will spend a lot of time and effort to pay the least amount of money they can per role. They take pride in that. It’s much easier to just bring new people in.

Unfortunately, I don’t think it’s the right way to think about the world if you want to be a great company.

Possible Reason #2: Their career ladder strategy isn’t developed

One of the most common things that happen, especially at high growth startups, is that your workload increases beyond the tasks of your original role, but your salary doesn’t change.

Defining these internal career growth ladders is quite time-consuming. And so if it’s not been well defined, then there’s no real precedent for you to get a raise.

In these cases, it’s not even the case that the company doesn’t want to give you a raise, it’s just that they haven’t done the work to establish what the next step looks like.

What this means for you

First, you need to realize that salary is just one element of your total compensation package. There are a lot of factors you can negotiate with that are outside of your base compensation. A quick list:

• Remote work
• Number of holidays
• Professional development opportunities
• Health and wellness benefits
• Bonuses
• Stock options or other long term incentives
• Your hours
• Projects you get to work on

Here are three principles you should keep in mind when negotiating a raise:

Principle #1: It’s all about the evidence

Identify your top two accomplishments over the last 6-8 months. Pick ones that have a quantifiable impact. This is your ammunition.

Present this info however you want, but make it as easy as possible for your boss to vouch for you. Don’t make him do any unnecessary work – ideally, it should be him having to just forward the evidence you’ve presented (via a deck or a document) to his higher-ups and then they discuss it.

Also, have a clear salary number in mind. There are plenty of ways to come up with a number – research sites like Levels.FYI, Glassdoor or maybe even reach out to others in the industry.

Once you have a clear number, bump it up by 15-20%.

Principle #2: Keep your emotions out of it

“Anger is our friend. Not a nice friend. Not a gentle friend. But a very, very loyal friend… It will always tell us when we have betrayed ourselves.” – Julia Cameron, The Artist’s Way

Anger can be good. But it’s not in your best interests to be angry when negotiating.

Instead, you want to be firm and solution-oriented. That means that you’re not fighting against your boss or the company – you’re on the same team figuring out how you can do your best work.

For example, if you give a number and they come back with one that you’re unhappy with, instead of getting angry you can simply respond: “That doesn’t work for me. I’m curious how you arrived at that number. Can we walk through it?”

When you keep your emotions out of it, you’ll focus on how the promotion benefits them first and not you. And that’s what they want to hear.

Principle #3: Timing matters

If you have a performance review coming up in 3 months, don’t wait for 2.5 months to bring up your desire for a raise. Start early. Your boss will need time.

Two other tips:

1/ Try bringing this up after you’ve completed a great project. Recency bias is real.

2/ If you’re purely trying to maximize your money, the way to do it is to get a competing offer and ask your current company to match it or go above. But you’ve got to be prepared to leave. High risk, high reward.