I'm surprised more companies don't do that, it's very smart. I remember leaving one company I generally liked because we were getting 1-2% raises per year. It didn't even cover inflation. (And before you ask: no, not just me, I knew this because of other's complaining not myself.) Also this was a very large corporation known to be good to work for! Leaving for a similar job got me a 25k increase immediately, and I know for a fact it was expensive and time consuming for them to replace me. I just don't get why companies do this to themselves. Long term, the only people that end up sticking around are the people that either can't get other jobs because of lack of skill, or they're tied to a geographical region, or they have some sort of (sometimes misplaced) loyalty. I'm not saying money is everything, but taking less than market value for half a decade seems like a terrible career plan.
Unless your previous company went out of business I'm not sure they've made an incorrect decision. They're able to get the work they need done at a lower price.
Sure they don't keep the highest performers but if they're not doing "rocket science" you don't need a rocket scientist.
Well, in that case it was for a project that required a very specific and somewhat rare set of skills (IE, you couldn't just throw a dart and hit a web developer). I was friends with a lot of people there, so I know it took them about 6 months to find a replacement, and even then the person was more expensive and had a long ramp up time to become as productive.
That's the big trick is most software companies aren't doing anything particularly novel or innovative that requires particularly skilled or inventive people. Where I work there's largely pocket of innovation where something new is brought into the company and then several other squads take that same process and apply it a few dozens times in a somewhat rote fashion.
Sure, but theres always ramp up time, domain knowledge, and the risk the new person is not as competent as they may have appeared in the interview, even if the skills are commodity
When most of the team can do the work because it's so generic the ramp up impact is more limited and there's usually some small back burner or simple work a new hire can be put on as a test and onboarding project.
Companies with these policies often end up in an uncomfortable position that they start lowering expectations to market. Over time this problem becomes bigger as the company can’t offer competitive wages anymore as the gap with existing employees is too large.
A startup that started 1-2% band adjustments in 2016 probably pays half the market rate for the same talent in 2022.
I'm comparing the costs of hiring a new employee versus offering a raise. The assumption is that most people will leave if they get an offer that includes a 15% raise rather than stay and only get 3%.
"the only people that end up sticking around are the people that either can't get other jobs because of lack of skill, or they're tied to a geographical region,"
Can confirm, this is me - lack of skill and tied down.
"but taking less than market value for half a decade seems like a terrible career plan."
Been taking less than market value for over a decade.
I had a similar experience. It was 3% counting raises for promotions. They could somewhat get away with it in a low inflation environment. Then again they had layoffs to cut costs even more.
Ironically they paid external consultants 3X the cost for skills they couldn’t keep internally.
I think it's about most corporate hiring and comp practices being tuned to weak labor markets where workers don't have many options and there's not strong competition for workers. Doesn't work well in stretches when tech is red-hot, which tends to be at least half the time, over a long time-line, at least so far.
