How to interpret different raise percents?

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B4Xt3r
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How to interpret different raise percents?

Post by B4Xt3r »

Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
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Re: How to interpret different raise percents?

Post by Jack FFR1846 »

Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
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lack_ey
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Re: How to interpret different raise percents?

Post by lack_ey »

The baseline level varies significantly between industries and companies, and I don't think many are explicitly starting off from inflation or are thinking in those terms, even if they should.

So I would say that in some cases that sounds about right, but would frequently be too optimistic or too pessimistic.
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JoMoney
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Re: How to interpret different raise percents?

Post by JoMoney »

My employer makes available salary ranges for various positions/grades.
The policy isn't spelled out this way, but after decades with the employer, and a ton of anecdotal evidence, It's become vary apparent that raises are geared for those in the middle to lower end of their specific positions pay scale/range. If the person is on the lower end of their positions pay range and not getting a larger raise, it's either because the person isn't well appreciated, or the specific job was down-graded to call for a lower pay-grade but they didn't downgrade the employees title/grade.
For people on the upper end of their pay range, despite being MVP's who get glowing written reviews, plenty of ancillary awards and bonuses, it's extremely rare for anyone on the upper end of of their positions pay range to get a raise that's anything more than a cost of living/inflation raise in the 1-2% range. If they're near the top end they often won't get a raise at all, but will usually be given a one-time award and lots of assurances that they're well appreciated (but an explanation that their position just doesn't allow for a higher salary).

With my employer, if you're on the upper end of your positions salary, and you want a raise (more than inflation adjustments), it's pretty much required that you apply for a position that has a higher pay grade.
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wootwoot
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Re: How to interpret different raise percents?

Post by wootwoot »

This whole theory is flawed. Some companies are more liberal with raises than others so these percentages are arbitrary. Also, how do you approach companies that give out RSUs as compensation? If I get a low % but a lot of RSUs does that mean a company doesn't value me?
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Re: How to interpret different raise percents?

Post by bengal22 »

Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
The best you can do is 3 percent??? Run run run.
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Jags4186
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Re: How to interpret different raise percents?

Post by Jags4186 »

bengal22 wrote: Thu Jul 04, 2019 9:33 am
Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
The best you can do is 3 percent??? Run run run.
My company has as follows:

“Exceeds expectations”: 3-4% raise
“Meets expectations”: 2-3% raise
“Partially meets expectations”: 1-2% raise, not bonus eligible
“Does not meet expectations”: 0% raise, not bonus eligible

IMO it’s a response to the newer job market of people moving around every few years. If your employees are going to leave in 2 or 3 years why pay them anymore than you have to. And on the flip side if you’re a good employee, there’s no incentive to stay at your current company as you’ll be losing to inflation.
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Re: How to interpret different raise percents?

Post by finite_difference »

wootwoot wrote: Thu Jul 04, 2019 9:20 am This whole theory is flawed. Some companies are more liberal with raises than others so these percentages are arbitrary. Also, how do you approach companies that give out RSUs as compensation? If I get a low % but a lot of RSUs does that mean a company doesn't value me?
Total salary = $ to RSU value.

Then you can calculate how much you get each year. Does it stay the same, or go up or down?
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Kenkat
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Re: How to interpret different raise percents?

Post by Kenkat »

JoMoney wrote: Thu Jul 04, 2019 9:19 am My employer makes available salary ranges for various positions/grades.
The policy isn't spelled out this way, but after decades with the employer, and a ton of anecdotal evidence, It's become vary apparent that raises are geared for those in the middle to lower end of their specific positions pay scale/range. If the person is on the lower end of their positions pay range and not getting a larger raise, it's either because the person isn't well appreciated, or the specific job was down-graded to call for a lower pay-grade but they didn't downgrade the employees title/grade.
For people on the upper end of their pay range, despite being MVP's who get glowing written reviews, plenty of ancillary awards and bonuses, it's extremely rare for anyone on the upper end of of their positions pay range to get a raise that's anything more than a cost of living/inflation raise in the 1-2% range. If they're near the top end they often won't get a raise at all, but will usually be given a one-time award and lots of assurances that they're well appreciated (but an explanation that their position just doesn't allow for a higher salary).

