Comment by pc86 | Hacker News Reader

Comment by pc86 | Hacker News Reader

EDIT: One of my points was mistaken. See the end.

I've seen this is several posts of Ryan's and it continues to bother me (from Part 3 of the linked series):

> Everyone is hired at Treehouse at an industry-standard salary level that matches their job description. Most of our team is distributed and outside of expensive outlier markets (like Silicon Valley or NYC).

> The only way to get a salary increase is by performing consistently well in reviews. We don’t have a profit-sharing plan or bonuses (other than the sales team which has a traditional sales team bonus structure).

To me this is a way to pay people as little as possible. The "industry-standard salary" for a position like developer increases year over year by more than the rate of inflation. But without even standard cost-of-living increases, it sounds like working at Treehouse for any measurable about of time will put you in a worse financial position than if you bounced around.

EDIT: It seems they do offer cost-of-living adjustments but only for employees who are performing well (not that I'm advocating giving raises to poorly performing employees, but we're talking about 1-2% to cover inflation here).

You need to have two increases annually. The first is an market/cost of living adjustment that person's salary increases commensurate with prevailing market. To my mind, this adjustment always works in favor of the employee. Therefore, if the market actually paid less for a job this year than last, then the employee would receive no adjustment. All employees receive these adjustments no exceptions.

The second is a merit increase based on their performance. This increase is analogous to a traditional raise. An employee may or may not receive a merit raise based on the incentive system the company has put in place.

Waiting to address poor performance until annual reviews is a horrendous anti-pattern. When an employee is performing poorly, it should be addressed as soon as it is identified. Therefore, a poor performance review should never be a surprise to anyone. Provided that the poor performance did not emerge near the end of the annual review cycle, truly poor performance reviews should be rare because the issue should have been resolved (either by the person correcting the problem or the company and the person parting ways).

So in a bubble market where salaries are potentially inflated, and then the market crashes, yet salaries stay the same? Isn't this a problem?

Realistically it’s hard to peg a salary to “market rate,” particularly when one has gotten merit-based raises on top of that. I think all employees should get a cost-of-living adjustment, tagged to inflation. So if inflation is 3% in a year, everyone gets 3% right off the bat.

I’m torn in that I think the flip-side makes perfect sense. If there is 1% deflation, why shouldn’t employees’ wages be cut by 1% across the board? At the same time I feel that’s the quickest way to see half your development team leave, even though we’re talking about less than the cost of a nice dinner each month.

In an environment where the market crashes and it dramatically affects revenue for a business, everything has to be on the table, from layoffs to hiring and raise freezes to voluntary cuts in pay (often to save the job). If you make $100k a year at “market rate” and there’s a huge crash, and you’re given the opportunity to cut your own pay to $80k or try to get a job for $60-90k, what do you do? It’s a tough call for anyone.

If there was a 1% decline, would it work to not adjust pay but record this negative inflation so that next year if it's +2% then the employees only get +1% raises? If the economy continues to go down then this won't work, but it would handle a short bump fairly without actually reducing anyone's pay. Would people still leave?

Why is it expected to get inflation-based increases with deflation-based reductions?

If you want to retain staff, you can't reduce their pay. So, if retention is a priority, you are stuck with those salaries.

The question becomes what you pay new hires. On one hand, the prevailing salary is much lower, and the company can save money. However, people talk and new employees will eventually discover the pay disparity which will kill morale.

If you want to retain staff, you can't reduce their pay. So, if retention is a priority, you are stuck with those salaries.

Even if nowhere they could jump ship for would pay them their old salary either?

Agree with you - companies ought to recognise increases in market rate/inflation, plus an increase for experience/responsibility. Employees need to recognise that receiving only one of these is a snub.

> Therefore, if the market actually paid less for a job this year than last, then the employee would receive no adjustment.

This strikes me as a likely reason for structural inflation: companies can pay less for the same job (if they choose), without needing to negotiate a highly awkward pay decrease. It's psychologically harder for an employee to argue against the status quo.

> EDIT: It seems they do offer cost-of-living adjustments but only for employees who are performing well (not that I'm advocating giving raises to poorly performing employees, but we're talking about 1-2% to cover inflation here).

Incorrect. We offer everyone cost-of-living raises every year.

Thank you for the clarification, Ryan. Unfortunately I can't edit that post any longer. I was confused by this line:

> Everyone who is performing well will receive a cost of living increase for their hard work.

I took that mean those not performing well (who may or may not be on their way out) do not receive the COLA raises.

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