Last year I was offered a tempting opportunity to join another firm. They offered a 50% pay raise, and guaranteed money for two years. The job was with a start up that was trying to make a big splash. In the end, I decided to stay with my existing company of over a decade because I was comfortable with my position, enjoyed working with my colleagues, and developed a lot of goodwill. Besides feeling pretty happy, I was afraid to take any more risk in an otherwise nascent recovery.
As the economy gets better (questionable now), I’m sure many of you will also find new and enticing job opportunities which you’ll stress over. I went through some serious deliberation for five months before making my decision. In the following post, I jot down some tips and thought exercises on how to make the right decision that you’ll feel good about. After turning down the sweet offer, I never once felt like it was the wrong choice. However, I will admittedly always wonder how it would have been.
THE CONSIDERATIONS ONE MUST MAKE BEFORE CHANGING JOBS
Money is a big part of one’s job satisfaction. To deny this would be silly. After making a certain amount of money, however, you care a little less about how much you make, and more about the quality of your life. That said, making an income that you deserve and therefore not getting underpaid is never far off your mind.
* People join people, not firms. What matters most are the immediate relationships you have in your office. If you enjoy your colleagues, respect their intellect, and have developed goodwill, you should consider staying. I would say that the people around you make up at least 50% of your job satisfaction. Don’t take them for granted.
* Think in after tax money. You might get a $100,000 more a year at your new firm, but that’s really only about $70,000 after tax, depending on your tax rate. Make sure you take down the gross increase number by 20-40%, and then decide. A 50% increase a year for two years is really only a 30% increase a year, which is much less enticing once you bake in the stress and moving costs.
* Retirement accounts add up. Part of the benefit of staying at the firm for the long-term is due to increasing company matches and profit sharing. Every time you move firms, you generally have to wait a year, or two, or three before your company match vests. If you lose a year of investment gains, and several years of compounding, you might really lose some big money.
* After your big pay increase, then what? Let’s say you get a two-year guarantee for 50% more. What happens in the third year if you didn’t live up to their expectations for the first two? The company will most definitely normalize you in the 3rd year! Let’s say you get $150,000 a year for two years vs. $100,000 a year for two years if you stayed. At your new job, they might pay you only $75,000 in your 3rd year and 4th year because you disappointed so badly, totaling $450,000 over four years. If you stayed, you might get a raise with the market and make $125,000 for your 3rd and 4th year, thereby also totaling $450,000, but with MUCH less stress and change! In fact, with four more years under your belt at your existing firm, you might get promoted and cherished that much more.
* What’s the worst case scenario? When you leave your stable firm for another, you have to rebuild all your relationships. It’s generally last in, last out during economic downturns or times of difficulty. Your worst case scenario is that you hate your new job, get fired, and need to find another job. That’s not so bad, if you keep up your relationships with your clients and have updated skills. The more confident you are about your own skills, and the more risk loving you are, the more likely you will go for that new job. You just have to know your own risk tolerance and stress levels.
* What’s the best case scenario? After your money contract expires, you might really enjoy your new firm. The firm might love you so much that they continue to give you higher raises than your previous firm, making your move the best financial decision ever.
* How would your spouse and children take the move? If you have a family, and are the main bread winner, you have to think that much harder before you move. Job security with a reasonable income is probably much more valuable than a short-term increase in income. If you have kids in school, you’ll have to assess what such a change will do to their lives, especially if you have to move locations. They might end up hating you forever if you decide to relocate while they are in high school. Studies show that kids are much flexible moving under the age of 10.
SO, HOW MUCH WOULD IT TAKE FOR YOU TO MOVE?
I ask myself this every year, because every year some empire builder with some grand plan wants to have a conversation. Given all the above considerations, my number is 100% a year for two years guaranteed. A 100% increase for two years means that I am saving two years of my working life by leaving i.e. Old job $100,000 a year for two years = $200,000, but $200,000 a year for two years = $400,000 = $200,000 difference or two less years I need to work at old job. 50% more for two years only means I save one year.
