I largely agree with you and think that fair is where you get cotton candy.
However, employers who wait for their engineers to squawk and bring competing offers are playing a dangerous and inefficient game, IMO. I've absolutely given raises when the local market put my long-time employees under market. (And sometimes the way you find out is a competing offer, but if you're hiring, you generally know the market.)
Fair pay is whatever allows you to hire a competent c-suite that will allow the company to fulfill its mission. However, this comes with a whole host of problems. How do you identify those that are likely to be able to do the job? How do you keep them at your company? How do you maximize their effectiveness in their role?
This usually comes down to pay. People who get high compensation offers elsewhere are likely to be good at it, but that means you have to compete with other companies for them. Even if you somehow did manage to find somebody that accepts your below market compensation, what do you do if another company just offers them more? If you pay them near market rate then there's much less incentive for another company to poach them. You're also less likely to end up with somebody that can't do the job.
The problem with that theory is everyone that is capable of basic reasoning (which includes every competent engineer) already knows that getting an offer from another company at a higher pay and then quitting if it is not matched is a certain way to get increased compensation, wherever you end up working.
Failing to match when there is value to the company just means that every time you are faced with that choice, you always lose.
While the worst case with letting people know that that's a good way to get raises is that it puts upward pressure on wages until very few employees can get better offers that they'd be willing to threaten to quit for, and you still end up paying people not more than it is worth to retain them.
The hypocrisy is that to even get to the point where you have a 24 / 48 hour exploding offer, you (the candidate) had to often wait weeks to get a response to the application, phone screen, on-site, decision.
So I don’t buy this fairness argument. If we’re talking about fairness, the process would be super quick, and then I would get a week to think about a decision that will affect YEARS of my life. To say nothing of things like asking previous salary, salary expectations, etc. Everyone knows why it’s done. If you wanted to be fair, the salary would simply be posted with the criteria that would influence it up or down. There is a reason unions and public sector jobs do this.
Companies have access to far more market salary data than I do. It’s not close to fair.
My job is far more influential to me than the company. It’s 100% of my income and yet I’m only one of many for the company. This should be taken into consideration.
It's very unlikely both people are performing at the same level. Everyone has strengths and weaknesses.
Whether I think it's fair or not is irrelevant, it is normal/standard practice that getting multiple offers simultaneously will increase your compensation across most or all of those offers.
And how is it against the company's interests to pay its employees a salary they'll accept?
The expectation derives from peoples lack of knowledge of what they're worth. It has nothing to do with fairness - it's about what they think they can get away with offering.
Based on experience, almost nobody negotiates their offers, and if you see people talking about their job moves, people are often excited about, say, a 10% increase.
That's why employers expect to be able to get away with anchoring it to your current salary.
But hiring and the work force AREN'T fair. My performance review, salary increases, and bonus aren't based on some normalized criteria, we're rewarded for going above and beyond.
Even on the surface "fairness" isn't really the objective, because there are going to be different hiring managers and interviewers throughout the whole process. The salary negotiation isn't going to be "fair" in this way.
I'd rather have someone who had a rich github history and a record of real accomplishment than someone who had none but could produce a good hacker rank score. Hiring is the most important thing that we do as managers, I'd be selling myself short if I didn't take it all into consideration.
A lot of these issues only arise if you're assuming you need to create some sort of master pay system that is "fair." We all know in practice that decisions like pay can be based on the environment at the the time of hiring, or other random variables.
For example, an engineer may get hired at a time when there is a high supply and relatively low demand, and is only able to negotiate a salary of $100k. 5 years later, because of the relative shortage of engineers, a junior engineer is hired at $130k, while the the more senior engineer is now only making $120k.
Of course, trying to come up with a master system to adjust for something like that will be impossible, as this article points out (using a hypothetical move from a higher cost location to a lower cost location). The company will not adjust the senior engineers salary until he puts up a fight and comes in with competing offers.
What this suggests is perhaps that the most effective and fair system is no system at all, one that remains dependent individual actors (or businesses) trying to get the best deal that they can for themselves. This is, in practice, what is happening now, but we wouldn't have any expectation of every company trying to create some sort of formula to determine what is "fair."
This means sometimes that you will be hurt by environmental factors (say you quit or get fired in a down market in your field), but other times you may cash in (maybe the senior guy at your company quits and you have the opportunity to leverage that into a much higher salary for doing his job).
Trying to make some master system that is "fair" and will work in all circumstances just seems silly. The market is perhaps a good arbiter of value on a broad scale over long time periods, but in more localized environments and shorter time spans, it is far more random. Thus, the best personal system in my mind is one in which we can take advantage of the randomness when possible, and learn to handle the inevitable downsides as well.
Another thing that is often forgotten is that everyone has different opportunities in the market for jobs. Two people may contribute equally to a project, but one of those people might be paid more because the company had to outbid a competitor. This goes to your point about the health of the company. It might not be fair, but the company might not have the resources to offer a raise for the sake of fairness.
I get that some employers, particularly in small businesses like you describe, might be committed to such fairness, but most employers in my experience have been perfectly content and even fight back (as in, "well, if you had a competing offer...") if the employees start comparing numbers.
Having seen this topic from both sides of the tables, I'm not sure if I agree. Don't get me wrong, I'm generally all for transparency, and I've also seen my share of cases (including my own) where someone was treated unfairly and it would have been good to talk about it.
But there's a few important and complex psychological factors at work here:
- Self-serving bias. There's a study that about 80% of employees think they're better than average. Obviously, that's impossible, but it already sets the stage on a path to unhappiness.
- Group bias and Dunning-Kruger. People mostly don't know _why_ exactly someone else earns more than them. Excluding real unfairness or the points below, there are often time cases where people really don't get the importance of some roles in the company or think they can do as good or the company can do without. As a techie, I've personally ridiculed the "business side" until I've witnessed the importance myself (and how much difference a bad to a good execution in this regard matters).
