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.

Cheaper to give one new employee a 50% hike than 10 employees a 10% hike

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