The older I get, the more valuable time becomes because I have less of it each day. If I only had 10 years left to live, I’d probably leave for just 50% more, or quit my job all together!
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Spot On Sam. I deliberate every time i get a job offer which is nowadays averaging about 2 in a month now given the state of economy and I am in the IT world. I deliberate and leave that, not because of financials but because of the stress that it will cause my wife and kids. My wife is a stay at home mom and she has her own circle of friends which is really important for her, given I am at the office 12 hours a day.
Last time I made a move was five years ago and it was easy as my kids were young and the offer was too high to be refused.
I was offered 26% increase from another company. I actually took the offer because at that time 26% was a HUGE increase. I submitted my 2-week notice, but my then-current company countered with 15% increase. I decided to stay and take 15% because 11% difference wasn’t worth changing jobs for. Glad I did though.
That’s something else to consider…many times a current company will counter with a slightly lower offer than your potential new employer… I was in this situation once myself and decided to stay.
I’m glad you stayed too. 26% increase is like a 16% increase after tax. That’s so not worth it imo! Glad you got a bid back from your existing employer.
It would have to take over 100% a year for two years, and at a point where I know I’m about to retire. I’m risk averse!
Headhunters sometimes call me and I have the same attitude as you – I LOVE my job, who I work with, benefits, freedom, etc. The possibility of losing all of that requires a premium of about 75% to 100% raise to consider it.
Only once did someone tell me I was being unreasonable, I asked to be removed from their list lol
We are indeed quite similar Evan! 75-100% raise sounds about right, but for two years guarantee. If only one year, it’s too risky to get “normalized” in year 2 and get paid way down.
I don’t know that I have a number right now. I’m very happy where I am and enjoy my job and my co-workers. The new offer would have to be very enticing. As in 3 times my current salary. Plus, salary means less and less as you build your investment and business income.
3X your current salary? You love your job THAT much? If you can get just 2X your current salary, I think it’s like winning the lottery in this economy!
That’s always such a tough questions – but you nailed one point for sure: it is about who you work with and who you work for. I never realized how important having a good boss was until I had a bad boss! Now, I’m back with a great boss and it just makes working so much better.
How long did you take working for your bad boss? I had a “bad boss” when I first started… but really, I think I was just not that great of an employee.
Did you try by having the new offer to talk to your boss and make him reconsider your salary?
I did. We came to a nice agreement that was good enough for both sides.
Sam, These types of questions are “good problems” to have. Yet, it points out that more money is not always the answer. After you have your basic needs met and a bit extra, then lifestyle concerns become paramount.
It really is about lifestyle after making/saving X amount of money. Everybody’s level is different.
I was with a very large financial services company for a couple years, we received part of the TARP funds a few years back, so we were under quite a bit of gov’t scrutiny and extreme reporting requirements. The hours were long and stressful… I received a job offer for a private consulting company that was on the path to launching an IPO, which is where I come in. The money was better, the stress was minimal in comparison, and the potential was endless. 11 months later business dried up, the IPO was called off, and my entire group was let go. Here I was in the metro Detroit area without a job, and I had just bought a home two months prior…worst timing ever! There is a lot to be said about job opportunity, pay, stress, hours…but also for stability! I never once considered job stability before that point. Fortunately I was able to secure an even more lucrative position at a healthy company that was even closer to my home, but many might not be so fortunate in the current market.
Wow, sounds like a whirlwind! If you could do it over again, do you think you would have rather just stayed at your existing first employer? Any thoughts about leaving Detroit?
Going back and talking to an existing employer about the other offer is exactly what one should do, in a non threatening way of course.
I would potentially take less money if a dream job opened up in theatre. In some ways, it’s a little more difficult to face the prospect of working for less money, though, now that I’ve been *spoiled* by a very well-paying job.
I hear you on being used to earning what we’re used to. That’s why there’s so much hesitation in taking lower paying jobs. They are everywhere, yet they go unfulfilled. Weird.
