Fair p(l)ay: the price of employee loyalty

Hire-to-Retire is dead. To be honest it’s been dead for the better part of a decade, but the remote working boom of the pandemic was the last nail in the coffin. Millennials and even more so Gen Zers are perpetually online and more aware of the wide world of job opportunities than any past generation. This constant exposure to new roles in cool companies, with challenging tasks and lucrative benefits combined with the ability to apply quickly, conveniently, and discreetly has led to an environment where employee loyalty must be earned every day.

Naturally job hopping is more in vogue than ever with jobs being viewed as temporary engagements and younger workers tend to hold their employers accountable and expect much more from them than generations past, being fully aware that they can always move somewhere else should they feel mistreated or undervalued.

While it’s easy to feel that young workers are ungrateful the stats don’t lie, and it’s been proven that job hoppers make on average 20% more than their loyal counterparts indicating faster career progression and bigger salary bumps with each new role. In an ever more expensive world trying to maximize the compensation for one’s skillset can hardly be seen as a condemnable act. Ergo keeping the paygrade of a firm competitive with market standard to reward loyalty is now more important than ever. 

So why do loyal employees make less? First the infrequency of salary updates. Casually browsing through the LinkedIn profiles of young professionals one can quickly notice a trend of job hoppers changing a corporate home every 1-3 years and oftentimes find themselves in roles more senior than the ones they previously held. During the early years of their careers loyal employees seem to keep up the pace going from junior to midlevel to senior in similar timeframes but the jump to managerial or expert roles usually takes a good while longer and that’s where stagnation tends to begin, an issue rarely faced by professionals who look for an empty spot at any company instead of patiently waiting for their current employer to facilitate their growth.

Up next is the size of each salary bump. Companies that are looking to fill a position with an external hire are forced to look at market rates and offer a competitive compensation package, often going above the market average to entice top talent and to make the hassle of changing employers worth their while. On the other hand, going for internal promotions oftentimes relies on outdated pay bands that no longer reflect the market for the role and since neither the candidate or the employer has felt the need to examine how the market is shaping or offer a package above the average the ensuing pay raise tends to be lower for the internal hire even if the change in role title is practically the same. 

Keeping the paygrade of a firm competitive with market standards to reward loyalty is now more important than ever. 

It's easy to attribute malice to an employer and blame corporate greed trying to cash in on an employee’s loyalty though that’s genuinely rare. More often than not the issue is incomplete information. Surprising as it may sound, very few companies actually have an up-to-date picture of the average salaries in their field and lag behind the breakneck speed at which the modern employment market is moving. Honest, open conversations, unbiased third-party metrics, and clear-cut roles able to be mapped on current market data all have a role to play in aiding an employer evaluate the proper compensation of each employee and make sure they reward loyalty instead of discouraging it.

From an employee’s perspective research is also important. Talking about one’s salary is a long-standing professional taboo but that only makes the problems worse. Doing research on the current market, asking peers, and checking salary ranges in job listings can help evaluating the market value of one’s skillset and potential discrepancies can be brought up to the employer. Asking for a raise can be intimidating but any employer would much rather have that conversation than being asked to extend a counteroffer out of the blue.

Hire-to-retire is dead but it doesn’t have to be. Employees should not be punished for their loyalty and staying at a company should be as valid a way to build a career as any other but in an environment of constant access to information employers should be more attuned than ever to the market value of their employees and take the first step in actualizing that value before their top talent decides to move where they feel most appreciated.