With my employer, if you're on the upper end of your positions salary, and you want a raise (more than inflation adjustments), it's pretty much required that you apply for a position that has a higher pay grade.
This is exactly how my current employer handles raises. It’s not really about merit so much as keeping people in the middle part of the salary range for a particular position. Bonuses are more performance based however.
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Re: How to interpret different raise percents?

Post by Kenkat »

bengal22 wrote: Thu Jul 04, 2019 9:33 am
Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
The best you can do is 3 percent??? Run run run.
It is very dependent on where you are at in your career. Early in my career I either moved quickly up the ladder or switched jobs and would frequently see 10%+ increases year over year. Now in my mid-50s, my desire to move around or move up is much lower. I’ve already driven my salary up to what I consider a high level and so am content to just stay where I am at with smaller raises.
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quantAndHold
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Re: How to interpret different raise percents?

Post by quantAndHold »

It’s completely company and industry dependent. I’ve worked at a couple of jobs where the company paid each person what they were worth on the open market, including letting people go who were overpaid. I’ve also worked at companies who doled out raises like JoMoney’s company. The policy was explicit and overt, not some secret thing. Other companies where the group got a bucket of raise money equal to a certain percentage, and it was the boss’ job to allocate that.

It also depends on how hard the company has to work to attract and retain workers. More liberal raises when it’s harder to hire people, less when people are begging for jobs. The other thing is that early career people tend to get bigger raises, and late career people may not get raises at all.
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Re: How to interpret different raise percents?

Post by MotoTrojan »

I’ve gotten anywhere from 3% to 10% not including a bonus. I don’t think one size fits all.
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Re: How to interpret different raise percents?

Post by Dottie57 »

Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
This. And OP, my former employers never offered. An inflation adjusted increase, NEVER.
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Re: How to interpret different raise percents?

Post by Dottie57 »

bengal22 wrote: Thu Jul 04, 2019 9:33 am
Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
The best you can do is 3 percent??? Run run run.
In this situation there are usually bonuses. At least for top performers who don’t get much for raise.
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Re: How to interpret different raise percents?

Post by Startled Cat »

It must be very, very company-specific. The companies I’ve worked for have been a bit random (but often generous) about giving raises, and definitely don’t follow the 0-4% rule I see described in this thread. For example, I took a new job in August 2017, and since then received the following salary increases:

November 2017: 3.8%
July 2018: 18.2%
January 2019: 3%
July 2019: 4.6%

My salary increased much more in 2018 than 2019, but I think it would be silly to read too much into that. I benchmark my pay to what competitors for talent are paying, not what I made last year.
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Re: How to interpret different raise percents?

Post by Traveler »

In almost ten years at my company, I have received a raise each year and they ranged from 2.25-3.5%. About half the time I was an "exceeds" and the other half a "meets" expectations. Because I haven't been promoted, and I was hired as an experienced manager with accompanying pay and because I don't have a defined benefit pension program like others have), I exceed the midpoint of the job and my raises have been 2.25%. Short of getting promoted which I've written off, I expect to get 2-2.5% each year until I retire or leave the company. I have to reconcile in my mind whether I'm ok with that or pursue something outside the company.
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Re: How to interpret different raise percents?

Post by Watty »

B4Xt3r wrote: Thu Jul 04, 2019 8:51 am Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
I would question the whole set of assumptions.

Salaries are usually set based on what the going market rate for the employees job and if they are at the top of that range then there will be little other than an adjustment for inflation.

To get raises beyond that the employee would need to be promoted into a job that has a higher market payrange.
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Re: How to interpret different raise percents?

