Posts Tagged ‘pay rise’

In 2012 I wrote about the economic advantages I had experienced by moving companies. Although it is, of course, an extremely limited data set, I had witnessed a consistent and pronounced difference between increases in my income when I stayed with the same company and moved to a different one.

Some of this could perhaps be explained by the concept of reference points, as discussed by Daniel Kahneman in his book Thinking, Fast and Slow.

One of the issues with gaining a large salary increase with your current employer is that your current salary forms a reference point. Say you are a graduate and took a £18,000 a year job. It is now a year or two after and your skills are now worth £28,000. All of that seems reasonable in the software industry.

The problem is that to your current employer, they would have to accept a £10,000 increase in costs – a 56% increase! So they probably make you a far more modest offer of £23,000. This then also becomes a reference point. When you ask for £28,000 that is not only £10,000 more than they pay you now, but £5,000 more than they had mentally prepared themselves for. They are left feeling like they are losing £5-10,000 a year.

In comparison, a different company can come at this from a neutral perspective. They look at what someone with your experience is worth and price you accordingly. This could result in a wider range of offers. Some high, but some even lower. However, this is of no consequence as obviously you will cherry-pick the high offers and pursue those.

To be clear, you shouldn’t quit your job. Well, maybe you should. In any case, read on…

We’re all trapped like rats in a capitalist system, right? None of us enjoys going to work. Sure, many of us are in jobs that we describe as liking, and in many ways, I do like my job, but that is a subjective term.

What we mean when we say we like our job is that we’re content with it – as jobs go, we’ve got one we want to be in, with the alternative being in a job that we don’t want to be in. But ultimately, we’re not doing jobs for fun, or voluntarily, we’re doing it because we live in a society where we are forced to work to live.

Unfortunately, it’s very difficult to break out of said system so the best most of us can hope for it just to play the game as best we can. The better you play the game, the more money you earn and the better job you can get – better probably meaning less work, because it’s an inverse pyramid – those Crew Members at £4.30 an hour (and that is what they are paid if they’re under 18!) are doing a lot tougher work that us sat in our offices in salaried jobs. Meanwhile, Richard Branson starts each day with a swim around his private island – more money equals less work.

So how do we play the game better?

The best tip I can give you is to leave the company you are currently with.

It almost never pays to stay with the same company. Even if they’re giving you good promotions and good pay rises, you can almost certainly get even more by going elsewhere, to a different company.

Why? Because the current company has you and thinks you will probably stay with them because it’s a hassle to switch jobs. Another company doesn’t have you, and is hiring, so it clearly in need of extra resource and knows it will have to pay to go out there and get it.

Don’t just take this statement is automatically true, though. I’m not claiming to be an expert on the subject. But I got the inspiration for this blog post when doing analysis on my pay rises over the years. Here are the results:

The results are striking – the years when I stayed with the same company, I achieved pay increases of 19 and 21 percent, while the years I moved to a different company, I achieved 58, 39 and 124 percent.

Those aren’t small, insignificant differences – we’re talking double the pay increase, at least, by moving company. Clearly, it pays to go elsewhere.