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Why aren’t salaries increasing?

June 6, 2008

If you were an employer, would you give a raise to your staff in response to the recent hikes?

Personally I would. Not by 40% but by a token amount to say that when we celebrate, we celebrate together and when we suffer, we suffer together. It will not restore purchasing power back to normal and it will screw up my financial targets for the year but I believe if you can’t handle the ups and downs, you shouldn’t be in business.

But that’s just me, a small outfit who can make its own decisions in an instant. What about big corporations, why are they so reluctant to increase salaries over the years beyond the obligatory 4-6% year end increments?

To understand that, you have to understand what a salary means. A salary is a price tag on your talent. Its subject to market forces, just like any commodity. A scarcity of talent will lead to a price increase. A glut will lower it. Labor laws ensure it stays within a reasonable range but still, the law of demand and supply will eventually determine how much you make.

If you’re only getting tiny annual increments despite working hard and meeting targets, a possible explanation is that there is a glut of the talents you are providing, meaning there are plenty of substitutes available. If your talent is one of a kind, you command a premium.

If your company is doing badly, they have no money to give you anyway so you can forget increments. If you are suffering under a greedy employer who says 1 for you, 100 for me, then you asked for it by staying there.

So how do you make sure you are consistently getting high increments and even offers? Not by being one of the millions of ordinary programmers or account executives or secretaries who’s only concerned with a 9-5 routine. Its by making your talents special and scarce. Its by making it expensive for your employer to lose you. And there’s only 2 ways to do that. You either be a superstar performer who’s in the top 10 of that job category or develop a talent that is in demand but very difficult to find.

The question now, if you are asking why isn’t your salary increasing, is do you fit any of the above?

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3 Comments leave one →
  1. June 6, 2008 10:36 am

    The 1st point employees should asked themselves is are they getting standard pays. I have known a lot of company that are not paying the standard salary to their salary. Those company are those big corporation and MNC which earns millions every year. And yet other smaller company with less than 10 workers are paying the same salary or sometimes even higher salary. These big corporation even has the cheek to tell their employee that the company are growing fast and soon gonna earn billions and yet give RM30 increment while buying new luxury cars for themselves and put it under company name.

  2. June 6, 2008 11:41 am

    yup.. agree with you willchua.. here is a true story experience by my mom.. her ex-company was bankrupt.. before that.. my mom and her colleagues suffered for 6 months working without getting a single cent! you might think.. if like that.. dont work la.. but do you think you’ll get back your salary if you stop working for them? my mom and her colleagues thought if they continue work there, at least there’s a hope.. the company might getting better.. then they can get paid! but her boss was so @#$%&* till i really dont know how to describe.. i do think in this 6 months.. the company at least earn some.. at least can afford to pay 2 months of their salary.. but the boss didnt do that.. till some of them (included my mom) cant stand it anymore.. finally.. they decided to resign.. then 2 months later.. the company bankrupt.. and they sell it to another company(or maybe bank..not really sure about it.).. become one of the share holder/partner.. and the company is not under his name.. so.. he is saved. what the heck! now my mom still hoping there’s a chance to fight back.. but its already 5 years.. quite hard..

  3. Damien permalink*
    June 6, 2008 3:17 pm

    @willchua, some companies pay out less cash but make up for it with cashable benefits like employee stock options. Sometimes it works out to be better than standard pay but if its not, then why stay with the company.

    @hf, sounds like the company had a serious debt problem and any money they earned went to the debtors first. When companies go under receivership, any income they get is managed by liquidators. The boss has no control. Or maybe the boss took the money and used it first. A responsible boss would be honest with the staff about the situation. I’ve known bosses who even looked for jobs for their staff when their companies decide to shut down.

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