Yes, as you would be wise in doing so. But also consider that if someone’s pay was doubled to twice that of what their job and experience goes for in the competitive market, chances are is that they’d not save or invest the difference but spend it, live up to their current earnings level like most Americans do. “Hey, I can now afford to buy that house or move to the much nicer apartment, buy the new car, the big screen, go on that vacation, max out the CC’s because I can afford to make more than the minimum monthly payment etc.”
But then their employer goes under and they lose their job.
Hunting for a new job, just because they were making $70k a year, doesn’t mean they are going to get that somewhere else. But not getting that much could mean a world of heartache if they’ve living a $70k per year lifestyle with a job title and skills only worth $35K in the market.
I recently took over compensation for the company for which I work. It’s been interesting and challenging to learn. What I have learned is that most company use market data, either local or national or industry specific depending on the job. Job descriptions with the educational and or years of experience are matched against the closest and most relative and matching job description in at least one compensation survey and typically more than one survey is used.
Jobs are then “graded” with a minimum, a mid-point and a maximum – a salary or wage “range”.
Typically you don’t want to bring in someone new at or above the mid-point of the salary range unless their experience and their resume are really impressive and they really knocked off everyone’s socks in the interview process. You want to try to offer them and bring them in closer to the min – you can always increase the offer if you really want to hire them.
You also don’t necessarily want to bring someone in below the min or have any employee in that very same job above the max as this can skew your compensation modeling, and if you have to track for EEO and affirmative action plans (especially important if you have any government contracts) and many companies such as the one I work for, also base annual increases not only on performance evaluations but also with a metric that takes their comp ratio (a % of their present salary compared to the mid-point).
We have some very long time employees, mostly hourly manufacturing employees, who are very good workers but for whatever reason, they are not either interested in a promotion or are not management or supervisory material, that are now at the max of their job grade. For those folks, rather than giving them an hourly increase, we give them a lump sum bonus. We also periodically review our present job grades and comp models and may increase the grades if warranted by market data. We did this recently for Lathe operators - (Lathe II and Lathe III) after finding where we had those jobs graded was now below market in our area.
Bottom line is if say I have a job opening for an IT Tech and the market says the mid-point is $35K we are not going to make an offer of more than that. If the applicant comes back with, “Well I was making $70k at my last job”, our response would be “Thank you for your interest in our company, and we wish you the best of luck to you on your continued job search”.
Very interesting; thanks for taking the time to post that. The average schmuck hasn’t got a clue what goes into compensation. He thinks that anyone who owns a company has all the money in the world, and is merely being an old Scrooge if he doesn’t want to pass it on.