100% salary hike. Change your job now. Have you recently seen any YouTube videos where someone claims they got a high salary offer with a 100% salary hike just by changing jobs? It sounds unbelievable but still tempting, right? In tech hubs like Bengaluru, it’s common to see professionals leaving their jobs for higher pay. Sure, a high salary offer and exciting growth opportunities sound appealing. But if the pay is unbelievably high, you need to be careful.
Most technology companies in India are service providers. They bring money in by charging headcount per hour, per month, or per year. This is the case irrespective of whether they call themselves product companies or service companies. This model exists in other countries as well. Then how do some companies make unbelievable high salary offer?
Here are the basic questions to ask.
Can They Really Afford to Pay a High Salary?
In a company if everyone keeps getting salary hikes, companies expenses have to go up. With every passing year, the cost of the workforce goes up. But the charge rate does not go up comparatively. No global customer would accept too much higher rates. If the new company and your current company are in the same industry, then there is a question how new company can pay such a high salary.
Potential Pay vs Actual Pay
Sometimes companies show the moon to attract talent. They show a ‘potential pay’ which has an equation with variables like individual performance, org performance, business unit performance etc. The actual pay is lower than what is on paper. But trust me, it feels good to have higher pay on paper! But some of the organizations have this gap outrageously high. We know a company which offers 1 crore per annum salary on paper but employees get only 20 lac in hand. This gap is too huge to neglect.
Is this sustainable?
Is it a temporary offer or can company provide this unbelievable salary for the long term
This is possible, only If –
The company has a higher attrition rate and people at higher salaries keep quitting the company. But this is also a red flag. Why do people quit even when they have such a high salary. Is the work culture toxic. Does the company not care for its employees. Will you be forced to to quit after some time? You need to think carefully.
Companies can pay very high salaries if the company’s charge rate is much higher than industry standards. However, this generally doesn’t happen. There is always pressure to charge less.
Companies can pay higher by increasing productivity. But in most of such cases, you are expected to do 5 persons job by yourself. In such a case your high salary will still be lower than all 5 people’s salary together. So the company can pay you higher. But this will put you under too much pressure.
Sometimes companies show artificial boost in productivity: There are work cultures where people work for 12-14 hours and bill for 8 hours. You might think you are getting higher pay but you are doing more work for that.
You might say, you don’t care about all these factors. You care only about money in hand. Let us ignore the work-life balance. Let us see cost of extended work hours. Since you are spending most of the time at work, everything needs to be outsourced including parenting. House help, cook, help to take care of your parents, day care, healthcare costs, lack of time to teach your children, lack of time to take correct financial decisions, all these will cost you more. Overall, this type of salary hike does not help your long-term finances.
Then, Is changing job is a waste of time. No, there are companies which genuinely might offer you very high pay. How do they do it?
Let us look at a simple graph. Let us ignore all factors other than salary, age and charge rate. It just shows two graphs on how the salary grows for one individual at two companies.
Most companies have same “sustainable” entry level salary and retirement salary .I say sustainable because in each industry there are multiple players. They offer similar products. They have similar costs and margins. The R&D spending has to obey this math. Hence the salaries have to correlate within the same industry.
Then why did they offer you a higher salary than their “sustainable” average.
It is likely to be one of the three common case:
1. Higher position:
First case is Your position is higher. It is like you are getting promoted when you are joining a new company. But checking if this is the case is not easy. Companies have different ways of structuring their organization. The responsibility and power may not map one-to-one. There is no exact way of knowing whether it is a higher role. You can ask your interviewer what will be your responsibilities in your new role and take a guess.
2. Same Role, but higher pay:
Second case can be Same Role, but higher pay: It is the same role, but paid higher. This can happen if the company is very desperate for talent and ready to pay higher. This happens if some urgent project comes up with high potential customer or if a startup is trying to get funding where number of employees is a criteria. If this is the case you need to be careful. Chances of losing job is higher in such cases if the deal does not go through.
3. Same Role, Higher Pay, Higher Employee Band:
Another case is Same Role, Higher Pay, Higher Employee Band: Companies have different employee bands based on employee performance. Employees with same experience, same role still will have different salaries based on their performance. This difference sometimes is huge. So while hiring they might have put you into a higher band there by offering you higher pay. Isn’t this good? Not really. Higher level, higher expectation from you. But the tricky part is, this high expectation is usually not well defined. The chances of you failing the expectations is much higher in such cases.
Whether they give a higher role or not, the higher salary would take you closer to the higher bracket soon. Then the economics of the business does not make sense unless you produce more ‘measurable’ business results. Is it really possible? Do the environment of the work and constraints allow this? If so, what is stopping existing employees achieving better?
What to do then? How to decide whether to take up this unbelievable pay offer?
1. Check the charge rate:
If new company’s charge rate is lower than your current organization, probably job switch is not good.
If the charge rate is higher, find out how is it sustained? May be, the organization is more efficient, by design and work culture. In such a case, you can take this offer.
2. Business value of the role:
If the business output of the role is higher, then it is an easy decision. It could be due to the higher number of people working with you. Or it could be a product whose revenue forecast is much higher than the one you are working on now. It may be the skill you have. Irrespective of the organization, the skill is always in demand. Take the offer.
3. Is the salary at the higher end of the employee pay band?
This is to manage the expectations. If you are taken at a premium, that means the organization has some compulsion to hire you. So there are extra expectations on you that others cannot fulfill. Is it a fair expectation? Or someone created a mess, and you need to inherit and own up. You need to be careful in such a cases.
Conclusion
You should not straight away accept unbelievable offer or not reject it. Check your future employer and future role carefully to make an informed decision.
