This is one of the reasons I loved Netflix. Each year they would say "to get new people in the door with your level experience, we had to offer them $XXX. Therefore we are raising you to $XXX."
Some years I got 25%+ raises. Netflix understood this like no one else.
Companies should understand when their business hangs on people, you need to keep the people happy.
Hiring people off the street for more money than people with 20+ years of experience isn't a good way to keep experienced workers employed.
The problem is - historically it hasn't bitten companies badly enough that they stop doing it.
On aggregate, you can get away with massively underpaying your top talent and overpaying new hires - most of which aren't good and will go to other companies before they're even moderately productive.
I question why they're so obsessed with hiring so many new people to do basically nothing. That's the reason they have to over pay for them: The sheer amount that they're trying to hire.
Perhaps it's inevitable that you have to hire 100 people to find 5 or so people that'll be good and stick around for a while that you can underpay in the future.
I suspect there's got to be a better way.
The reason for that is the culture around keeping compensation secret. Most people (in the US at least) believe it's impolite to talk about salary directly. I do wonder how much of this taboo has been cultivated by corporations that benefit from workers feeling like they shouldn't talk about salary.
On top of that, some companies tell their employees they are not allowed to talk about salary. That practice is illegal, but some companies still do it.
To be clear, Federal law is very explicit that you have the right to discuss and disclose your salary.
You have the right to do it, but your coworkers might become bitter and envious if you make more than them. You have to judge how mature your coworkers are and whether it would cause trouble for you if they made a complaint to your manager. For example, if you are on a team of like 5 people, it could be impossible for them to maintain your anonymity as they say "Why am I making less than others?" You might also imagine that if your coworkers don't get the raise, they will not be as motivated to work, and may cause problems for you that way.
I've been on both ends of this, usually the lower end, and I can say first hand it is hard to not take getting paid less as a personal affront to your dignity. And every time I was underpaid I not only didn't get a big raise, but I took much longer than expected to find another job. If you are underpaid, your best option is to leave in most cases. Don't underestimate how long you have to tolerate the low pay while you try to leave.
Isn't it good to know how underpaid you actually are relative to your coworkers? If your colleagues are being paid less than you are for the same work, shouldn't they direct their ire at the company rather than you?
I am 99% convinced that pay secrecy primarily benefits employers and management at the expense of most employees. It creates an asymmetric information environment that makes it difficult for employees to negotiate raises or even to be paid market wages.
The 1% uncertainty is that government jobs (which have pay transparency) tend to be underpaid, and the rare (?) private workplaces with pay transparency don't seem to have done much better than their pay-secret counterparts, with the exception of law firms, where the associate/partner model seems to have caught on. Union negotiated rates seem to have up and down sides.
Of course, you should really consider how much money the company is making, where it is coming from, and how it is being spent. In my experience, (non-founder) technical staff members are often paid very poorly compared to the money that they bring into the company, even after considering large amounts of overhead, expenses, benefits, taxes, etc.
You would think that, but imagine you are making less than someone who does less work than you, or is clearly less skilled. Although you might initially blame the company, you may grow to resent your coworker who is getting more for less. Especially if it's a lot more. You can't really start making more demands of them because they make more, or else slack off because you make less.
I think there are situations where secrecy can be good and others where it can be bad. When salaries are public and negotiated by groups, that can lead to other worst-case scenarios. Your company can always decline to pay you more by coming up with a delusionally low pay scale, while claiming the high ground of fairness or some shit. When people can negotiate for more, they can potentially raise the bar gradually. And with the legal protection behind salary disclosure, and websites that make it easy to share your salary, I think it's better to let salaries fluctuate with the market. It might be nigh impossible to demand a raise without switching jobs, but at least the current norm lets employers effectively bid on you.
Suppose at the end of 1 year you found out that your coworkers were being paid twice your salary for the same work.
Now suppose after 5 years you found out that coworkers were being paid twice your salary for the same work, and had been for years.
It seems to me that you want to find this out sooner rather than later.