Post by prudent »

Where I used to work had the same deal as JoMoney posted. Raises depended on where you were in your position's salary band and your rating. Beyond that, each group was allocated a sum of money to distribute and could not go over. If someone was at the top of their position's salary band, the best they could get was a 3% one-time bonus. HR would distribute a matrix where you could cross-reference someone's rating and position in the salary band and there you'd find the max amount for a raise. The matrix rarely changed no matter what kind of year the company had - to their credit, even after a few very bad years in a row they didn't lower the numbers on the matrix. Nor did the numbers go up after a great year. They believed each position had a certain range of appropriate salary and they stuck to it.

Nothing in the process had anything to do with inflation. The path to bigger raises was to get promoted. The people who focused on "what skills do I need to improve on so I can get promoted?" during review time were the ones who tended to get promoted if they developed those skills.

Also, managers were expected to have a distribution of ratings approximating a bell curve. So if your peers had raised their game while you didn't, your rating could drop even if you did the exact same quality/quantity of work as the previous year.
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Re: How to interpret different raise percents?

Post by Thesaints »

Companies do not generally base their yearly raises on inflation and certainly not on "CAGR inflation", which is an average over N years by definition.

How raises are apportioned varies wildly between different employers. Some tend to give a few percent increases to almost everyone, with top performers getting maybe 5%, instead of 3%.
Others only reward top performers: “As you all know first prize is a Cadillac El Dorado. Anyone wanna see second prize? Second prize is a set of steak knives. Third prize is you're fired.”
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Re: How to interpret different raise percents?

Post by B4Xt3r »

Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
I'm not sure why I would desire to make a career at such a place.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

lack_ey wrote: Thu Jul 04, 2019 9:13 am The baseline level varies significantly between industries and companies, and I don't think many are explicitly starting off from inflation or are thinking in those terms, even if they should.

So I would say that in some cases that sounds about right, but would frequently be too optimistic or too pessimistic.
Yeah, I'm not asking if companies do do this, rather more a long of the lines of should these be my interpretations of their actions.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

JoMoney wrote: Thu Jul 04, 2019 9:19 am My employer makes available salary ranges for various positions/grades.
The policy isn't spelled out this way, but after decades with the employer, and a ton of anecdotal evidence, It's become vary apparent that raises are geared for those in the middle to lower end of their specific positions pay scale/range. If the person is on the lower end of their positions pay range and not getting a larger raise, it's either because the person isn't well appreciated, or the specific job was down-graded to call for a lower pay-grade but they didn't downgrade the employees title/grade.
For people on the upper end of their pay range, despite being MVP's who get glowing written reviews, plenty of ancillary awards and bonuses, it's extremely rare for anyone on the upper end of of their positions pay range to get a raise that's anything more than a cost of living/inflation raise in the 1-2% range. If they're near the top end they often won't get a raise at all, but will usually be given a one-time award and lots of assurances that they're well appreciated (but an explanation that their position just doesn't allow for a higher salary).

With my employer, if you're on the upper end of your positions salary, and you want a raise (more than inflation adjustments), it's pretty much required that you apply for a position that has a higher pay grade.
Yeah, I understand this. I'm not sure my interpretation of it would be all that flattering. Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
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Re: How to interpret different raise percents?

Post by B4Xt3r »

wootwoot wrote: Thu Jul 04, 2019 9:20 am This whole theory is flawed. Some companies are more liberal with raises than others so these percentages are arbitrary. Also, how do you approach companies that give out RSUs as compensation? If I get a low % but a lot of RSUs does that mean a company doesn't value me?
Your confusion would go away if you thought in-terms of total compensation.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

bengal22 wrote: Thu Jul 04, 2019 9:33 am
Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
The best you can do is 3 percent??? Run run run.
I'm not sure 3% is run run run territory, I mean that probably is a small real raise each year.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

finite_difference wrote: Thu Jul 04, 2019 9:42 am
wootwoot wrote: Thu Jul 04, 2019 9:20 am This whole theory is flawed. Some companies are more liberal with raises than others so these percentages are arbitrary. Also, how do you approach companies that give out RSUs as compensation? If I get a low % but a lot of RSUs does that mean a company doesn't value me?
Total salary = $ to RSU value.

