Salary Compression: Engineers Penalized For Loyalty

April 2, 2013 at 9:12 am 11 comments

Salary compression has several definitions. It can be described as a pay inequity when new employees receive salaries higher than those salaries being paid to the current employees in similar jobs. Whether at an Executive Vice President level or Project Manager role, it can be demotivating to an existing employee. As we all know, salaries are supposed to be confidential, but most people know what their colleagues take home. One candidate who has been with his current firm for 20 years, told me he was rewarded for his loyalty with a much lower salary than a newly hired colleague. “I have warded off recruiter calls, direct invites from competitors at business meetings only to find out that new staff are receiving $10K more a year AND a signing bonus? I refuse to resort to threatening to leave to have the company equalize my pay.”

Pay inequity happens more than employers would like to admit and it is a difficult task to control. Engineering salaries continue to increase specifically for executives and those practice builders who can increase sales. New hires can only be recruited by offering them as much or more than existing senior professionals. Career employees with 20, 30 or more years of dedicated service often suffer the most under salary compression. Are they being penalized monetarily for their loyalty?

This is a nightmare topic for human resources executives. Many experts have written on this topic and even more human resources leaders have urged their CEO’s to address this issue. Here are some confidential comments from HR Execs on this topic:

This phenomena is not unique to our industry. In my 30 + years across several industries, this is a very common dynamic across all professions and in all industries. My message to managers is to never try to go cheap when hiring someone because it will catch up to you quickly and you will not likely have the salary budget later to correct inequities.

We see it as a particular issue in our employees with shorter tenure as recent grads quickly are making more than those who graduated just a couple of years earlier. We programmatically review salaries of our young professionals each year to address compression issues.

All can see how free agency works in sports. Testing the market and going to the highest bidder is not difficult. The same applies to smart and capable professionals. The answer is to deal with the whole employment equation – provide competitive salaries, interesting and challenging work, in a good environment and you will be able to retain talent.”

This is an ongoing issue, particularly within the oil & gas and mining sectors.  We addressed this issue in a few ways; for long term key employees we instituted a deferred compensation program where they would vest over a three year period.  Providing eligibility for stock grants was also put in place however this became an issue as well when hiring from other firms who had robust plans in place and expected to be compensated for what he/she may be leaving on the table.  This is an ongoing challenge.  The other reality is maintaining margins when increasing rates what is the appetite of the client?  The other area where this occurs frequently is through the integration of acquisitions where there is potentially great inequity amongst the same roles and levels. “

Unfortunately we see this all the time.   Unless you are in the very top ranks, employees are needing move to a new company every 3-5 years to ensure their salary keeps pace with the cost of living.  Staying at their current employer may offer a 2-3% merit increase or none at all.   Taking the call from a recruiter and making the move to another firm, often results in a 10% or more increase.  And in the current market, for highly sought after talent, the increase for engineering talent is warranted.   Unfortunately, the loss to the company is far greater than paying a more substantial increase to keep top talent, cost to recruit, onboard, client relations, just to name a few.”

Have you experienced this yourself as an employee or manager? If so, how did you handle it?

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Carol Metzner
President, The MetznerGroup
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Entry filed under: Career Development, Civil Engineering, civil engineering blog, Civil Engineering Companies, Civil Engineering Jobs, Employee Retention, Human Resources, The Workplace. Tags: , , .

Slow Hiring Process Like Slow Playing Poker Civil Engineering Salaries: Does Yours Measure Up?

11 Comments Add your own

  • 1. Ralph Gallipo  |  March 3, 2014 at 4:23 pm

    Salary Compression: Engineers Penalized For Loyalty |

    […]How Do Civil Engineers Help A Country?[…]

  • […] New York or Los Angeles then they do in North Carolina or Michigan.  And with our recent blog on salary compression, salaries of two employees who sit next to each other with identical resumes may differ in […]

  • 3. Civil Engineering Salaries: Does Yours Measure Up? |  |  April 17, 2013 at 10:53 am

    […] New York or Los Angeles then they do in North Carolina or Michigan.  And with our recent blog on salary compression, salaries of two employees who sit next to each other with identical resumes may differ in […]

  • 4. Odessa Phillip  |  April 12, 2013 at 7:45 am

    I worked for a very large engineering firm loyally early in my career and was there when I successfully secured my professional engineer license. Imagine my dismay and devastation when I discovered that a colleague who threatened to leave the firm for another position despite NOT passing the PE was able to negotiate a $10k increase compared to my $1500 raise for asking for an increase? That changed my perspective forever and ruined my belief in loyalty to these firms at all. It’s a sad reflection of the civil engineering field and needs to change in order for our profession to begin to recruit young people back to such a critical field.

    • 5. Nick  |  April 13, 2013 at 12:26 pm

      Concerning Phillip’s experience, here is my perspective over the course of my 20+ year career. My immediate supervisor at my first job after graduation had a two-year degree in something like drafting. My second job – in middle management, I answered to a supervisor who had a Land Planning degree, and by this time I had my P.E. At my third job (again middle management), my supervisor (supposedly) had a Civil Engineering degree, but was not a P.E. (believe me, there is a difference). Following that, I was quite happily self-employed until the economy dumped, then unknowingly went to work for an agency with no respect for anyone with a P.E. (they did not understand the risk and associated liability that a P.E. holds – I won’t go into further detail here). Thus, for the bulk of my career, I have answered to people that have accepted less risk and associated liability than I do, for less money and little or no respect. As Phillip indicated, this situation runs rampant in our “profession”, if you can still call it that. I have participated in many recent discussions on LinkedIn that have touched upon this topic, as well as professionalism and leadership in general. Unfortunately, there does not seem to be any “formal” movement gaining ground to correct these issues. On the bright side, at least many of us are talking about it. Maybe someday things will change….