Yes I see what you mean now. Of course it would be important to know that sooner rather than later. But I suspect if you are paid that little, you would know it from industry averages. But awareness of how screwed over you are is not going to make you happy. If you can be paid that much less than the next guy and not know it from industry averages, you should probably be able to guess it.
At one job where I was perhaps making 70% of what my coworkers did, and I found out a couple of years before I was able to leave. It did upset me a lot. I knew I was underpaid before that because of how other companies paid, but knowing specifics definitely rubbed salt in the wound. I suppose knowing specifics might be a necessary evil but I think back then it might have been better to not know. On the other hand, that experience set me down a path that eventually worked out ok, so I can't really say I wish I didn't know.
That's all true. I've usually asked co-workers I'm friends with, and believe we can both be mature enough, if they want to exchange pay info. I've also told a few people what my salary was when I'm leaving a company, and tell them to share it freely.
Everything you say is true though, it can cause a lot of drama if people start having hard feeling over pay. This is why companies sometimes tell people not to share their salary, or even put it in the company handbook, etc, and I'll say again: it is illegal for a company to tell or even suggest that you not to share you salary.
How are the two related? Why does being paid less cause you to take longer to find a new job?
Being paid less didn't actually make me take longer to find another job. But I looked for other jobs to get more money. My point is, simply knowing you are paid less/unfairly is not a silver bullet. Most companies will refuse to give raises on demand, on principle. You most likely can't just get a new job right off either or you would have just done it. So you'll be stuck for months or even years knowing how much less you make than your coworkers. Nobody thinks they'll mind knowing the truth, because they underestimate their own ego and how difficult it is to get more money.
Most businesses would rather pay someone new and unproven significantly more than you're asking rather than give you, say, a random 10% raise. It kinda makes sense, because there's no limit to what you can ask for. Most non-tech people seem to resent how much more we make as well. So for various reasons, they don't want to pay you more and/or don't believe you are worth more, and you have to prove it to them by leaving.
I don't know if corporations originated the taboo, but they absolutely cultivate it so that they can retain the upper hand in salary negotiation, enabling them to pay below-market wages to everyone except for new hires with multiple offers.
There is an unfortunate cultural problem where people are morally valued by how much money they make. Pay is often very disconnected from economic benefit (consider the enormous economic value produced by underpaid teachers, or grad student researchers) and nothing to do with moral value.
Thinking about this a bit, wealth (in the US at least) confers social status, which is taken as a proxy for personal honor, character, dignity, etc.
This thread and study seem to disagree with your assessment: https://x.com/captgouda24/status/1773031323604488342?s=20
Because VC money based around vague promises of selling data to advertisers have traditionally propped up even fundamentally unprofitable businesses so software quality hasn't significantly contributes to success or not. Now that we're out of ZIRP then companies might start learning that in 10 years or so after they've replaced a few generations of programmers, nobody knows how anything works, and suddenly software quality starts to actually matter to investors and consumers
I suspect in software specifically, there will never be such a reckoning because compared to maintenance, replacement is too easy.
Maybe when it's not important to be bug for bug compatible. For most important software, it kind of is.
I would argue it does bite them, but by the time it does it's someone else's problem.
In almost all cases, it's the consumer that gets bitten.
Actually quite a lot. You can check the glassdoor and then search the companies market cap over the years. One company I research recently, Philips seem to have this problem 15 years ago. Compounding effected today, it is just a very small insignificant company. Meanwhile it gave birth to titans like ASML.
> there's got to be a better way
Be better managers. Do more human work during the hiring selection process. Take HR away from the lawyers. Take Responsibility and Accountability for the management layers of the company (including the C-suite).
But we all know these are just pipe dreams.
High staff turnover some companies consider as a good thing
But they don't. The people calling themselves managers will justify not paying existing people more once they have to pay new people more by saying that that is what they signed up for when they started. And then when people leave, they convince themselves that we are all interchangeable. No matter what happens, they have some sort of excuse or justification.
That's better than being forced to do interviews at other FANGs, getting offers and only then getting raises matching those offers. I heard Netflix suggested this as well, for determining the current "market rate". Offloading the market research to engineers basically.