I think I would need at least 50% more to switch jobs. My current place of employment offers amazing benefits and the people are wonderful! Plus, it’s very close to both my wife’s and my family. We’re very happy to be in the position we’re in. :)
Sounds like a perfect situation you are in Derek! However, if it’s that wonderful, a 50% bump is not enough!
Maybe I need a better job agency or negotiator. I asked a similar question in the forums and it seemed the average raise needed to jump ship was 10 to 50%. 100 to 300% raises, is this even possible? If so, I better open my eyes wider!
Or maybe you are getting very well compensated for what you do now and we’re all just underpaid! The most I can ever get is probably a 50-100% pay raise. Any more and it doesn’t work.
200-300% raises doesn’t seem feasible at all for the majority of us, so it’s wishful thinking imo.
I’ve thought about this situation myself a lot over the years too. Earlier on in my career I would easily have taken a new job for a 10% raise if it was in the same city. Now, it’d probably have to be closer to a 100% raise. I like my current day job, the people I work with, the hours, limited stress, etc. Starting a new job would throw off my work/life/blogging balance and I’m just not interested in dealing with that right now. I’m in a happy place right now and that’s worth a lot more than extra money.
Looking forward to Yak Chat. The last one was so much fun! -Sydney
10% raise? Come on now Sydney! That’s way too low! :) Glad you are in a happy place. I look forward to see you on #YakChat!
Haha, if my employer doesn’t give me a 10% (or close) raise after my first year of work, I could consider switching to another employer that *would* give me that – mostly because that is the market rate, and if my current employer is already making their raises a little too low, it would be easy to fall behind the market rate very quickly if you stick with them.
Salary is a factor but not the only factor for me. So many things, like those you mentioned would need to line up. If I like who I work for, I like the work I do and I get paid fairly, then I wouldn’t be tempted to move. Even now at my current job I am going to ask for a raise but even if I don’t get one, I will still stay. I like it too much. I really could only answer this question when presented with all of the facts of the job in question. Great post Sam. I am sure it has everyone thinking.
Sounds like you have a healthy gig, so hang on to it! I’d always ask for a raise once a year if your performance review is above average. Can’t get if you don’t ask. Gluck!
You should think “net take home pay” all the time. Normally, 30% increase over net take home pay would be enticing. Other considerations need to be factored in, but assuming everything is equal, 30% on net should be good enough
I agree. It’s how I think when buying things, just the opposite. The $30,000 car actually costs $43,000+ in gross income to afford it!
“* Think in after tax money. You might get a $100,000 more a year at your new firm, but that’s really only about $70,000 after tax, depending on your tax rate. Make sure you take down the gross increase number by 20-40%, and then decide. A 50% increase a year for two years is really only a 30% increase a year, which is much less enticing once you bake in the stress and moving costs.”
30,40,50% increase? if you are being offered that by another firm, it’s because you are underpaid where you work!
I completely got the point of loving your job and not quitting it. After all, I’ve been working for the same firm for the past 8 years and I’m very happy there. But I also know that I would never be able to get a 50% increase anywhere as I am paid well too compared to what is offered on the market. If you are that good in your position, there is nothing holding you back to ask your employer for a raise ;-).
Each year, I make sure that I get my fair share of salary increase. I rather negotiate with my employer telling him that I want to stay for the firm then receiving crazy offer from a competitor and then realizing that I was underpaid for several years.
Money would not be the factor for me to switch job. I think that my lifestyle quality is more important. Since I work 4 days a week, I can’t figure how someone can offer me a 3 days a week job (with full pay off course)! this is probably why I will stay where I currently work ;-)
Not necessarily, since this is a start up, and to attract people from existing establishments who already have the relationships the start up has to pay up, otherwise, they will never get anybody to join.
These are the opportunities which everybody who has done their job long enough will start seeing. It’s a matter of when you will decide to take the leap.
I wonder how they can potentially make money if they have to pay people 50% more of what the market can offer. On a business stand point, this also means that their cost of operating will be 50% higher… then you need to make a lot of money to compensate.