- Global and local unfairness and market development. Firstly, local markets develop for hotly contested skills, sometimes very fast. Also, it makes a heck of a difference in which company stage someone is hired. A year later, I might have to pay someone much more to get into the same team.
- Lastly, there can even be unfairness in fairness, hidden in plain view: Does someone getting relocated into a hot market really have to suffer paying double the rent as someone living there for years? Is having a family a personal luxury or partly beared by a socially responsible employer? Does someone with a PhD who's being outperformed by a young smart college dropout earn the same? More? Less? I don't know the answer to these questions, but all possible answers have some merit. Often times, I try to factor something about this in when deciding salary. In any case, it's freakishly hard to develop such thing as a "fair" salary over a whole company as an employer.
- In most countries including mine, it's prohibited to _lower_ someone's salary, so the only way you can ever adjust local or global unfairness is to raise wages.
What's following is this: All of these factors work together to create a lose-lose case to talking salary with others. The chances are enormously high you'll get demotivated. Most likely from your own salary, but even if you earn more than the others, it's awkward and hard to handle emotionally.
Although it's probably good for your brain and overall heuristics development to do so, it will be bad for your heart. Proceed with care — and if you want my personal 2 cents: Don't keep what you learned from always giving your best and optimizing for learning. Keep up your spirits, stay positive and don't get into a defensive attitude. Search for like-minded people who see your real value and you'll keep reaping your fruits later on, trust me.
One way to think about it is in terms of economic theory. Negotiations are fairest when both sides have equal power. But you have approximately one job, and a company typically has way more employees. It's more painful to lose a job than to have 1 employee quit. So the negotiation is fundamentally unfair.
So when it comes time to negotiate your annual raise, it's not you alone dueling with your boss (and the whole corporate hierarchy backing him up). Instead it's you and all your colleagues getting together, sending in some representatives, and saying, "Profits are way up this year, so we all deserve decent raises. Let's talk numbers."
(This is less interesting to tech workers, in that we already have a ton of salary negotiating power due to supply/demand differences. But personally I'd still like to see more collective action to deal with other issues. A good example is the way employees recently forced Google to get out of military contracting. Or imagine how different Uber might have treated employees if they'd had a union that helped keep awful managers in check.)
Consider a hypothetical scenario for the person on the other side of the table:
You are hiring up an engineering team and hope to hire up a team of 10 engineers paying 100k/yr each. So far you've hired 9 people at 100k and are working on filling that last slot. You find someone perfect but he has a competing job offer and is asking for 110k/yr instead of just 100. He's no better than the other 9 people you have already hired.
In a situation with relatively secret salaries it might make sense to go ahead and pay the 110k. It's only a 1% increase in your yearly budget which probably isn't a deal breaker.
But in a situation with relatively public salaries you're in a bad spot. You can either not hire him thus prolonging your search, or you can hire him and face potential moral/teamwork problems. Maybe you can hire him and bump everyone else's salaries up to 110k but a 10% budget increase might not be feasible. So the company is a bit screwed in this situation. And to the extent that the companies success is also the success of individual employees the individual employees might be a little screwed too.
I've made this scenario simpler than what reality would generally look like but the same principal holds.
In nearly every situation in which I've had insight into engineer's compensation I know for a fact that fairness has always been a top priority. But it's worthwhile to see that it sometimes can't be the only priority and to understand how the salary taboo fits into this.
You don't have to care to pick up free money off the ground. Wage-fixing didn't involve any downside or tradeoff until they got caught.
If they cared about cheap, they'd be willing to take on tradeoffs like communication overhead with satellite offices in low COL areas, potentially increased risk of a bad hire by making the interview pass rates higher, etc.
Even if you want a particular engineer very badly and money is no object, you're going to offer just enough to beat his next best offer. You're not going to 10x it. That would be waste.
1) So what? In your example, the candidate doesn't know what the fair market salary is (precisely because these data aren't transparent now), but once they're hired and they find out, they'll instantly become unhappy and more likely to move. "they'll expect more money" == "employer won't be able to screw the employee over".
2) Oh these poor poor companies who won't be able to screw their employees out of their fair compensation.
3) Do you mean the startups that get crazy stupid valuations? Or those startups who pay peanuts and have little benefits? People already know the risk they're taking with the latter, and the former can afford to pay competitive salaries or sell the other benefits harder.
No, it should not be up to individual businesses. You are clearly comfortable with exploiting people for the benefit of the business.
If your business can't afford to pay for top talent, then perhaps it's ok if it doesn't get the top talent. Businesses should purchase what they can pay for, just like we do when we go to the store.
You speak here as if it's somehow not fair for the companies that employers get paid more? As if the competition only works in one direction, to reduce the salaries, because employees are interchangeable.
Instead, let's enjoy the interchangeability of employers for a while and use the competition of companies for the best talent in our advantage. At least while it lasts.
In software, every organization attempt I've seen seems to be about "fair pay" meaning same pay for same job, arbitrary promotion/demotions, working extra hours with no compensation and job security (i.e. protecting people based on seniority from layoffs). Most of the time, the first part of the deal, moving from salary to an hourly wage, is a showstopper.
I think that you are exactly right. But it is also something that people dont want to admit out loud. Many people need to believe that promotions and hirings are fair. Admitting it is often not, or that it is actually semi fair only had other implications and hurts motivation.
However, employers who wait for their engineers to squawk and bring competing offers are playing a dangerous and inefficient game, IMO. I've absolutely given raises when the local market put my long-time employees under market. (And sometimes the way you find out is a competing offer, but if you're hiring, you generally know the market.)
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