Salary, Gravitation and other Invisible Forces
We all know gravitation draws everything on earth … well, to earth.
At the risk of upsetting my child’s science teacher (my own teacher lost faith many years ago), let’s agree that on earth, gravity gives weight to physical objects, thus they stick to the ground, if no bigger force says otherwise.
But one unique thing (I know, it’s not really a physical object) gravitate upwards, not down. It’s called SALARY.
Why? How come that naturally everything is drawn down and only salary is pulled up?
What are the forces which drive this strange phenomena?
It happens because almost all stakeholders want it to go up:
- Candidate – a candidate to a job naturally aims to earn more, so they are asking for as much as they believe reasonable.
- Recruiter – the recruiter wants to close the vacancy and bring the most suitable candidate, as fast as possible. Have you ever seen recruiters’ incentive plan, or formal recruiters’ objectives, which say they need to bring the candidate at the lowest pay possible? I’ve been doing this for more than 20 years and have not seen such an incentive plan. In most cases recruiters incentives (if exist at all) look at other important dimensions, such as time to close a vacancy. It is within the interest of the recruiter to offer more and bring the talent the company needs.
- Hiring manager – at least in mid to large companies, the direct hiring manager knows that the opening pay level will impact the employee’s salary much more than future raises and bonuses. Later they will be restrained by merit budgets etc. When hiring, it is the time to secure higher salary, increasing the chances of employee being happy and not being tempted by a better job offer. Also, some managers would also consider that higher salary to their subordinates will later strengthen the case for increase to their own salary.
- Employee – employees (all of us) always want more salary. It’s natural.
- HR – retention is a big thing for HR- It’s really important. HR wants to make sure employees stay, and one very obvious and quantifiable way to encourage this is by increasing salary. When someone leaves, HR (and direct manager) are likely to blame the salary, instead of (for example) poor management, the tedious job, lack of career opportunity etc.
- Inflation – remember this one? Old people still remember this beast and the young folks are now getting to know it. It makes the same amount of money (salary) less useful, forcing pay increases.
- Social interest – have you ever heard someone bragging about a low salary? No, if someone is talking about salary in public, it’s about a higher salary. Have you ever heard someone telling a story about this guy receiving average salary? No, it will not be interesting, it’s always about the guy that received a very high salary. Up until a few weeks ago, the media was full of stories about tech employees’ high salaries.
- We tend to remember these anecdotes of high salary more than we remember the so many cases of people receiving low and average salary.
Of course, Senior HR managers, CFOs, and CEOs know all of that, so they put pressure to contain pay levels. They often put too much pressure, but they seldom reduce salaries.
We’ve seen cases of massive pay reductions only in very extreme cases, like after 2000’s bobble burst and for some companies also in the beginning of COVID pandemic.
So what can we do about it?
First and foremost, acknowledge: salary gravitates upward. Almost always. Bear in mind these invisible forces that pull it upwards.
Second, use concrete benchmark to understand the market; not anecdotes – these are likely to be inflated. Understand that your ‘gut feeling’ is misleading and usually in one direction, upwards.
Managing Partner Europe
Zviran compensation & benefits solutions