Then you can calculate how much you get each year. Does it stay the same, or go up or down?
+1
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Re: How to interpret different raise percents?

Post by B4Xt3r »

quantAndHold wrote: Thu Jul 04, 2019 10:08 am It’s completely company and industry dependent. I’ve worked at a couple of jobs where the company paid each person what they were worth on the open market, including letting people go who were overpaid. I’ve also worked at companies who doled out raises like JoMoney’s company. The policy was explicit and overt, not some secret thing. Other companies where the group got a bucket of raise money equal to a certain percentage, and it was the boss’ job to allocate that.

It also depends on how hard the company has to work to attract and retain workers. More liberal raises when it’s harder to hire people, less when people are begging for jobs. The other thing is that early career people tend to get bigger raises, and late career people may not get raises at all.
I do understand this, and am trying to form my personal interpretation of it.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

Dottie57 wrote: Thu Jul 04, 2019 10:38 am
Jack FFR1846 wrote: Thu Jul 04, 2019 8:55 am Your math is wrong.

As I see it, in my company, raises are computed as follows: 4% of each group is given a 3% raise. These are the "walks on water" rated employees. Everyone else gets zero. As a manager, your task is to make up a new excuse out of thin air as to why almost nobody gets any raise.

This is actually how my company doles out raises. I was one of the "walks on water" employees one year.
This. And OP, my former employers never offered. An inflation adjusted increase, NEVER.
Sounds like a place that I wouldn't want to make a career out of.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

Startled Cat wrote: Thu Jul 04, 2019 10:49 am It must be very, very company-specific. The companies I’ve worked for have been a bit random (but often generous) about giving raises, and definitely don’t follow the 0-4% rule I see described in this thread. For example, I took a new job in August 2017, and since then received the following salary increases:

November 2017: 3.8%
July 2018: 18.2%
January 2019: 3%
July 2019: 4.6%

My salary increased much more in 2018 than 2019, but I think it would be silly to read too much into that. I benchmark my pay to what competitors for talent are paying, not what I made last year.
Benchmarking against what competitors pay is also valid to me.
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Re: How to interpret different raise percents?

Post by B4Xt3r »

Watty wrote: Thu Jul 04, 2019 10:52 am
B4Xt3r wrote: Thu Jul 04, 2019 8:51 am Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
I would question the whole set of assumptions.

Salaries are usually set based on what the going market rate for the employees job and if they are at the top of that range then there will be little other than an adjustment for inflation.

To get raises beyond that the employee would need to be promoted into a job that has a higher market payrange.
Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
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Re: How to interpret different raise percents?

Post by nordsteve »

Companies with modern job family structures will have a progression like this:

Nut Engineer 1 -- can find correctly sized nuts
Nut Engineer 2 -- knows how to tighten nuts
Nut Engineer 3 -- tells the level 1 and 2 engineers how tight the nuts should be tightened
Nut Engineer 4 -- know which nuts can be left off of the assembly
...
Nut Engineer 8 -- inventor of the nut

There's typically more need for engineers at the lower levels of the ladder. You move up in the job family by mastering the next set of skills.

Compensation is set by examining the market and determining how much the company needs to pay in order to attract and retain engineers at each level. In large companies, you have attrition data (people quitting), recruiting data (what competing offers are candidates reporting) and salary surveys as inputs to the compensation process.

Sometimes your salaries get out of kilter with the marketplace, and the company needs to do something drastic like what Microsoft did last year.
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Re: How to interpret different raise percents?

Post by Thesaints »

B4Xt3r wrote: Thu Jul 04, 2019 8:26 pm Yeah, I understand this. I'm not sure my interpretation of it would be all that flattering. Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
Yes, but that is true only under Communism. In a capitalistic economy the CEO and his pals get most of the cake.
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Re: How to interpret different raise percents?

