Pay Increase with Internal Promotion

[younginvestor2013]

In your experiences of being promoted internally (i.e., not leaving your company but staying at the same company and getting promoted, whether in the same or different department), what has your overall pay increase been just on salary alone (and on bonus if applicable)?

Is a 20% raise on salary reasonable, or too high? I think it is reasonable and fair, especially since 3% of it is essentially COL increase.

I am learning/realizing that the salary you start out at a company is so important because it is the basis for which all of your raises will be based from.

If you accept a very low ball figure and salary to start out with, then the magnitude by which you are underpaid will be magnified overtime. For example if you are underpaid by 10% (arbitrary, I know..but based on "your research), and you are eligible for a raise/promotion and get a 20% raise/promotion, then you are still being underpaid 10%. Your employer has no incentive to give you a 30% raise because you were previously 10% underpaid.

Just curious what your experiences have been. With my new job (which I am liking, a lot, and have a ton of room for growth and think it is probable that I will be promoted just after about 1.5 years of being there), I tried to negotiate my salary up about 7% higher than the offer I accepted (didn't want to risk them retracting the offer or me coming off as too aggressive so I accepted the lower offer, but wish I would have been more firm in my counter).

I am young in my career, and most of my peers at my company are "industry veterans" and have 10+ years experience (vs my 3 years). I recently was able to learn how much some of them make by stumbling upon some files (accidentally, but I did begin to snoop...) - and in doing the math of my assumed career path with the firm, it seems unlikely that I'd be able to "catch up" to their compensation with promotions unless the raises were substantial (at least 20% or greater) with each raise. This doesn't offend me or make me mad a ton, because there is still opportunity for me to grow quickly (along with my income) for being so young, but it just shows how large the gap can be with pay amongst colleagues.

 

[Spudd]

I'm sure this is very company-dependent. I definitely never got such a huge raise with a promotion during my time at Megacorp. In fact, my company didn't even give raises with promotions - just moved you onto the next salary curve so that your next scheduled raise would be larger than if you'd stayed at the previous level.

 

[Mill]

I worked at a megacorp, and snooping through the shared files, I found a document. Im not sure if it was current or not, but it was definitely professional and looked like the real deal.


"Supervisors guidelines to making pay decisions"


There was a section on internal promotions. It stated that the guideline was to try to increase salary of a promoted employee by 6-10%. If situations warrant more, please see VP level nosebleed...blah blah blah.


I thought it was interesting, though cant really offer experiences as Ive never been promoted internally.

 

[NgineER]

My first promotion was along the general guidelines of my mega corp, 10% raise and 5% extra bonus (which at that point doubled my bonus, 5%-->10%.

Changed job to new mega corp, negotiated hard and got ~20% raise. The last two annual raises have not been much as I am above the average pay for my SGL. promotion is likely this year, and I can expect 10% raise from what I understand.

 

[NgineER]

From what I have seen, 20% is a very unlikely amount for a single step promotion.

 

[CRLLS]

In my experience, a promotion means maybe 2x the normal raise, so if raises average 3% for the general population, that means ~ 6% for a promotion. That can vary a bit from company to company, but unless you received a Master's degree in the last year on company time, then don't expect too much more.


BTW, You will never be underpaid 10%. Unless you are in a union where pay is written in a contract, everything is negotiable and either you accept it, or you don't. You end up getting paid what you agree to.


That being said, exceptions do occur. I did accept a job offer under market value once because I needed a job and they were the only one with any offers. When annual raises were handed out. I was told they were very happy with my work and thought I had "earned" a 20% raise; but it was reduced by the number of months employed during the last year, so I got 7/12ths of that 20%. This calculation is common practice in the first year of hire. I was happy with the ~12% raise and told them so. I was also happy with the company and expressed that as well. But I added that I didn't think that the practice was right. If I had proven I was worth 20% then I should get full 20% since I would be working the next 12 months at the "new" rate just like everyone else. Long story short, a few days later I was told my position pay grade was re-evaluated and that my new salary would be 23% higher. Not because I had complained of course, but because the position was reevaluated. RIGHHHHHHT.


