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Why Being a “Loyal” Employee May be More Harmful Than You Think

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Jeff Cuellar

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Do you consider yourself a “loyal” employee? Well, what if I told you that staying at a company for longer than two or three years is financially harmful, would you believe me?

Sure, you might say that I’m full of crap. But take a minute to think how many years you’ve worked loyally for your current company. Now think about how much your annual pay raises have been during those years.

How much have those annual pay raises been over the last few years – 1%, 2% or 3% of your salary?

If you’re pay raises are 3% or lower, guess what? Your annual pay raises aren’t even beating the rate of inflation! In other words, it’s not even really a raise, but more of a veiled attempt at keeping you underpaid.

The bottom line is this – being loyal to a company that doesn’t give you 5% – 10% yearly pay raises won’t pay off in the end. But if you’re willing to jump ship and seek better opportunities every few years, the long-term financial rewards will be substantial!

 

Loyalty Can Reduce Your Earning Power

Forbes came out with a recent article that’s very relevant to Singapore’s work environment. According to the article, employees who stay with their companies for longer than two years get paid 50% less than those who job hop.

That makes a lot of sense.

If you’ve spent two or three years with a company – you know what the pay raises are like. In fact, it’s safe to say that the average pay raise has been between 2%-5% per year, depending on your work performance.

However, when you shift your “loyalty” from one company to another, you can potentially see a “pay raise” of 10%-40%+ each time you do so! Of course, the “raise” you’ll receive from your new employer depends on the following:

  • how valuable and in-demand your skills are
  • your work/management experience
  • your job accomplishments

What’s great about not being too loyal to a company and making the switch to a newer, better paying job is that your baseline salary jumps higher as well.

That means that a majority of the time, if you make the switch to another job, your salary negotiations will start from your current salary and not lower. After all, the whole point of job hopping is to get to another that’ll pay you more.

Here’s an example of how much more a job hopper can make from making the switch a few times compared to the typical hard working loyal employee:

Loyal Employee Ambitious Job Hopper
Years Starting Salary Raise % Annual Salary Starting Salary Raise % Annual Salary
1 $30,000 3% $30,900 $30,000 3% $30,900
2 $30,900 3% $31,827 $30,900 5% $32,455
3 $31,827 2.5% $32,622 $32,455 20%* $38,946
4 $32,622 4% $33,926 $38,946 5% $40,893
5 $33,926 4% $35,283 $40,893 5% $42,938
6 $35,283 2% $35,988 $42,938 20%* $51,525
7 $35,988 3% $37,067 $51,525 5% $54,101
8 $37,067 3.5% $38,364 $54,101 5% $56,806
9 $38,364 4.5% $40,090 $56,806 30%* $73,847
10 $40,090 $73,847
10-Year Total =  $346,067 10-Year Total = $452,411

*Denotes job shift “raise” the ambitious job hopper

The example above is meant to give you a general idea of how much more an ambitious job hopper can make compared to the average loyal employee who earns pay raises of 2%-5% each year. It doesn’t take into account inflation, which would actually nullify the loyal employee’s annual “raise” anyway.

However, you might be in the VERY lucky position of having an employer who values your contributions enough to give you a pay raise of 7%-10% each year.

If you’re in that position, it just might be better to stay – although if you’re that good, you’ll probably get plenty of enticement (salary increases, promotions, perks, etc.) to switch sides.

 

Job Hopping Does Have Its Drawbacks

There’s no doubt that taking “command” of your career by switching sides every two or three years can double or triple your starting baseline salary in 10 years or less. But taking this approach to boost your earnings does have a few drawbacks.

The biggest drawback being that many employers won’t see job hoppers as ambitious go-getters that deliver results.

In fact, some employers won’t even consider hiring you if you’ve worked at three or four companies over the last 10 years. Why? Because they see job hoppers as mercenaries that switch sides every time a competitor throws more “gold” their way.

To an extent, they’re right. But then again, if the employer offered good prospects for promotion and annual raises, they would be able to retain their talent.

After all, isn’t it cheaper in the long run to pay a very talented employee more instead of hiring and firing numerous people who can’t get the job done? Of course, as a prospective job hopper, it’s your job to get that point across to your boss.

If your boss doesn’t want to pay you more because he thinks it’s better to invest money elsewhere (such as a new laptop for his office), you should take your skills and expertise to a company who will value your talent – and pay you damn well for it!

 

Final Note: Have plenty of career questions that need answering? Don’t forget to check out our extensive collection of career-related information on the MoneySmart Learning Center today!

Is it easier to get the raise you deserve by asking your boss or by job hopping? Share your thoughts and experiences with us on Facebook! For even more useful information on everything personal finance, visit MoneySmart today!

 

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.