There have been studies of Silicon Valley, and your experience is the common case.
Some of it has to do with stock based compensation. I’ve not heard of any companies that, by default, renew RSUs at a dollar value comparable to what they gave the employee as a new hire (even if they’ve promoted the person!)
Even if they did, that would be less than what that employee is paid when the initial grant expired, or what they could make by moving jobs (since they’re now 4-5 years more senior).
I’ve heard people call this effect the “salary cliff.” I know a manager at $bigco that has an elaborate system to push it out a few years by gaming the system. The idea is to get a few extra years out of people before they switch jobs.
I’m not sure why this is the equilibrium the system has chosen. It might be that people put a large monetary value on having a stable set of coworkers.
More cynically, it might be political. If only a few cherry picked employees stay, and all the other organizational memory walks out the door every 4-5 years, then all the organizational power eventually accumulates in middle management.
Stock based compensation may be the norm in Silicon Valley, but it isn't par for the course across different roles and industries. But the ~3% raise seems to be pervasive. This tells me that it doesn't have to do with stock based compensation.
~3% a year is a cost of living increase. If anyone gets 3% for a promotion they could ask where that number came from. If they recently got a 3% bump that means the promotion put them ahead by ~12 months of work at the company in the prior position. Does that make sense? If they haven't gotten a raise for close to a year, it means the promotion didn't really come with a pay bump at all if that's what they normally get.
Questioning these things when offered is probably the best way to get the employer to change them, or at a minimum it may make it clear what your future prospects at the company are.
I've only ever had it referred to as an annual merit increase, but it's definitely more aligned with the national cost of living.
Regardless of what it's called though, the question remains. Why does your value to other companies increase faster than your value to your own company? Presumably you're learning more about your company's business and your specific domain problems, which should make you more valuable to your company than it would to others. Is that assumption not valid?
> Why does your value to other companies increase faster than your value to your own company?
I think there's a lot that goes into this, which also shows how complex the topic is.
- There's your actual value and your perceived value
- When you're there and filling a niche, there may not really be a lack for a specific skill set which (might exist if you left) which there might be at the other company.
- Companies aren't always good and managing their desire to pay the least amount possible to retain an employee (natural, to keep costs down) with the employees willingness to leave, if they even have any inkling of the latter.
- An employees willingness to leave can have many inputs, some of them nothing to do with work, so it's hard to judge (e.g. lack of ability to work from home some days can go from a small annoyance to a reason to look for alternate employment depending on what else is going on in their life).
etc.
As to whether your skill should always be increased to the company you're at, I think that's generally true, but may not be in the specific instance. People get complacent, and sometimes the work environment can cause a excellent employee to perform in a mediocre manner, and vice versa.
At FAANG you typically get RSU new hire grant and then annual RSU refreshers. And you are right that companies do not renew initial hire RSUs grant.
However you will only hit salary cliff if your initial grant was bigger than what would be your annual refresher at the end of year 4 at company (both initial RSUs and annual refreshers vest over 4 years). If your annual refresher is same as your initial grant your salary will not increase that year (which you might still consider not great, because until now your salary was increasing every year due to RSU refreshers).
> Even if they did, that would be less than what that employee is paid when the initial grant expired, or what they could make by moving jobs (since they’re now 4-5 years more senior).
If employee became more senior that would mean they got promotions (base salary increase in double digits, bonus increases) and their annual refreshers are much bigger now (they almost double between levels [1]).
If they did not get promotion over past 4-5 years (that's only possible for senior roles, grad and junior levels need to get promotion in certain time frame otherwise they are out) there's quite low probability they would get hired to more senior role at other FAANG (though they might be offered big initial RSU offer)
> More cynically, it might be political. If only a few cherry picked employees stay, and all the other organizational memory walks out the door every 4-5 years, then all the organizational power eventually accumulates in middle management.
Same salary rules apply to management, so they could also walk out if they hit salary cliff. However if you are manager/director/VP you will be higher level and your annual refresher might be high enough to keep you there.
Some of it has to do with stock based compensation. I’ve not heard of any companies that, by default, renew RSUs at a dollar value comparable to what they gave the employee as a new hire (even if they’ve promoted the person!)
Even if they did, that would be less than what that employee is paid when the initial grant expired, or what they could make by moving jobs (since they’re now 4-5 years more senior).
I’ve heard people call this effect the “salary cliff.” I know a manager at $bigco that has an elaborate system to push it out a few years by gaming the system. The idea is to get a few extra years out of people before they switch jobs.
I’m not sure why this is the equilibrium the system has chosen. It might be that people put a large monetary value on having a stable set of coworkers.
More cynically, it might be political. If only a few cherry picked employees stay, and all the other organizational memory walks out the door every 4-5 years, then all the organizational power eventually accumulates in middle management.