And I guess that if you accept such high raise, you have to say goodbye to any salary increase for the next 5 years?
That’s the point of raising start up capital, to attract talent away from established competitors. Use cash, options, and whatever benefits at their disposal!
The other way is having another part of the firm subsidize the startup portion of the firm. It happens all the time. Identify the empire builders!
Congrats on being needed/wanted! Love it. Ultimately, you have to decide where you are most comfortable. I see many changing jobs for just a little more money, then come slinking back when it doesn’t work out.
Hey, that was last year. Now, I’m just another nobody!
I’m not sure what it would take – right now I feel like I would be in such a better position if I stuck with one company for a few years (have only been working one year) that I would probably pass on a small increase and hold out for a much bigger jump once I have a few years of (very valuable) experience.
I work for myself, and the thing that’s most likely to lure me out of self-employment isn’t the pay, but rather the experience I could have at a given organization that I couldn’t create through self-employment. For example: at some point in my life I think it would be fun and educational to work at a major magazine. I’d come out of self-employment to do this, since I couldn’t replicate that experience by working solo.
Glad you highlighted the people aspect of jobs satisfaction. I totally agree that much of one’s happiness in the job – at least for a lot of people – comes from the quality of the relationships they have at work.
If someone has a nightmare evil boss, for example, it could make a potentially great job very stressful. Conversely, if somebody has a truly great boss, it could make an average job quite comfortable.
Like many others, 50%. But, you have to take in all the benefits like you said. I currently work at a University, and one of the best benefits is free grad school. Add that to my modest salary, and it is fairly competitive. :) If I were to switch jobs now, it would have to be well over my 50% mark for normal cases. Maybe an extra 100%; which in this economy seems difficult to jump up that much.
Free grad school is a huge benefit! I’d take advantage of that benefit, have lots of kids so they an benefit too! :)
That’s quite a premium for you to get – I doubt that anyone would pay me 100% on top of what I already make to do similar work.
I think you need to keep things in perspective. A 50% increase when you make 6 figures might not be all that life changing, especially when you consider the factors you outlines such as work relationships and other benefits. However, to someone making $24K a 50% raise would be life changing – it would make the difference between just surviving vs. having a small emergency fund, retirement savings, and some disposable income.
A 50% pay increase will likely never come my way in my industry nor my location. I am very fairly paid for what I do and I love my job and my company so I can’t complain. But if some hypothetical 50% increase was presented to me I would jump at it for the simple fact that I am currently squirreling away as much money as I can in the hopes of moving to a self-employed status in the next few years. The extra income now would simply speed up that dream.
This is not a post to tell you what to do Denise. This is a post to discuss the risks of moving for a bigger compensation elsewhere. You make a good point about moving if you’re in the poverty income level. Yes, absolutely move, as it’s one of the easiest ways to increase incomes at that level.
I’ve always thought I would consider any job willing to pay me at least 15% more. But after reading your article I’m thinking I should reconsider. I currently like my job, like my company, like my coworkers and like my boss. Why would I be willing to risk that for a small raise and uncertainty. However if I was offered a 50% increase in pay somewhere else it would get alot of consideration. For my family that could have huge benefits.
I’d take 10%, heck I’d move for the exact same pay if it was to a more interesting aspect of the field overall (IT is so vast, I’ve been painted as a Windows guy by previous employment and hate it). I’ve made a decision to quit in 6 months anyhow..(5 months 2 weeks and counting!)
Oh wow! Good luck J! Do you have a post about you quitting and where you’re going? Does your employer know?
They don’t know and many read my blog, so I can’t post about it yet..I’ll let them know as the countdown gets closer, until then, nose to the grind! Don’t burn bridges right?
I’ll be expanding my online offerings and going full time.
Ah nice! Good plan and I wish you the best of luck going full time online!
Thanks Sam, I know it will be tough but it’s just so worth it to be with my wife and kids more especially while they are young.
