Here’s a quick way to check!

When an old employee comes to you and says, “Hey, I really like working here but I’m hearing from folks that I can make like $10-15-20K more doing the same thing at the company across the street.”  And you go, “Well, you know, we love you and you’re doing great work, but we just can’t afford to pay you that much more. Sorry.  Let me see what I can do for you – I need to talk to HR.”

Your supervisor then goes to HR.  She tells HR what you said.  HR might actually know that your competition is indeed paying that much more – but the budgets are done – we didn’t figure in 20-20% pay increases.  Let’s first go back and try and give them $3,000, bringing their total to $75,000, and again tell the employee how valuable they are to us and how much we need them on ‘our’ team.  Sound like a plan?  Sound like you’ve had this conversation before? I have.

So, the supervisor does it – gives them employee $3,000 and waits and hopes the employee will take it and not actually go out and look.  Here’s the problem.  The $3,000 increase you just gave them – probably was the straw that actually broke the camels back!  Now, for sure they’ll look.

Let’s fast forward a month down the road.  Same employee comes into the supervisor’s office and turns in 2 week notice.  They got their offer for $20K more than you were originally paying them, they are now at $95K – they gave you a chance – you blew it.

Fast forward two months down the road.  You’ve posted the position, did interviews and now want to make an offer to the replacement.  The replacement wants $95K.  You go to the hiring manager and tell them the budget only has $75K in it.  The hiring manager comes back and says they have no choice, we have to pay $95K…

You value new employees over old employees.