Post by thx1138 »

B4Xt3r wrote: Thu Jul 04, 2019 8:26 pm
JoMoney wrote: Thu Jul 04, 2019 9:19 am My employer makes available salary ranges for various positions/grades.
The policy isn't spelled out this way, but after decades with the employer, and a ton of anecdotal evidence, It's become vary apparent that raises are geared for those in the middle to lower end of their specific positions pay scale/range. If the person is on the lower end of their positions pay range and not getting a larger raise, it's either because the person isn't well appreciated, or the specific job was down-graded to call for a lower pay-grade but they didn't downgrade the employees title/grade.
For people on the upper end of their pay range, despite being MVP's who get glowing written reviews, plenty of ancillary awards and bonuses, it's extremely rare for anyone on the upper end of of their positions pay range to get a raise that's anything more than a cost of living/inflation raise in the 1-2% range. If they're near the top end they often won't get a raise at all, but will usually be given a one-time award and lots of assurances that they're well appreciated (but an explanation that their position just doesn't allow for a higher salary).

With my employer, if you're on the upper end of your positions salary, and you want a raise (more than inflation adjustments), it's pretty much required that you apply for a position that has a higher pay grade.
Yeah, I understand this. I'm not sure my interpretation of it would be all that flattering. Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
Of course not. It is called the “job market” and not the “job meritocracy” for a reason. Supply and demand works for labor just as it does for potatoes.
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Re: How to interpret different raise percents?

Post by wootwoot »

B4Xt3r wrote: Thu Jul 04, 2019 8:26 pm
wootwoot wrote: Thu Jul 04, 2019 9:20 am This whole theory is flawed. Some companies are more liberal with raises than others so these percentages are arbitrary. Also, how do you approach companies that give out RSUs as compensation? If I get a low % but a lot of RSUs does that mean a company doesn't value me?
Your confusion would go away if you thought in-terms of total compensation.
Maybe you could explain how this applies across different companies. Your theory is full of holes and doesn't account for these differences.
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Re: How to interpret different raise percents?

Post by DVMResident »

B4Xt3r wrote: Thu Jul 04, 2019 8:31 pm
Watty wrote: Thu Jul 04, 2019 10:52 am
B4Xt3r wrote: Thu Jul 04, 2019 8:51 am Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
I would question the whole set of assumptions.

Salaries are usually set based on what the going market rate for the employees job and if they are at the top of that range then there will be little other than an adjustment for inflation.

To get raises beyond that the employee would need to be promoted into a job that has a higher market payrange.
Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
I actually laughed at this one. That’s not how businesses works. Nor do they give a damn about inflation:wages. They pay what they think they need to keep too many employees from running to the competitor at once. I put emphasis on too many. 8-12%/year voluntary turnover is the number HR targets (at my megacorp, at least).

My magecorp targeted 2.5-3% raises and 3.5% was the superstars. This seems roughly in line with the rest of the posters’ experience. Bonuses were more variable, but not enough to care. Promotions were 7-12% per tier while leaving and coming back to a level higher/new hires were 15-20% higher than previous level. Go figure. RSU/options were structured to make it painful to leave, though in my experience you can use these to negotiate a larger sign on bonus. So more of a psychological hurdle than real.

On personal note, national inflation does not reflect personal inflation. I think focusing on CPI really is the wrong bench mark. Market salary for your skill set is more meaningful.
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Watty
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Re: How to interpret different raise percents?

Post by Watty »

B4Xt3r wrote: Thu Jul 04, 2019 8:31 pm
Watty wrote: Thu Jul 04, 2019 10:52 am
B4Xt3r wrote: Thu Jul 04, 2019 8:51 am Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
I would question the whole set of assumptions.

Salaries are usually set based on what the going market rate for the employees job and if they are at the top of that range then there will be little other than an adjustment for inflation.

To get raises beyond that the employee would need to be promoted into a job that has a higher market payrange.
Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
This might apply somewhat if someone is paid on commission but even then if someone is getting paid an extraordinarily large amount in commission the company will change the commission plan to make their compensation more in line with the market rate for a given position.
finite_difference
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Re: How to interpret different raise percents?

