When the new hire gets more pay than you
So, the new guy that joined last week is paid more money than you, you find out. Significantly more. And he has the same rank and title as you.
Not fair! you fume. You’ve been loyal to the company and this is how they repay you? What do you do? What can you do?
The short answer is, nothing.
Your employer has the sole discretion of paying the staff whatever it thinks its a fair price. Of course people will react to unfair compensation in their own ways but in principle, unless you have the clout, there’s really nothing much you can do about the gap. Yeah, life ain’t fair. Deal with it.
So why do employers have this habit of paying strangers more money than those who’s been loyal to them?
Well, these are the top reasons based on my experience.
- The person was hired on contract. Contract staffers are often paid more for doing the same job than their permanent counterparts. Their tradeoff? No job security, no perks, no bonuses.
- The market price for talent has risen. When they hired you 5 years ago, the price of a junior engineer may have been $3,000. They can’t get anyone for that price anymore so they’re forced to shell out more loot.
- You and the new guy were hired by different persons. Or if it was the same person, he may have changed his mind about how much your function is really worth. This can happen if the business or the market had undergone tremendous change.
The point is, if this happens to you, it might not be because your boss thinks less of you. It may be because you joined the company at the “wrong” time, a time when talent was a lot cheaper. After that your annual increments simply couldn’t catch up with market rate creep.
Its natural to think, why don’t companies just peg everyone’s salary to the latest market levels once a year? The answer – that can actually make companies go belly up. The only way they can pay more is if they increased their income or raised their prices. something that could effectively put them out of business. There’s also this question. Do you adjust the salary of everybody, including the chronic underperformers? What if they never leave?
Most employees who face this dilemma will eventually come to the same conclusion. Jump ship to reset their market value to more current rates.
It might work, or it might not. Just be prepared to answer this question from your prospective employers: “We looked at your last salary slip. Can you tell us why we should pay you significantly more than your last drawn salary?”