  • 6. EJ Mendez  |  April 7, 2013 at 12:59 pm

    Some companies would rather see experienced employees affected by salary compression leave than try to find solutions to this ever growing problem.

  • 7. Nick  |  April 3, 2013 at 11:52 pm

    An interesting trend that I have discovered is relative to maximum salaries in the Civil Engineering profession. This became particularly apparent when I heard an HR staffer make the comment “The titles and the personality keep getting bigger….but the paycheck doesn’t” relative to a retiring executive-level Federal employee. Since that moment only a few months ago, I have paid more attention to what is happening with positions and salaries in the profession (albeit most of them are public sector, because the wage is typically advertised). What I have observed since then is most engineering positions range between $80K to $120K. The upper end is not necessarily dependent upon geographic location. It appears that at the range between entry level positions and top-level engineer salaries has shrunk. Thus, a shiny new engineer will start their career closer to my salary that has taken 20+ years, and they will likely impact against my salary within 10 years…since the upper range is not moving up. I left a good position in 2005 to become self-employed because I had reached the end of my salary range and did not see good opportunity for a promotion in the foreseeable future (that was one observation that I made that was correct). Self-employment was great for two years until the economy crapped all over me, and I had a large client that defaulted on a large balance. Fast-forward eight years, and I’m now working for the Federal Government with a really cool title and more responsibilities that I can keep track of…..and I’m making the same salary that I was in 2004. I have a Union employee who is making $7,000 per year more than I am, and my younger engineers (5 years experience) are only about $12,000 per year behind me. I just had a conversation with a colleague from my employment in 2005 (who is still in the same position), and we concurred that unless a Civil Engineer is in that very limited minority (say 0.25% just to give it a number) that makes it to executive management or is very successful with starting their own firm, salary typically caps somewhere between $100 to $120K… responsibility and expectations continue to mound.

  • 8. Dan Hydrick  |  April 3, 2013 at 2:29 pm

    As a headhunter, I hear all kinds of story on this subject. It doesn’t matter if you are in the top ranks or the bottom. all will listen.
    An increase in salary is what will be need to be to get the “A Player” to move. That’s a given. They are good, they can get a “JOB”. Grow opportunity and $$ are the conversation of the day.
    Can HR do a better job? They can if they are not listening to those of us who recruit everyday. We know with in a few phone calls where the market is. A headhunter can tell you with in a week where the market is for the candidate you seek, if they can’t, you are partnered with the wrong recruiter firm.
    It’s not HR’s fault if no one is listening at the top. However, I hear an echoing from the top down and not a real time strategy. Do you push back on subjects that you are the expert on.
    How’s this for a story, 22 yrs loyal engineer, major Bridge player, saved the company $$M, never said no. When I spoke to him he was a cheerleader for the firm….and was $18k below the market! Gone!. I know it was my fault right? Maybe not!
    This is an easy fix for those that listen. My clients enjoy the safety of knowledge. They can choose to add more than lip serve to the bottom line or not. I stay busy.
    I have always found loyalty; right up until I tell the prospective candidate what I have as a salary window for the same job with the same type of firm…then things go quite.
    Lateral moves for a loyal employee are rare. However, as the percentages climb, the more of a conversation we start to have.
    I too will wait until this economy turns around, loyalty has taken a beating in the Engineering world. Underemployment, no over time and just plan shocking working hours and not personal touches, will take it’s toll when the work starts to pick up.

  • 9. Someone who knows...  |  April 3, 2013 at 1:35 pm

    It becomes an issue of taking care of your people. Everything we do is about our people. If you can’t take care of your people, then you deserve to lose them.

  • 10. aepcentral  |  April 3, 2013 at 9:22 am

    Absolutely. This seems to be an issue that never really leaves. A candidate told me that after feeling demotivated, he began to feel “taken advantage of and then had resentment set in.” Having seen the bottom line numbers on cost per hires in competitve market times, it astonishes me that better retention programs are put in place. Thanks for your input!

  • 11. Annette Hooker  |  April 3, 2013 at 9:13 am

    I agree, Carol. I’m sure there are several factors that lead to an unintentional ‘loyalty penalty’. One I most commonly experience is a lack of planning on the part of Project Managers. I’ve been in situations where there is an immediate ‘emergency’ to hire an experienced professional. This ‘emergency’ often leads to a swift recruiting tactic that often leads to wooing a candidate with a salary that is above average for their experience/skill level, ultimately leaving veteran employees with a lower salary than their newly hired counterparts. Another is the lack of focus on retention. It is very important to recruit the very best talent and the very best ‘fit’ for the company, however; it is more difficult and more important to keep that talent. Employers don’t often realize how much it costs to hire an employee, or, re-hire an employee. I believe that we, as HR experts, need to make a greater effort to educate employers to the real costs of recruiting, retention and loss of employees. As the economy bounces back and firms regain traction in the market place, it will be very important for us to incentivize our loyal employees to stay with us rather than defect to one of our competitors for a few extra dollars.


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