Post by finite_difference »

DVMResident wrote: Fri Jul 05, 2019 1:58 pm
B4Xt3r wrote: Thu Jul 04, 2019 8:31 pm
Watty wrote: Thu Jul 04, 2019 10:52 am
B4Xt3r wrote: Thu Jul 04, 2019 8:51 am Hi All,

Does my intuition about interpreting raises seem right to you? Let's say that inflation is X% CAGR and that we are discussing a decent employee that is producing more value each year as they get better at their job.

Yearly CAGR raises:
  • <X: company either cannot or does not value you. This is a warning signal.
  • =X: Not necessarily a warning signal, but could be interpreted as such because the company is not rewarding you for the extra value you are creating each year as you become better at your job
  • =X+(1 to 2)%: this should be the normal operating range for good employees
  • =X+(2 to 4)%: company wants to retain you and is demonstrating their commitment to compensate you for your extra yearly value that you are generating.
  • =X+(>5)%: company is really rewarding you and really wants to retain you.
-b4xter
I would question the whole set of assumptions.

Salaries are usually set based on what the going market rate for the employees job and if they are at the top of that range then there will be little other than an adjustment for inflation.

To get raises beyond that the employee would need to be promoted into a job that has a higher market payrange.
Shouldn't a person's compensation be tied to their fair shake of the value they create and not necessarily a title?
I actually laughed at this one. That’s not how businesses works. Nor do they give a damn about inflation:wages. They pay what they think they need to keep too many employees from running to the competitor at once. I put emphasis on too many. 8-12%/year voluntary turnover is the number HR targets (at my megacorp, at least).

My magecorp targeted 2.5-3% raises and 3.5% was the superstars. This seems roughly in line with the rest of the posters’ experience. Bonuses were more variable, but not enough to care. Promotions were 7-12% per tier while leaving and coming back to a level higher/new hires were 15-20% higher than previous level. Go figure. RSU/options were structured to make it painful to leave, though in my experience you can use these to negotiate a larger sign on bonus. So more of a psychological hurdle than real.

On personal note, national inflation does not reflect personal inflation. I think focusing on CPI really is the wrong bench mark. Market salary for your skill set is more meaningful.
I am quite curious about what they teach in Business School about raises. Presumably those theories would be enshrined into MegaCorp practices. For example, common sense would seem to imply that raises should be used to reward merit and keep up employee morale.

And from personal experience I find that it’s so true that raises do help with morale.

Thus I think the OP’s general outline is correct but underlying it is the job market — and it’s all about demand and supply.

So it seems like the prevailing Business 101 theory is to pay as little as possible to increase profit. Morale be damned.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Afty
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Re: How to interpret different raise percents?

Post by Afty »

As others have said, raises are very company dependent. There are no hard and fast rules like “a 5% raise means you’re a superstar.” A 5% raise may mean you are underpaid for your job role and your company is moving you toward the middle of the salary band. Or maybe it does mean you are a superstar. No way to tell without more information.

It sounds like what you’re really looking for is honest performance feedback. What performance feedback have you received from your manager? If you feel like it’s lacking or not honest enough, can you talk to your manager about that?
flyingcows
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Re: How to interpret different raise percents?

Post by flyingcows »

As an employee, I think it's wise to interview with other companies at least once a year to help you assess your market value. Every industry is different, I can only speak for mine...In the US, total compensation for software development roles have increased 100-200% in the past 10 years. Depending on the company your working for, capturing that kind of growth might require that you leave your employer for a new one every 3-5 years. If you really want to remain with the same employer long term, and you are ok being paid below market rates, perhaps you could neogiate some bonus/retention payouts (bonus, rsu, etc)
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thx1138
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Re: How to interpret different raise percents?

Post by thx1138 »

finite_difference wrote: Sat Jul 06, 2019 10:26 am So it seems like the prevailing Business 101 theory is to pay as little as possible to increase profit. Morale be damned.
The question bluntly is how much does morale affect profit. That depends on the position really. Some positions are very costly to turn over meaning there is profit to be had in retention and thus in morale as well. Other positions turn over isn’t very costly (e.g. unskilled labor) and so morale be damned as you say.

