Do Companies Give Small Pay-Rises Every Year to Discourage Salary Negotiations?

SlavOz on 28/12/2019 - 16:53
Last edited 29/12/2019 - 11:21 by 1 other user

This came up in a discussion with a friend; he's been at the same company for 6 years, and has gotten a small pay-bump almost every year (except once or twice) without even asking. Each time it was only a fraction of his salary, so it was about $2-3,000. In total, his salary has increased by about $10,000 since he started.

This sounded like a good deal until he told me that it's extremely rare for his company to accommodate formal salary re-negotiations. By contrast, I was with my previous employer for only 3 years (IT role, for what it's worth). I never received any proactive pay increase but after my second year I applied for a salary re-negotiation and made a solid case by showing my performance and achievements. In the end I managed to raise my salary by $12,000.

It sounds to me like his company tries to save money by throwing employees a small bone every year to discourage them from asking for a higher salary. Is this a common tactic in large corporations? Does anyone work for a company that does it this way too?

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  ChillBro on 28/12/2019 - 16:58

  +16

  I'm pretty sure it's standard for most companies to give 2-3% per year because without it, you'd actually be earning less every year. 32.5-45% of 'increase' goes to taxes while the rest (barely) covers inflation.

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    Orpheon on 28/12/2019 - 17:04

    +14

    Yep, those aren't pay bumps by any means - it means your company values you enough to keep your pay stagnant in line with inflation.

    So, not very much.

    • 

      AnneThrope on 28/12/2019 - 20:30

      +6

      My (ex) employer played this game.
      Had to go through the pretence of 'Performance Review' with no or vague KPI every year, only to receive a token 'raise' that didn't even keep up with inflation.

      Meanwhile the business grows and support staff numbers are cut.

      Over a few years it reached the point where less than half the support staff were supporting ever-increasing users while being paid effectively less every year.

      There was also a bonus scheme 'unlocked' by various high-level targets being met… but when that happened for the first time in a decade the final determination was 'discretionary' so missed out on that too.

      Finally decided that their contempt was so blatant that I could no longer work for them.

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  UNFKNBLVBL on 28/12/2019 - 17:07

  my company does this, I always thought it was to counter inflation as mentioned above

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  AdosHouse on 28/12/2019 - 17:22

  I get about a 2.5-3% pay increase each year. But only to keep it in line with the Award wages.

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  whooah1979 on 28/12/2019 - 17:23

  his salary has increased by about $10,000 since he started.
  In the end I managed to raise my salary by $12, 000.

  Your friend received $10k over 6 years and you $12k over 3 means that your friend is more expendable than you.

  • 

    SlavOz on 28/12/2019 - 18:09

    Agreed, but it seems like the company has a hand in that.

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    [Deactivated] on 28/12/2019 - 18:22

    +2

    Not necessarily, people that don't ask for a pay rise, generally don't get. People who negotiate often get more even if more expendable. When the less expendable person puts in their notice, all of a sudden they get counter offers…

    Personally I'd always keep one eye on the job market and use that in negotiations. At the end of the day if they have the money and want to keep you, they will negotiate, no matter the policy. 1-3% means they don't want you to leave but are giving the bare minimum so you don't go backwards. If you don't even get that each year, they want you to leave.

    • 

      kiitos on 29/12/2019 - 10:03

      Hmmmm. Does this apply to contractors too? The but about if they don't give a small raise each year.

      • 

        [Deactivated] on 29/12/2019 - 14:38

        One of the thing that legally defines a contractor is that you tend to set your own rate (at contract expiry). They pay it or you look for other work.

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  Hithere on 28/12/2019 - 17:29

  +1

  Most likely to be the amount awarded annually by the Fair Work Commission.

  A 3.0% increase was given to employees in July who are paid under the national minimum wage or a modern award

  • 

    gazzathegreat on 29/12/2019 - 19:19

    Looks like your friend is just getting the annual award increase.

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  TheOtherLeft on 28/12/2019 - 19:45

  +5

  I've found the only way to get a decent pay rise, i.e. 30ish% is to look for another employer. You'll never get a decent payrise staying with the same employer especially if they play hardball if you try to negotiate a rise.

  • 

    SlavOz on 29/12/2019 - 00:42

    Changing roles in the same company can achieve the same thing. I know plenty of people who've had like 4-5 different roles with the same employer with their pay jumping each time.

    Generally agree though. Changing companies is the best way to make more money. The employment and salary game is rigged in favor of new employees.

    • 

      TheOtherLeft on 29/12/2019 - 08:15

      I've only gotten about 10% payrise when changing roles in the same company

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  [Deactivated] on 28/12/2019 - 20:44

  +2

  I get a 1.5-2% increase each financial year. I had another job offer which was ~ 15% extra (included super and a car I didn’t need/wasn’t practical) and negotiated in November to get +9.5% to stay at a job I was happy at. Also got the next round of 1.5-2% increase for the new financial year.
  You can always negotiate for a pay rise, it’s up to you to value yourself against the market and if your employer respects that value.

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  Donaldhump on 28/12/2019 - 23:03

  +1

  You only get what You ask for

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  MeesusEff on 29/12/2019 - 00:47

  Lol husband gets 1% every year, hospitality sector, even though hes improved sales by 10-100k's. Boss refused a payrise because 'it wouldn't be fair to the other managers (who do nothing)'

  • 

    jmi on 30/12/2019 - 09:43

    +2

    If I was your hubby, I be looking for interviews and quit at the earliest opportunity once I got another job. There is no point in staying in this job if the boss feels justified to step over your husband so other people can profit off his efforts.

