Why Newbies Are Getting Paid More Than You
and how you can earn more than them.
I was one of the first to join the pilot team. After two years, the business expanded and my company hired more people for my team. I was excited as this meant there was a chance that I would also get a promotion. I worked hard the past two years and knew more about the business than anyone else in my team.
As I hoped, I got promoted to level 2 and, along with that, I got a 10% salary hike. Before I could celebrate my salary increase, I heard gossip around the team that the newly joining level-1’s are getting more than my new salary.
That broke my heart. I’m more knowledgeable and skilled and I can complete the tasks twice as fast as a newbie. How is it fair that they are getting paid more than me?
I’m sure you might have come across a similar scene at your workplace. This is called Salary Compression. let me explain why this is happening and how you can overcome it.
Increased supply and reduced demand
In my scenario, two years prior they needed only 4 people but more than 20 people had applied for this role. So the company didn’t have to pay a ton of money to hire — the demand was more than the supply.
Now, the company wants to hire 10 people and there are not many people who will join for that low salary. So they have to increase the base salary to attract more applicants.
Hiring is about their goals, not yours. — Courtney
Inflation
Do you remember when your favourite chocolate bar was $1? Now it’s $1.25. That extra quarter is inflation. Inflation means your money can buy less today than it did yesterday.
For every country, the rate of inflation is different. In 2022, the US inflation rate was 6.5%. Let’s imagine your annual hike was 5% that year. This means that your 2023 salary was 1.5% lower than the previous year despite your salary increment.
Experience and educational qualification
Imagine one of the newbies who joined my team is an MBA, or has worked with the competitor for 5 years. They know more than me and can bring in new ideas and improvements to the current process, that I’m incapable of bringing.
So, the company is going to pay them more than me as they will be adding more value to the table than me.
Is salary compression ethical?
The companies where you find salary compression have these two things in common.
Lack of standardized pay structures:
These companies don’t pay you for what you’re supposed to be paid for the role but rather pay you the bare minimum that will lure you in. A sign that you’re going to be hired by these companies is that they will ask your previous companies’ payslips for verification. This is because, If you’re underpaid in your previous company, they can underpay you here as well.
Inconsistent pay increase: neglecting or intentionally not updating salaries in line with inflation and market value.
Isn’t it more expensive to recruit new hires than to update the salaries of the existing staff?
Companies don’t feel this heat as, generally, people are nice and loyal. They stick to the employer despite knowing this. Or worse; as salary details are kept confidential, they don’t even know that they are being exploited.
How can you earn more than the newbies?
Unfortunately, there isn’t much internally that would work. Employees have little influence on salary decisions. However, here are some approaches:
- Confront your manager and negotiate for a raise.
- Get promoted (Sometimes, you will still earn less or the same after the promotion).
Other external options that might work:
Look for a new job:
Try to find a place where they won’t ask you how much you are earning but rather will tell you how much they will be offering.
A move to a new company is often more advantageous for you than a promotion, as you will be offered a salary in line with current market demand.
Explore freelance or side hustle:
This is a great time to explore opportunities around you. Doing a side hustle might fill the pay gap caused by compression.
If you’re good at something, offer it as a service. I have friends who have done make-up as a side hustle and now earn much more than if they worked for someone else.
You can also look into becoming a creator by writing or making videos that can help others in your field.
If companies understand that the effects of salary compression, such as higher turnover and lower employee motivation, cost them more than adjusting the salary structure, then we might see an improvement. I think it is also important to talk and write about your experiences to create awareness against such unethical practices.
I’d love to see your feedback on this topic through the comments.
