High salary and the price of loyalty

I recently saw the image above in one WhatsApp group on mine. it’s a modified version of another meme where knowledge favors people who read books instead of playing with their smartphones. But this modified meme is also more true, and more painful

it’s not really difficult to understand this meme. People who change jobs frequently get higher salaries compared to those who stay at the same job. Of course, this is not always the case and there are more parameters to estimate your income than just staying or changing jobs. But this meme captures one of the problems with the corporation in general and hiring in particular, that loyalty is not recognized.

I have been the one who has stayed

Before I write my critics of this phenomenon, just so you know that I am in the group of people who have stayed, and Indeed compared to some of my peers who I know move to other companies or new hires who join our company, I know that my salary is not great. It’s relatively small, and even when I was taking the role of project leader, I think my salary is rather sad.

But I stay, partly because I love Thales(Ex Gemalto) overall value and environment, and I’ve not been very successful at interviews. I think I’ve applied to Google and Facebook as everyone else did, I applied to a couple of companies in Malaysia when I wanted to move there to stay with my wife and a couple of other companies. But I got only one final offer from one company out of perhaps 6 or 7 companies I’ve ever applied to or I’ve been approached, which I finally rejected due to the salary.

So I definitely have a bias toward loyalty, and I want to be very honest about it.

Why loyalty is important

I don’t promote people to be blindly loyal to everything. Even to your spouse, to whom you’ve sworn to God to be loyal forever, you need to have some sort of boundary where being loyal no longer make sense. In the context of work, I guess a regeneration and the movement of people could be necessary where bringing in or out certain people could actually benefit both employee and employer.

But when your team switches too often, certain know-how will be lost together with them, no matter how much documentation you put in. replacing them with a new team will be really costly because of the training you need to put in, which is particularly painful if your company work on a lot in house technology.

I experienced this pretty hard when I led a team in Thales. We were in the middle of the project and suddenly two of my team moved, one resigned, and one moved to another team. We managed to recruit people to replace them but I needed to make a lot of adjustments to the planning. I also need to spare more time to train the newcomer to start contributing quickly. It’s not a particularly pleasant experience.

Having a stable team is necessary when you are working on a long-term project where everyone in the team knows what they are doing and you can depend on everyone to manage their task properly. When the employee stays, at least over the course of the project, you can count on them, you can build more reasonable planning, you can estimate better, and I think you can execute the project with less stress.

When loyalty is ignored

I have no problem if people want to switch jobs. There can be a million reasons to change jobs, you want to do something new, you want to move to another place, your current place is not conducive, any reason could be there. But most of the time the main reason to move is a better salary.

You already know from the beginning that when you move to another company, you will most likely get the increment, which in most cases, could be the increment you can get after 4 or 5 years if you stay in your current company. I’ve seen my friends who got 10%, 15%, or even 20% after moving to another company, sometimes with a similar industry to the previous company. They get an increment, simply because they move.

the problem with that is it will create the feeling that staying in one company will be bad for you in terms of your salary. Well, right now, it’s no longer just a feeling. There have been multiple research that shows that switching jobs constantly indeed pays you better compare to staying in one company.

As an employee, we have little incentive to be loyal. In a world where materialistic views become more prominent, how much you earn at the end of the month is a big factor to decide where you want to work. The idea that you can have a roughly similar job in another company with a 20% increment is a no-brainer. This is particularly true in Tech where average job retention is probably around 2 years.

Why do companies pay newcomers higher

it’s what economists call salary compression. it’s when literally company pays the newcomers higher to the point where the gap between the newcomer and the experienced becomes smaller.

I think there could be many factors causing that, tightening the labor market and increasing needs for talent sometimes push the company to give a better offer to attract talent. It’s, in the end, a supply and demand. But what I failed to understand sometimes is when the company ignores the situation of the people who have been loyal to the company and not considering their salary when giving an offer to the new hire.

I personally have rejected a candidate because he requested more than a senior in my team. I also failed a newcomer probation because he did not perform better in his salary range compared to someone with less salary than him. During the 2022 salary adjustment at Thales, I pushed for higher salary increments for people who’s been loyal to the team when the market was really favoring the employee.

Maybe the next year they will move, no guarantee that when you increase your loyal employee’s salary higher that they will stay. But what I think is important is to consider the salary of your loyal employee when making the offer for the new hire. Because when you pay outsiders higher, it incentivizes them to go.

Conclusion

Of course, I don’t have the full context, I’ve never been a manager or CEO, so my view could be biased. but I think it’s really important to look after people who care so much that they stay because the cost of losing them will be much higher.