    Essentially this to the boss: https://www.youtube.com/watch?v=pvJXf8aEVRA

    • 

      MeesusEff on 02/01/2020 - 01:38

      +2

      Yup! One of the buyers he works with offered him $30k more straight up when he found out how much my husband was getting paid lol so his last day is next week! That sap was nice enough to not stiff them by leaving over the Xmas - NY period, worked about 70 hours last week and only gets paid for 38 because its salaried.

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  Ash SA on 29/12/2019 - 01:34

  +1

  Most businesses work on the model that if you did what was agreed upon in contract i.e. job desc or KPIs, we gonna keep paying what was agreed upon as well.
  And to counter the inflation, they keep on increasing that 2-3% based in your tax bracket. This is not to be confused with raise.

  If you want more, show more. Here, “show” does not stand for “done”, show is “to present”. If you can boast and can prove the boast when things come calling, do it. Make your points throughout the year. You will get the raise.

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  Lastchancetosee on 29/12/2019 - 09:05

  Depends on the Enterprise Agreement. Smaller percentages are given automatically each year to keep up with the cost of living. To change levels or get a higher classification, there is a formal application for promotion.

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  OzHunterNSW on 29/12/2019 - 10:02

  -2

  Sounds more like photocopier gossip.
  Bonus is a gift.
  Wages are a seperate issue.

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  zambuck on 29/12/2019 - 10:19

  I'm also in IT. Our CEO told everyone in the company that they can choose their own salary. If they want more money they can get a job elsewhere and leave. The only time they talk about an increase is when someone submits their resignation, and by the time an offer to match the other employer's bid is approved by senior management the person has left anyway. Graduates can do the same job for less, according to management.

  • 

    Doggiie on 29/12/2019 - 10:39

    The pay match only when handing resignation is also the same for where I work. I just find it wrong ethically from an employer's standpoint. You're asking an employee you claim to value a price match (not even a significant difference), and ask them to burn their bridges. So much for valuing your employee?

  • 

    MrBear on 30/12/2019 - 09:47

    Our CEO told everyone in the company that they can choose their own salary. If they want more money they can get a job elsewhere and leave.

    What a d!ck. Based on that alone, you know there is no goodwill towards employees.

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  Shaun R on 29/12/2019 - 10:36

  I work under an EBA, and in addition to a legislated 3% pa raise each year, if I meet my KPIs for the year I get an increment - which is an additional 3%.

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  bobbified on 29/12/2019 - 11:56

  I generally don't get any increases at my company. Not even the stock CPI. There was a year I got 1% and that was based on "performance" (most other people for 0%!), so I should have felt happy.

  Just take take what you get - if you feel you're not valued, go look for a job elsewhere. What they offer/pay you at the new place should be a decent indicator of your worth.

• HeWhoKnows on 29/12/2019 - 12:02 Comment score below threshold.
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    ozbjunkie on 29/12/2019 - 13:28

    +6

    The brainwashing has certainly worked on this employee.

    Either than or this guy owns a business.

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    SlavOz on 29/12/2019 - 13:48

    +2

    Your self-esteem and professional self-worth is dangerously low. I wouldn't be surprised if you're experiencing career stagnation. Employers need talented employees just as much as employees need the company. It's a two-way street.

    Most advice out and data out there seems pretty clear on how to get ahead at work - be aggressive and keep asking for more money. Those that take the risk ultimately end up either getting it or being forced to look for a new job until an even better one comes along. In fact many economists have pointed to this as an explanation for the gender pay gap - men are more willing to take risks and leave if they feel undermined. Women (on average) play it safe and stay humble.

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    Never Pay RRP on 03/01/2020 - 09:12

    So dont give your employer an excuse to ask you to leave

    Just to be clear, asking for a pay rise is absolutely not grounds for dismissal, and if an employer even mentions that as part of the reason for firing someone, they are inviting an unfair dismissal claim.
    Also if you work in an environment where asking for your fair market rate of pay is somehow frowned upon, I'd advise leaving as soon as possible

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  SuperMid on 30/12/2019 - 09:47

  I think most companies are like this, even some of the bigger ones. Ive found the best way is to switch companies (if your industry caters for this type of move). Both of my last job changes have resulted in a 30% salary increase for me each time. Try negotiating a 30% raise.

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  chasis on 30/12/2019 - 13:50

  +2

  An old employer of mine said one smart thing the whole time I was there. He shared a story of working at a bank:

  "Every year if I was lucky, they would give a 3% raise, so after 10 years I might be earning $20k more. I realised if I change company then I can get $20k more right now. The new company will pay me for the experience I am getting at this job. My current company already has me at my current salary…why would they want to pay me $20k more?"

  Around 15 of his 50 employees left within 3 months.

  I think companies should look more at how they value employees and see it from a market perspective. Obviously they train you so they potentially added that additional $20k to your worth. But that's still your worth. I'm sure it is more costly replacing and training new employees that to give decent pay raises, but it seems most companies don't see it this way.

  I would always advise looking for a new job rather than sucking up for a raise. Not that I'm saying you shouldn't work hard and well.

  • 

    SlavOz on 30/12/2019 - 21:11

    +4

    I really can't fathom how some companies can let stable, performing employees walk away over a $10-15k pay rise.

    General rule of thumb is that any new employee you hire is near useless for the first 3 months, while they learn the systems, clients, culture, etc. After that, how long until they can reach the same level of engagement and experience the existing employee was at? Even then, how can you be sure they'll stick around for at least as long as the last employee? All those maybes so you can save $10-15k seems ludicrous.

    • 

      SuperMid on 01/01/2020 - 15:47

      +1

      I used to work at a large corporate. They couldnt care less about retention. Employees that had been there for 8 years, good loyal hard working people, left because they couldnt recieve a minimal pay rise.