If you already are doing what you enjoy and you love your job, then it really doesn’t make any sense to me to even consider leaving it. Most people I know don’t enjoy their jobs that much so taking another opportunity may be appealing regardless of the increase in pay. No amount of extra money can guarantee you will be as satisfied in your next opportunity so I don’t think I could put a number on how much extra pay would be worth taking the leap.
50% hike! Even after tax its still 30% and I would go. I am renting now, no kids, wife doesn’t work. I have faith in my talent and know that I will get an alternate job if this new job doesn’t suit me. 30% net hike is too much to reject, IMO
Some people like challenge to work wonders, am sure new job had challenges and unless you put yourself up against the challenge you will never know what you missed.. Why would I think of not performing well in new job, and, stay put in my circle of comfort of current job?
No amount of money could make me move! My options are limited because of age, current job (Teacher) with pension and lifetime medical. I have less than 6 years left till retirement. Aside from this, we wish to be close (geographically) to our children.
I bet if someone offered you $2 million cash you’d quit your teaching job right now!
I’m pushing top levels for my position and the industry. Leaving for more pay would mean added management responsibilities and more travel, neither of which I’d be keen to take on. I’m approached from time to time by headhunters, but the offers usually involve relocation, which I’m also not keen on. I like the people I work with/for, I’m reasonably well compensated, so I’m staying for now.
Yeah, relocation is generally a non starter for me too, unless it was in Hawaii. It’s too hard to uproot everything.
There are many factors that play a role in a decision like this. If the company is a brand new start up and I’ve been working for a stable company for 10 years, then moving would be extremely hard. A 50% pay increase is a pretty penny, but then again if I had to move somewhere, where the cost of living is higher than where I’m currently located, then that would be a factor in my decisions. Why move somewhere, where you pay more to live, equaling out your new salary increase.
Since I am young and if I saw potential in this new company, I probably would give it a shot. Taking a risk and being on the top of this new company would be a huge benefit in 10 years from now.
No dependents, take that risk! Even if you fail, you have tons of time to make it up. Just careful about debt levels!
Hmm… this really depends. I don’t think I would move unless I got a double increase or something of that magnitude, but it also depends on move to where?. The city where I live the economy for developers is pretty decent, though we don’t get paid the same salary as Silicon Valley especially after taxes. At the same time living costs are also lower.
I am working at a place that recently went through acquisition and sell-off, and while I get a decent salary, I am slightly underpaid compared to my experience and what others at the company get. So… it wouldn’t take that big of a raise to get me to go for another job in the same industry. I do appreciate the interpersonal relationships and everything, and that’s really the hardest part — jumping into the unknown and starting over. At the same time, other people are leaving so there’s churn-over anyways. I guess at some point I can’t be afraid to jump into the pool.
If there is churn everywhere, management will appreciate your loyalty. Now is the time to ask for that raise!
I’ve been contemplating making a move myself because I have gotten much more lucrative offers from other firms. But you you said something that really struck a cord. People join people – not firms.
That’s certainly the case with me. I’m sticking with my current firm because I love what I do and the people I work with. Job satisfaction isn’t just about the money.
You’ve got to figure out your percentage to move though. That’s what the exercise of the post is about. Once we know, we will make much more informed decisions.
Good luck!
I hate the work I do, but I really like everything else about my job. I have great benefits, nice perks and the relationships I’ve built are great. I just don’t want to earn what I earn and do what I have to do to make the money.
Pray tell what it is that you do? VC?
Great post! I was looking for some opinions about this and things to consider.
I currently earn 84k and I am being offered 110k with another company. The project at the other company looks interesting, my commute would go down from 42miles to 5 miles, the benefits are very similar compared to my current benefits, and It seems like I might have a better chance of moving up the chain compared to my current company.
I must say I am happy where I work and the work I do, I feel proud of the company I work for, I like my coworkers, and I am neutral about my boss. Above all this, I do hate my long commute, and will now be close to 4 years.
Is there anything else that I am not considering before a decision like this? (I have no kids, no wife, and I’m in my 20s).
Thanks in advance for any comments or opinions.