Ask HN: Why do companies pay new hires more than long time employees?
It's cheapest overall for an employer to pay market rate for new hires and give existing employees small, regular raises.
If you need to hire someone, you're going to have to pay market rate for a particular hire. You can pay less for less skill or in certain locations. You can try to offer below market and wait for a candidate with few options to accept. But you can't really get around this. If market pay is going up, you're going to have to pay more than for existing employees. If pay is going down, you can pay less than existing employees. Usually it is the former, but there are absolutely companies right now in the declining wage situation where they are paying new hires less.
As for existing employees, most will complain if they are being paid less than new hires, but only some fraction leave. Usually bringing everyone up to the new hire pay level costs way more than the cost from backfilling positions where someone left for more pay or to give counter offers for those you want to keep from leaving.
If they don't, the new hire goes to another company that does.
Here is another, but related question: why don't long time employees look for a better paying opportunity?
Looking for a job is another part time job, at least for engineers who need to take technical tests.
I know very well. But that new hire somehow managed to find that time, didn't they? If they are that much better than the long term folks, than the salary parity seems to be justified by that also.
It's easier to find the time if you're already laid off / between jobs, or your current position is awful for whatever reason. Otherwise, for most folks with tolerable jobs and things to keep them busy outside of work, it's tough to justify the time (especially since it often entails taking time off work).
The effort to search, even in good times, shouldn't be underestimated
The measure differs by the person, but I've legitimately been putting up with a job bad for my mental health for years. We can get accustomed to a lot
This only happened to get better for me in the last week because an opportunity landed in my lap. Had my network forgotten me, I would toil here for years until something broke permanently
I don't think the salary difference is completely unjustified. It makes sense companies want to save as much as possible. Constantly being on a job search is not feasible though, at least not if you want to have some time for yourself and family.
There is a sort of asymmetry with how full time salary jobs work, where companies push employees to their limit, implicitly asking for all their focus (or else you risk bad reviews or worse), and at the same time they treat them like assets than can be moved around like chess pieces. The consistent thing would be to allow employees to do their job without caring about the organization, without liking the product, etc., or if the company wants that level of loyalty and passion, they should reciprocate and make sure their salary is growing with their careers and compensating for things like inflation.
Well, this is why licensing exists.
My wife is in a licensed field. She still has interviews.
Not the technical take home type, but she still spends 1+ days for every company she pursues. Total time is not much different than what I do per interview.
Yes fields that are easy to get into and licenses are easy to get have natural filters
I really, really wish we had licensing! Licensing would help with imposter syndrome, too.
You get this with a union/guild. Example: IBEW
https://en.wikipedia.org/wiki/International_Brotherhood_of_E...
I've been looking at IBEW and the path of pursuing electrical as an alternative now that software development seems to have dried up entirely and need to find something less volatile. Haven't pulled the trigger yet though, because software was such a natural path originally, it's a little intimidating to go back to school and I have no idea what the trades are like. Got the time though, nearing a full year since being laid off and seems like it'll be another if I don't do something else.
It also seems naive to think I'd be capable of becoming an electrician or succeeding in trades, but might be worth a shot.
It is a time commitment, but it can’t be offshored nor automated.
> why don't long time employees look for a better paying opportunity?
comfort, convenience, they know all the shortcuts, they know the tribe, they know the people who that will help them and the people to avoid. They pick up the phone and get the thing they are looking for in 5mins, no begging required. A learning curve can be a b*tch, and folks that have been sitting in the same chair for 20y got nothing new to learn. If they are smart they are doing 100% of their tasks at 50% of the time, so they nap at home, or take really long coffee breaks in the office. Work is close to home (probably) and getting another job that is 30mins driving more (meaning 1h/day, 5h/week) ain't worth the extra $500 per month.
Also, 'better the devil you know'.
Why not? Being the new guy/gal sucks - all the institutional knowledge that you have accumulated means that you’re much more efficient that when you move to a new place, plus you know everyone and you’ve got relationships and likely friendships that you’ve cemented over the years. When you move to a new place, you suck until you’ve worked how things work - you need to hope the excitement of a new job carries you while you find your feet.
This is the answer here.
Market rate isn't what the average person is being paid. It's the amount that both parties accept.
Pay = (cost of change) + (value of work)
For new hires, the cost is high (interviews, effort) so the pay needs to be high. For long time employees, the cost of staying is negative (friends, familiar/working code, devil you know) and the cost of moving is positive, and this gap increases with tenure.
There are a number of reasons why a job in the hand might be worth two in the bush. Each situation is different though so ymmv.
Firstly there's more to a job than just pay. Some places are better to work at than others. Perhaps it's team dynamics, geographic location, remote or office, good or bad office etc.
Some financial perks improve with length of tenure.