If you are happy with the job and the pay then accept it. Learn as much as you can and become one of those "industry veterans" you speak of. If you are not happy, then try to make your case for more pay. If it falls on deaf ears and you cannot accept that, then accept that you at least tried and look elsewhere. Sad thing is, jumping ship is usually to only way to get a big raise.

 

[zesty]

At my previous employer, I was making $70k. They promoted me to the next level with a posted range of $85k-$105k... and the best they could give me was $77k.

As soon as I hit the pension vesting deadline, I jumped ship and went somewhere else for $100k.

 

[meierlde]

From what I have seen, 20% is a very unlikely amount for a single step promotion.

I would qualify that by in todays Inflation environment. I think I recall 20% in 1981 or so. But then inflation was 11-13% etc.

 

[stepford]

This depends a lot on individual company and job type, but in my own little MegaCorp promotions start to become very rare after one's first few years. In my world there are only 6 grades for engineering staff ranging from fresh out of school with a BS at grade 1 to the equivalent of a PhD in grades 4-6. In other words, once you hit grade 4 it can take a looong time to move up. Most folks eventually hit grade 5, but thereafter it takes an act of God (or good connections) to move higher.

Recognizing this most of the senior engineering staff have learned that one occasionally needed to at least go through the motions of leaving the company - get an offer from a competitor then go to management and threaten to quit. I did this once to move up from grade 5 to 6 and most of my colleagues have done so at one time or other. The risk, of course, is that if your management doesn't particularly like you then you have to be prepared to take your offer and jump ship. I never liked this aspect of our corporate culture, but it was the game we were all obliged to play.

As far as pay is concerned, each of the technical grades has a salary range that's published each year. While the range in each grade can be quite large (+- 15-20%) most folks seem to end up fairly close to the mean. In our case the mean salary for grade 6 was about 20% higher than that for grade 5 and that was indeed about the raise I got when I was promoted. Most other years, including when I've been very successful and those in which I've accomplished little of value, I've gotten 2-4%. This consistency illustrates both the benefits and drawbacks of working for the MegaMachine.

 

[Texas Proud]

This was a few decades ago.... I was paid less than others.... but got the promotion... now, the rules were that a manager could not make less than the highest paid employee... one of the guys was paid very well... I was looking forward to that raise...

But, they decided to move the guy to another manager... so my raise was pretty low.... just another way they can get you....

 

[photoguy]

One year I hit a salary cap and got no raise but the bonus was a decent percentage. So it is possible to catch up even if you start behind. I think my company did not have a policy of reducing raises as one got closer to the cap but this will vary.

The next year I was officially promoted but I don't remember my raise. Generally I got anywhere from 7 to 15% per year and didn't get anything "extra" for moving up. I suspect I was near the high end for raises but don't really know for sure.

This is just my experience and is probably atypical.


Sent from my iPad using Early Retirement Forum

 

[MuirWannabe]

6% is the standard promotion increase at my Megacorp. And can be less than that. Never more. That is separate and on top of the annual merit increase. I think your promotion increase percentages are not valid or typical in today's environment.


I do think your assumptions on the importance of starting salary are on the money. Starting salary guides everything from that point forward since % increases are how things are done. Don't accept a lowball thinking it will be made up for in the future. It likely will not. Again, there are exceptions. But they are exactly that, exceptions.


Muir

 

[pb4uski]

A 20% raise for an internal promotion would be unusual in my experience. I think 5-10% is more typical, perhaps up to 15% in unusual circumstances.

My advice to someone in the first 10 years of their career is to focus first on getting the best experience that you can get in your chosen field and less on what you earn, as long as what you earn is not way low in relation to what peers with similar education and experience earn in the market. Then later in your career, you essential cash in that experience.

 

[MRG]

I think it just depends on the company. We used to have ranges for job titles. If you didn't make as much as the range you got whatever the increase to bring you up to the new minimum. My last promotion was 1%. But I'd had some much larger in the early years. I had the pleasure of giving a guy his new title and salary, a 30% bump.

All that said it can work against you. Megacorps new Rifs have targeted some of the higher compensated employees. They figured they could hire 2 entry level people for the price of one SR. person.