Yup! We were encouraged to take interviews at other companies for multiple reasons. One was to report back the offer as data for the HR team. They used that both in level setting new offers as well as making sure you got an appropriate raise.
It was also because Netflix understood that if you found a better job, it was better for both you and Netflix to leave and take that job, because it meant that you weren't truly happy at Netflix and may not be doing your best work.
It was truly an enlightened way to think about talent, and I've never seen anything as good since.
Sounds pretty ideal! But it also sounds like you're talking about all of this in the past tense... why did you end up leaving, if you don't mind me asking? :)
Had a baby and retired. :) Retirement didn't last though, now that both kids are in school I'm back at work. FWIW I would go back in a heartbeat if they had a role for me.
Wasn't Netflix a family-friendly place? How common was part-time employment? Did the culture of fear prevail?
They were plenty friendly to families, but I was ready to go full time at home. We didn't really have anyone working part time, and at the time there was no remote work either.
Ahh, those seems like great reasons. Double congrats, and thanks for answering!
It’s an awesome mentality, but I think it comes out of Netflix being a company that sells to consumers and not enterprises. I work at a big cloud company. We don’t have enough engineers to do the work our customers want us to do. Each piece of work comes from someone spending millions of dollars a year that has executive visibility. Letting someone go means some committed project goes unfunded and an unhappy customer.
You can afford to hire, you have the work. Where's the bottleneck? I'm hearing lots about unemployed people, especially on here.
In finance this is called price discovery. In the labor market it’s called waiting until someone is one foot out the door. It’s much more expensive to correct the situation once someone has already decided to leave.
But corp logic: it's cheaper to raise ONE top performer when he wants to go than to raise EVERYBODY (even those not interested in leaving) to match market
No argument, but if I'm interviewing and get a better offer, I'm probably gonna leave.
Further in some corporations, interviewing for other positions is a bright shiny red flag for that person to be let go or fired. Even if they accept the counter offer.
If I could get the same amount of money from my current job I would probably stay unless I'm sure I would love the other job more. Because when money is a constant, it's either do I want to keep doing what I'm good at, or jump into something possibly different (and riskier).
Would the 25% raise be composed primarily of salary or stock?
Netflix doesn’t do stock comp.
apparently for some people they do lol
historically they've had an options program that you could optionally participate in, with your salary.
the rumblings i've heard seems to imply they'll be rolling out an RSU system in the future as they continue to destroy the unique corporate culture they had.
Had that at Wind River years ago. They'd both give you RSUs as a kind of bonus but you could also invest a part of your salary in RSUs. Don't know if they're still a thing.
Cash. Netflix lets you basically turn a dial on the ratio of cash to stock, but it starts with a single cash number.
Netflix is just salary
Pretty sure I've read and heard everywhere that Netflix is a rarity in that the vast majority of your total comp is directly in salary. So it likely resulted in primarily salary increases.
Yeah. just don't go on paternity/maternity leave.
Netflix has a one year paternity/maternity leave policy, and some people take the full one year.
Paid / unpaid?
Paid. Looks like they changed it to "take whatever time you need", and most people are taking 4-8 months.
https://jobs.netflix.com/work-life-philosophy
Sure. Did they stop punishing people with their "actual meritocracy" metrics for taking it?
Would they also do the opposite now that the tech labor market is going sour? "
We got 1000 qualified applicants and a bunch accepted our low ball offers, your salary is reduced by 25% "
As far as I saw they never lowered salaries. They would say "the market is down this year, so you won't get a rise, but you're still at the top of your market". You could always go out an interview and come back with new data if you got a better offer.
In other words, they're trying to keep the variance of the distribution of salaries constant over time.
Limiting economic disparity have always been beneficial to the group I believe (I don't have data for that).
In the same company, the top should not be paid x% more than the lower salary. In the same country, the maximum wage should not exceed x% more than the minimum wage (after taxes).
That's awesome! It comes down to mindset by the people running the company
Makes me happy that at least someone out there is experiencing pay fairness.