Long-termers tend to have more job security than newbies. First in, first out when positions are cut.
Fewer, or more, responsibilities. Things like being on-call over weekends.
Seniority often comes with non-financial perks that aren't monetary, but make life better. More flexible working conditions. Better parking. Work from home, and so on.
None of which stops people discussing pay with their manager. Which is a Lot easier to do than switching jobs.
Because it's a red flag if you leave before 1 year. So if you figure out in your 6th month that you were were getting underpaid well tough luck because you have endure 6 more of the same crap or your next job will take a lot longer to find especially in this market.
> Here is another, but related question: why don't long time employees look for a better paying opportunity?
The devil you know is often better than the devil you don't know.
Why risk ending up with a bad employer for more pay if you can already coast at an OK employer for good enough pay?
I see it much like that Treehouse Of Horror episode of The Simpsons where Homer time travels to the past and finally comes back to the present to discover that everything is the same except everyone now has a long tongue they eat with; after all the things he went through earlier, his response is "Eh... close enough."
For the same reason insurance companies charge existing customers more than new ones. To take advantage of switching costs.
I answered this question here last month: https://bloomberry.com/why-new-hires-often-get-paid-more-tha...
Basically it comes down to a few reasons:
1) Hiring budgets are always > than budgets for raises
2) HR and recruiters are incentivized to hire new people rather than retain current ones
3) Employers overvalue experiences obtained elsewhere
4) Nobody really wants to solve the problem of retention because it's a deep-rooted issue with no easy fixes (unlike paying someone new a lot of money)
New hire budget is bigger because they're competing for talent. For existing employees, since most don't leave jobs for better pay, they only need to approximate industry average pay.
Switching jobs is stressful and you can only do that so often before being flagged as a job hopper. One company declined to interview me because I switched jobs in less than 3 years(2.5). Plus, if the pay is decent, why rock the boat? The competition may have worse work environments, bosses or colleagues.
This is why unions existed.
In my company the new hires are usually the worst payed people. We have a scheme that has a base pay and if you fullfill the requirements, additional money is added to the base pay each month. It used loyalty with the company and certifications to determine the addition to the base pay.
Lol. Loyalty!
Not sure if you are serious, but in case you are: your company is very very special.
The disconnect comes between what market rate is and what actual pay is. If you want to hire people you must offer competitive pay.
Larger, older companies tend to reward loyalty, often the ones that are making single digit annual growth. There's not a lot of new ground to break into, so they don't need the smartest people. They just want to keep the existing money making system from breaking, so the ones who are running it are better rewarded.
It's also because the ones with the most tenure are the ones deciding how pay works.
I've been seeing the entire opposite. New hires in this shitty economy are getting really smaller offers than they would 2-3 years ago.
One very clear sign of this is if you are in the management side (I am), the amount of REALLY IMPRESSIVE talent that is looking for a new job at the moment is just bonkers.
Recruitment agencies business for developers is a dying kind of business at the moment, companies can directly access top-notch talent by sorting through CVs, running tests etc (typical company recruiting process).
Most companies have very low IQ. Don’t expect any strong reasoning from them.
>> Most companies have very low IQ
Go get rich then.
Because they are competing with each other at current market rates.
But you can make this work for you. Give yourself a raise every 2 years or so.
This is like saying why are potatoes more expensive than tomatoes. Well because the market decided so
That's true, but the question is why is the market doing that? What is it about the new hire that is worth more?
There is no mystery here. It is expensive to bring someone new on and train them.
There is an arbitrage too by the company that once most people are comfortable, they chose stability and the known quantity they have over the unknown opportunity they would have with changing companies.
The real question is how can someone not understand that a company is not going to pay more if they don't have to? Seems kind of obvious.
Except tomatoes are more than 4 times as expensive as potatoes. :D
I guess it might depend on where you are
What place has potatoes more expensive than tomatoes?
Outside of Asia, which is more rice-based than potato-based, potatoes have a hard-earned centuries-old reputation of food for poor people (cheap to farm, not much nutritional value). But even after checking the prices in Japan, tomatoes are several times more expensive.
Maybe you’re not looking at the price per kilogram, but price of package for packaged vegetables?
I feel like this isn’t the best place to litigate the price of tomatoes
Lmao true I was just arguing that market can be irrational :D
I am very well versed in how to react to this but I agree that we shouldn’t have to react to this
Because long time employees don’t ask for raises, or more accurately, demand them.
Because they can.
What else possible answer did you expect, i sincerely wonder?
Do they?
Any evidence or data to back this up?
Anecdotally, I can say that when I was hiring devs in a large AU Corporate, this wasn’t the case :-)
Cause they can
They can do a lot of things, but they're consistently doing this. The question is why?