Why do companies pay better offer to new joiners rather than retaining existing employees?
Companies often prioritize cost optimization over the well-being of their employees. It seems there's a tendency for companies to offer more attractive pay packages to new hires rather than investing in retaining their existing workforce.
This approach, aimed at bringing in fresh perspectives, has always led to dissatisfaction among current employees who feel undervalued.
In my experience, many professionals have encountered situations where significant salary hikes were only granted when they considered leaving their current positions. So, some companies do make efforts to retain talent.
So, job-switching becomes a necessary step to achieve substantial salary increases, as long-term loyalty to a company does not always result in proportional financial rewards.
If I think from a company’s perspective, a new employee will bring in more zeal than an existing employee, plus some fresh perspective from the market or competitor. Maybe the existing team has become complacent or demotivated because of other reasons which cannot be solved with a hike, so the company may look outside. Sometimes it is done to shake up things within a team. But personally I am not in favour of doing this for the biggest reason that it’s not fair
At my old company they had a large hiring budget but negligible retaining budget. So they will not even try to match an offer of an existing employee but will hire an outsider for twice the money who knows nothing about our work.
Absolute madness
“New hires may be able to negotiate a higher salary than existing employees because they have more leverage. They may have multiple job offers to choose from, or they may have specialized skills that are in high demand.”
It’s a pretty popular age old question. You won’t find new reasons
Umadbro
Stealth
9 months ago
Nothing like this. Every company has a different budget for new hires vs promotions. For growth, budget for new hires is high as it signals company is expanding. The kpi is how many people joined. Person staying impacts only one kpi which is attrition - never looked at when you have to show growth.
In product based companies, it is required to stay atleast 5 years to make any meaningful contribution at a senior level. So If you chart out over that period of time, it should even out. In 5 years the existing employee should get 1 to 2 promotion to even out.
Brutallyhonest
Stealth
9 months ago
This is one of mysteries unsolved
Tbh this is much more seen in a bull market
That’s when companies can no longer get good talent at the price that was good 2-3 years ago and end up offering 30-40% extra even
Correcting existing employee pay does not make so much sense then and there, but it bites in such a situation, making the market even crazier cuz now those guys leave
At my last company, my manager said my salary was on the higher side of the band.
Any increment would call for a promotion, and I was pretty much on track for it in next 6m-1y.
I had completed a little over 2 years in the team.
Then they converted an intern at a higher salary than mine, and ~40% more than other hire at the same level (who had 2yoe)
Complete mockery of existing employees 😂
Long live, Supply Chain @ BlinkIt.
Equitymaster
Stealth
9 months ago
Rohit Sharma vs Pandya
Demon
Stealth
9 months ago
Need. The need for a skill that already exists in a company (existing employees) is lower as compared to something that doesn't (new employees). If the company is hiring someone with a different or a different level of skill set than what's needed in day to day ops, the call would have been needed in response to some pressing need. That is why it's advisable to learn new things for which market has a talent scarcity.
If you are in a company that pays freshers more for the same skill than their experienced folks, just leave, it's going to shut down anyway given it's a HR driven shithole. Smart founders and managers know the importance of retaining their best.
LastSamurai
Stealth
9 months ago
The other factor is that for an HR decision maker, negotiating a higher hike with an existing employee is seen as a loss whereas getting a new, sought after employee is seen as a win. The northstar for them is very skewed that way!
SlimWidth77
Stealth
9 months ago
Something an Engineering Leader told me:
Hiring and Retention are 2 different purses
You cannot mix then
Might be BS, IDK 😬
A bit nuanced take: while I'm against it, companies would want fresh talent/perspective to come in as well
iShowSpeed
Stealth
9 months ago
They're stupid
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