 

[utrecht]

Every time I read a thread like this, I get very envious. Talk of 10%, 15% raises? Bonuses? That stuff is unheard of in police work. At my former dept, we got bi-annual step raises of 5% until we were maxed out which took about 17 yrs or so. So call it 2.5% annual raises. Well, that was until the recession hit and they froze all step raises. I went 6 years without a raise at the end of my career. They just unfroze the step raises last year. We also didnt get a cost of living raise from 2008-2012. We got 4% in 2013.

On the other hand, just today I got my first pension check. My pension starts at $55,500 and increases 4% of that amount every year which makes me feel all warm and fuzzy inside.

 

[scrabbler1]

As others have mentioned, one's salary is often determined by where it falls within a range for a specific job title.


I received 4 promotions in my 23-year career. The first two, in the mid-late 1980s, gave me raises of 16% and 10%. Regular raises in the late 1980s and into the early 1990s were in the 5%-7% range. My third promotion, in 1993, didn't carry with it an unusually large raise although as we moved into the mid-1990s the regular raises were on the decline (so a 7% raise with a promotion was actually pretty big).

 

[Texas Proud]

Every time I read a thread like this, I get very envious. Talk of 10%, 15% raises? Bonuses? That stuff is unheard of in police work. At my former dept, we got bi-annual step raises of 5% until we were maxed out which took about 17 yrs or so. So call it 2.5% annual raises. Well, that was until the recession hit and they froze all step raises. I went 6 years without a raise at the end of my career. They just unfroze the step raises last year. We also didnt get a cost of living raise from 2008-2012. We got 4% in 2013.

On the other hand, just today I got my first pension check. My pension starts at $55,500 and increases 4% of that amount every year which makes me feel all warm and fuzzy inside.

One thing that you have to remember is some of the people here were working in the 70s and 80s.... inflation was high... a 6% raise did not keep up with inflation... today a 2% raise is better than that 6% back then...

My first job after graduation was working for one of the large accounting firm (there were 8 back then).... when it came time for a raise I thought I got a good one.... but we soon learned that the new staff that was just hired were making more than the one years were... same thing happened the next year... a good % raise, but the new hires were making more than the two years...

 

[stepford]

Every time I read a thread like this, I get very envious. Talk of 10%, 15% raises? Bonuses? That stuff is unheard of in police work. At my former dept, we got bi-annual step raises of 5% until we were maxed out which took about 17 yrs or so. So call it 2.5% annual raises. Well, that was until the recession hit and they froze all step raises. I went 6 years without a raise at the end of my career. They just unfroze the step raises last year. We also didnt get a cost of living raise from 2008-2012. We got 4% in 2013.

On the other hand, just today I got my first pension check. My pension starts at $55,500 and increases 4% of that amount every year which makes me feel all warm and fuzzy inside.

The grass is always greener...

Even apart from the significant differences in pensions, the Megacorp workers who receive these raises and bonuses generally work a lot of overtime - either uncompensated or, at best, at straight time. No time and a half for the salaried/exempt folks. Our pensions also depend only on base salary and years worked - all those extra hours don't move the needle at all.

Even so I honestly think these differences can be a wash over time. I have long time friends who've spent their careers in the public sector. Now as we're all nearing retirement I have a greater liquid net worth, but they have much better pensions coming. Consider the equivalent annuity value of the pension and our NW's are very close (mine actually about 10-20% less than theirs). No complaints, I think all of us who can consider ERing have done OK.

 

[CRLLS]

To put some of these high raises in perspective, it was less than a decade ago that some engineers in megacorps were taking pay freezes or even pay cuts. This was during the recession. It was preferable to layoffs. In my years, I have seen both extremes more than once. The only thing that is constant is change.

 

[younginvestor2013]

I guess I'm just wondering how my trajectory will pan out. Working for a smaller firm, I have learned that many employees at my firm have "moved up the ranks" very quickly, so I feel that this is probable for me.

I discovered that individuals at basically the highest promotable level (without being management or executive management, meaning there are multiple of them), make about 85% more in salary than I do. Granted, most of them have around 10-15 years experience.

Plus, I learned they make an additional 15-20% in bonus than I do.

I guess I'm just curious if each raise would be enough to get me to their pay level if I were to get to their level in today's dollars. Given that it would be 3 promotions "away", I would have to attain about a 28% pay raise on each promotion on salary alone.