And of course “profit” is ambiguous. Short term, long term? That context will also impact management’s perception of the value in retention and thus morale.

Clearly there isn’t one correct answer. But as many failed businesses have shown there certainly are lots of wrong answers!
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FIREchief
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Re: How to interpret different raise percents?

Post by FIREchief »

Jags4186 wrote: Thu Jul 04, 2019 9:42 am My company has as follows:

“Exceeds expectations”: 3-4% raise
“Meets expectations”: 2-3% raise
“Partially meets expectations”: 1-2% raise, not bonus eligible
“Does not meet expectations”: 0% raise, not bonus eligible
This gave me a good laugh! Back at Megacorp, one of the things HR did was to occasionally try to tune up the ratings. Decades ago, it was just a rating 1 through 5. I'm sure there was some supporting documents that said each number corresponded to. When I was last at Megacorp, it was similar to your listing:

Far Exceeds
Exceeds
Meets
Needs improvement - not eligible for variable compensation payout

Your listing looks like a next step in evolution (maybe you're at the same Megacorp). Every employee expected to be far exceeds and no boss wanted to give a needs improvement. Looks like the HR gurus have come of with an elegant solution. Just get rid of the far exceeds and wedge in a less harsh "negative" rating. Did they used to use the word "requirements" instead of "expectations?"

I'm guessing the percentage ranges accommodate where an employee is currently situated in their pay range (e.g. an exceeds in the top half gets 3% while and exceeds in the bottom half gets 4%).
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Watty
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Re: How to interpret different raise percents?

Post by Watty »

finite_difference wrote: Sat Jul 06, 2019 10:26 am I am quite curious about what they teach in Business School about raises. Presumably those theories would be enshrined into MegaCorp practices.
I can't speak from direct experience in business school but most likely;

1) Avoiding lawsuits for discrimination is critical when setting salaries. If you use a mindless HR algorithm based on a set salary range that is pretty defensible in court.

2) If the company has a PE of 25 then every extra dollar in salary reduces the earning by a dollar, and that costs the shareholders $25 to keep the PE cosnstant.
Jags4186
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Re: How to interpret different raise percents?

Post by Jags4186 »

FIREchief wrote: Sat Jul 06, 2019 3:28 pm
Jags4186 wrote: Thu Jul 04, 2019 9:42 am My company has as follows:

“Exceeds expectations”: 3-4% raise
“Meets expectations”: 2-3% raise
“Partially meets expectations”: 1-2% raise, not bonus eligible
“Does not meet expectations”: 0% raise, not bonus eligible
This gave me a good laugh! Back at Megacorp, one of the things HR did was to occasionally try to tune up the ratings. Decades ago, it was just a rating 1 through 5. I'm sure there was some supporting documents that said each number corresponded to. When I was last at Megacorp, it was similar to your listing:

Far Exceeds
Exceeds
Meets
Needs improvement - not eligible for variable compensation payout

Your listing looks like a next step in evolution (maybe you're at the same Megacorp). Every employee expected to be far exceeds and no boss wanted to give a needs improvement. Looks like the HR gurus have come of with an elegant solution. Just get rid of the far exceeds and wedge in a less harsh "negative" rating. Did they used to use the word "requirements" instead of "expectations?"

I'm guessing the percentage ranges accommodate where an employee is currently situated in their pay range (e.g. an exceeds in the top half gets 3% while and exceeds in the bottom half gets 4%).
Haha, I don’t think it’s the same company. We do also have an “Outstanding” category where raises can be whatever is approved by the executive council but as my 20 year veteran boss has told our team, “no one gets outstanding, you best bet for a big increase is to get poached by a competitor or marry a member of the controlling family”.

I guess I’ll find out what I am in a week or so and report back if I get 2% or 3%!
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