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When new hires get paid more, top performers resign first

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Re: When new hires get paid more, top performers resign first

#21

Used to be a high performer at Big Tech. Found out a coworker with less experience at the same level had $200k/year more in comp. I didn’t care about the money, I care about being taken for a fool. There were additional factors, but I left and started my own company within three months and nobody in my old team has anywhere close to my experience.

Not only is it an example of the idiotic decision making processes that companies use that are not effective in the long run, it demonstrates how they are happy to pit employees against one another.

It is awkward for a person to know that they make substantially more than coworkers. It forms a feeling of guilt and other negative feelings. But what are they supposed to do? Negotiate lower salaries when starting or after working for a while? And it's definitely frustrating knowing other coworkers with the same or less experience and responsibilities as you make a whole lot more. It forms feelings of jealousy, not feeling valued, self worth, and other negative feelings. And all of this is caused by the company simply not caring about actually employing and managing humans.

And it's always been insane to me that companies will let an experienced person leave because they won't raise their salary and then immediately put out a job requisition at a salary that would have kept the experienced person. It makes no sense, and yet, this happens constantly.

Re: When new hires get paid more, top performers resign first

#22
>Interestingly, even employees who aren’t actively looking for a new job may become more aware of shifting market prices when a new hire joins at a higher salary, sparking concerns that they may be being taken advantage of.

Because being paid less to do more means they are being taken advantage of. That's blindingly obvious. It's just that it was thrust in their face by the new hire occurring.

Re: When new hires get paid more, top performers resign first

#23
post #8

Can someone who understands economics better than me explain how the workforce can "shrink" in 2024? The number of people isn't going to dramatically decrease, are just a ton of people retiring? Or does this imply that there's going to be a reduction in the number of available jobs?

[deleted]

Re: When new hires get paid more, top performers resign first

#24
post #9

This is one of the reasons I loved Netflix. Each year they would say "to get new people in the door with your level experience, we had to offer them $XXX. Therefore we are raising you to $XXX." Some years I got 25%+ raises. Netflix understood this like no one else.

Would the 25% raise be composed primarily of salary or stock?

Re: When new hires get paid more, top performers resign first

#25
post #2

Sounds plausible. The obvious Q though is - were the researchers able to identify a causal effect? Or could it be that the highly-paid new hire is a sign of the market being hot, so the top performers are able to get new better offers? i.e. would they have left even without the new hire?

[deleted]

Re: When new hires get paid more, top performers resign first

#26
post #9

This is one of the reasons I loved Netflix. Each year they would say "to get new people in the door with your level experience, we had to offer them $XXX. Therefore we are raising you to $XXX." Some years I got 25%+ raises. Netflix understood this like no one else.

Would the 25% raise be composed primarily of salary or stock?

Netflix is just salary

Re: When new hires get paid more, top performers resign first

#27
post #9

This is one of the reasons I loved Netflix. Each year they would say "to get new people in the door with your level experience, we had to offer them $XXX. Therefore we are raising you to $XXX." Some years I got 25%+ raises. Netflix understood this like no one else.

Would the 25% raise be composed primarily of salary or stock?

Netflix doesn’t do stock comp.

Re: When new hires get paid more, top performers resign first

#28
post #9

This is one of the reasons I loved Netflix. Each year they would say "to get new people in the door with your level experience, we had to offer them $XXX. Therefore we are raising you to $XXX." Some years I got 25%+ raises. Netflix understood this like no one else.

Would the 25% raise be composed primarily of salary or stock?

Pretty sure I've read and heard everywhere that Netflix is a rarity in that the vast majority of your total comp is directly in salary. So it likely resulted in primarily salary increases.

Re: When new hires get paid more, top performers resign first

#29

Well no shit. If I'm currently a top performer and we hire new workers at a higher pay rate than me, if I have to wait to get a raise because of BS corporate bureaucracy then the company should know from the second they say no I have my foot halfway out the door. Funnily enough at many companies the second you actually threaten to leave, that corporate BS suddenly isn't an issue. But trust has already been lost. Exac…

> at many companies the second you actually threaten to leave, that corporate BS suddenly isn't an issue

Not "many" - "every company". Unless you're an useless cog in the machine, you can always leverage a raise by saying you got a better offer somewhere else.

In very rare cases it pays to take the raise from the old company though, your name is already on a List, so better start looking for other jobs anyway.

Re: When new hires get paid more, top performers resign first

#30
post #8

Can someone who understands economics better than me explain how the workforce can "shrink" in 2024? The number of people isn't going to dramatically decrease, are just a ton of people retiring? Or does this imply that there's going to be a reduction in the number of available jobs?

If you do not have a job and are not actively looking for work, you are not part of the "labor force". The "labor force" is defined as (working + actively looking). Also, the denominator of the unemployment rate is the size of the labor force, not the size of the working-age population.

In particular if someone gives up on looking for a job because they're too discouraged, or if someone decides to become a stay-at-home parent, this causes the size of the labor force to go down by one person.

Search for: "labor force participation rate".

Also some definitions here (US-specific): https://www.bls.gov/cps/definitions.htm

Here's also the transcript of the Planet Money podcast from March 2023 which talks about reasons folks left the workforce at that time: https://www.npr.org/transcripts/1162753771

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