You are the only person who is ultimately responsible for maximizing your profits, so you should view yourself as your own President and CEO. Studies have shown that staying employed at the same company for over two years on average cuts your lifetime earnings by about 50% or more, and 50% is at the lowest end of the spectrum. This is assuming that your career only lasts ten years. The longer your career, the greater the difference becomes.
Human resources consultancy Aon Hewitt has released its annual salary increase survey of more than 1,000 companies. They have found that “variable pay” – merit pay and bonuses – is projected to decline to 12.5% of companies’ payroll, the lowest since 2013. Raises are also expected to be meager, with companies budgeting a 3% increase in 2018. Underperforming employees can expect even less. Two-thirds of employers are looking to increase merit pay differentiation. Among those:
- 40% are reducing or eliminating raises for underperforming employees
- 18% are using a more aggressive, highly leveraged merit increase grid
- 15% are setting higher performance targets
The current inflation rate is 1.9%, as published by the U.S. Labor Department. This means your raise is actually 1.1%. There is little you can do about management’s decision, but you can decide whether you want to stay at a company that is only going to give you a 1% raise. The average raise an employee can expect when changing jobs is between 10% and 20%. There are extreme cases in which people receive much higher pay raises, but this all depends on each person’s situation and industry.
Why can you expect so much more of a reward for jumping ship than you can for showing loyalty? The answer is simple. Recessions allow companies to significantly cut back on raises and the salaries of newly hired employees. While these reactions to a recession are understandable, they are meant to be temporary. Instead they have become the new norm.
Bethany Devine, a Senior Hiring Manager in Silicon Valley, CA who has worked with Intuit and other Fortune 500 companies told Forbes, “I would often see resumes that only had a few years at each company. I found that the people who had switched companies usually commanded a higher salary. The problem with staying at a company forever is you start with a base salary and usually annual raises are based on a percentage of your current salary. There is often a limit to how high your manager can bump you up since it's based on a percentage of your current salary. However, if you move to another company, you start fresh and can usually command a higher base salary to hire you. Companies competing for talent are often not afraid to pay more when hiring if it means they can hire the best talent. Same thing applies for titles. Some companies have a limit to how many promotions they allow each year. Once you are entrenched in a company, it may become more difficult to be promoted as you may be waiting in line behind others who should have been promoted a year ago but were not due to the limit. However, if you apply to another company, your skills may match the higher title, and that company will hire you with the new title. I have seen many coworkers who were waiting on a certain title and finally received it the day they left and were hired at a new company.”
Brendan Burke, Director at Headwaters MB, strongly disagrees. He told Forbes, “companies turn over great employees because they’re not organizationally strong enough to support rapid development within their ranks. In many cases, that is a recipe for discontinuity in service and product offerings as well as disloyalty in the ranks. As such, we take the opposite approach. Rather than force folks out after 24 months, we try to retain our junior and mid-level staff and develop them within the ranks.”
Mr. Burke is absolutely right. Most companies are not equipped for rapid promotions and reward their top performers for a variety of reasons such as office politics. Everyone hates office politics, but understands that it is an unavoidable evil and frequently a major obstacle to rewarding talent.
It’s a fact that employees are underpaid. Instead of focusing on things you can’t control, like the economy or management decisions, focus on the things you can. As the President and CEO in charge of your own profits, you can control your own salary by aggressively negotiating your opportunities and being unafraid to ask for more.