Sometimes I think I am overthinking things and should just enjoy being in my mid 20s But then I don't want to underestimate my worth and prolong my working career either

 

[ER1970]

Corporate job. 3 major promotions in the last 10 years. The first time was a 35% increase to move me to a higher level. The 2nd & 3rd time each came with a 15-20% increase.

 

[Klubbie]

I discovered that individuals at basically the highest promotable level (without being management or executive management, meaning there are multiple of them), make about 85% more in salary than I do. Granted, most of them have around 10-15 years experience.

Plus, I learned they make an additional 15-20% in bonus than I do.

I guess I'm just curious if each raise would be enough to get me to their pay level if I were to get to their level in today's dollars. Given that it would be 3 promotions "away", I would have to attain about a 28% pay raise on each promotion on salary alone.

Sometimes I think I am overthinking things and should just enjoy being in my mid 20s But then I don't want to underestimate my worth and prolong my working career either

Personally, if you truly have the salary/bonus information of your co-workers, I would use this information to jump ship at some point and negotiate a bigger salary at your next job.

I left my last job largely in part because a document was accidentally leaked out to me and 1 or 2 others that had salary information for everyone in our department. Once I discovered I drastically underpaid compared to my peers and those who have less responsibility than me my time there was numbered. I was already pissed I got promoted into a role that tripled my responsibility and direct reports with no raise, and finding out the salary information I did was icing on the cake. They refused to give me a raise into the appropriate pay grade for my post-promotion job. So ultimately the information I had about my peers salary was pivotal for me increasing my total comp by nearly 30% at my next job, which just happened to be at another firm. There are some other factors that weren't part of the initial comp package I negotiated that will end up making the job change a 40% total comp increase.

I'd stick around for 5 years or so (total) where you are and see what happens. If you see the promotions and raises getting you to a point where you feel you are being fairly compensated, and you like your co-workers and the company I'd stick around. But if you find yourself getting resentful because you are underpaid to your peers I'd move to another firm with a good solid 5 years or so experience.

Money isn't everything and good co-workers and the work itself are incredibly important to job fulfillment, but I have found it incredibly difficult to maintain a positive attitude about a position and a company, no matter how much I liked the job or people when I have known the salary information of my peers and that I am being underpaid in comparison with no plans to correct that.

 

[Closet_Gamer]

For the OP --

Kudos for thinking about this stuff. In a later post, you used the word "trajectory" which is an important concept for a young dreamer -- what does my future wealth creation curve look like and how do I bend that curve?

Almost every company has a "career ladder" for each function. You move from "junior wrench turner" to "wrench turner" to "senior wrench turner" to "super senior wrench turner" as you improve your craft and mark time with the company.

In that light, your income trajectory is a conveyor belt moving up to the right at 2-3%/year with occasional 10% bumps from a promotion. You can plot with a degree of precision what will happen to your income.

But what happens to that curve if you take big risks along the way?

You introduce variability -- the potential for big moves up or down.

If you want to change your trajectory you have to take risks.

Risks can be starting a new business unit, fighting for the development of a product concept, figuring out how eliminate 1/2 the wrench turners, or just taking on some hugely visible "if we fail we go under" type project risk. That's when you get noticed, which is when good things happen. I would bet that those senior guys who are making way more than the conveyor belt increases justify all took and delivered on one or more of of those risks along the way.

To really bend your curve, you need to become a serial risk taker. Get off the conveyor belt mentality and think of it as leaping vine-to-vine through the jungle.

I've been a serial risk taker -- with successes and failures. The result is at age 43 I now earn 15x what I did when I started as a "Member of Technical Staff" 21 years ago. That's a Compound Annual Growth Rate of 13.5%. Of course, it wasn't a smooth income curve...I've had multiple 30%+ jumps...I also took a 70% pay cut once and had to rebuild my curve.

My suggestions for bending your curve:

1) LBYM -- create the personal financial capacity to take risks
2) Choose your risks wisely -- fight on favorable ground and don't just swing at every risk that comes your way
3) When you take the risk, fight hard to win. You won't always, but heart counts for more than people give it credit for
4) After you win, consolidate your position and bank the higher income
5) REPEAT REPEAT REPEAT

Sorry for the long post. Good luck. You'll do great.