DZone
Thanks for visiting DZone today,
Edit Profile
  • Manage Email Subscriptions
  • How to Post to DZone
  • Article Submission Guidelines
Sign Out View Profile
  • Post an Article
  • Manage My Drafts
Over 2 million developers have joined DZone.
Log In / Join
Refcards Trend Reports Events Over 2 million developers have joined DZone. Join Today! Thanks for visiting DZone today,
Edit Profile Manage Email Subscriptions Moderation Admin Console How to Post to DZone Article Submission Guidelines
View Profile
Sign Out
Refcards
Trend Reports
Events
Zones
Culture and Methodologies Agile Career Development Methodologies Team Management
Data Engineering AI/ML Big Data Data Databases IoT
Software Design and Architecture Cloud Architecture Containers Integration Microservices Performance Security
Coding Frameworks Java JavaScript Languages Tools
Testing, Deployment, and Maintenance Deployment DevOps and CI/CD Maintenance Monitoring and Observability Testing, Tools, and Frameworks
Partner Zones AWS Cloud
by AWS Developer Relations
Culture and Methodologies
Agile Career Development Methodologies Team Management
Data Engineering
AI/ML Big Data Data Databases IoT
Software Design and Architecture
Cloud Architecture Containers Integration Microservices Performance Security
Coding
Frameworks Java JavaScript Languages Tools
Testing, Deployment, and Maintenance
Deployment DevOps and CI/CD Maintenance Monitoring and Observability Testing, Tools, and Frameworks
Partner Zones
AWS Cloud
by AWS Developer Relations
Securing Your Software Supply Chain with JFrog and Azure
Register Today

Trending

  • Revolutionizing Algorithmic Trading: The Power of Reinforcement Learning
  • Personalized Code Searches Using OpenGrok
  • How To Use Geo-Partitioning to Comply With Data Regulations and Deliver Low Latency Globally
  • Manifold vs. Lombok: Enhancing Java With Property Support

Trending

  • Revolutionizing Algorithmic Trading: The Power of Reinforcement Learning
  • Personalized Code Searches Using OpenGrok
  • How To Use Geo-Partitioning to Comply With Data Regulations and Deliver Low Latency Globally
  • Manifold vs. Lombok: Enhancing Java With Property Support
  1. DZone
  2. Culture and Methodologies
  3. Career Development
  4. Why You Are Overpaid

Why You Are Overpaid

Dave Fecak user avatar by
Dave Fecak
·
Jan. 24, 14 · Interview
Like (0)
Save
Tweet
Share
26.22K Views

Join the DZone community and get the full member experience.

Join For Free

I wrote Why You Make Less Money in early 2013, which attempted to account for the many reasons some technology professionals make less than others with similar qualifications. Underpaying employees (defined as below market rate, which can admittedly be difficult to truly know) will cause problems for both the employee and his/her employer, but overpaying also creates some challenges on both sides that are often overlooked.

Rarely do I encounter someone in this industry who openly acknowledges being overpaid, but when it happens the conversation is not what you might expect. The realization of being overpaid is typically not met with a sense of pride or accomplishment, but rather a sense of fear. One explanation for the negative reaction is that the discovery is usually made during a job search (active or passive), where someone finds several employers are unwilling to approach their current compensation.

I am not suggesting that you should turn down job offers that are significantly above what you know is market rate, and taking advantage of market fluctuations is expected to some degree. However, there are three main dangers when it comes to being overpaid.

1. You’re locked in to your job unless you take a pay cut. Acknowledging that you are overpaid may not help.
2. You based your lifestyle on an unrealistic earning expectation.
3. You are likely first to go when rates normalize or the employer has financial difficulty.

If you are overpaid, it is vital that you recognize the anomaly and you should not base important financial or career decisions on current income.

It is useful to look at some possible explanations as to why one may be considered overpaid. (and how common it is)

Consulting or contracting dollars – In the technology world, these complicate market rate. Consulting companies and body shops charge big bucks, and they are able to hire salaried or hourly employees at levels well above what are typically paid to the client’s own staff. These premium rates and salaries are routinely explained by several contributing factors, such as the instability of contracting, the advantages of hiring temporary employees, or benefits plans. The compensation is also fairly easy to justify, as a company can easily afford to pay you 100K salary if it is known you’ll bill 2000 hours at $125 (250K).

The disparity between contractor/consultant pay and traditional employee pay primarily becomes an issue when someone makes the move from one world to the other. Most would expect to increase or maintain their compensation when changing employers, but that is usually not the case for contractors or consultants switching over. This is also why you may witness contract-to-hire employees trying to extend their contract period before conversion, as they are likely about to take a pay cut with little difference in any other aspect of the job. Very common

Unique combination of skills with unusual value to a specific company – An experience profile that is highly valued by one firm is much less valuable across the general market. An applicant with significant experience using every component of a company’s stack that also possesses highly-specific domain expertise may receive an inflated offer that won’t be matched by other employers. This situation is compounded when there are known competitors that value an identical skill set, and the cost of losing the employee will negatively impact the business. Rare

An employer early adopts and banks on a new technology – This is not dissimilar to the explanation above, with the exception that it is one particular skill that creates the variation. New hyped languages and platforms tend to cause spikes in demand that are impossible to fill with experienced workers, which temporarily raises wages above what they were and what they will likely be in the future. This creates a short-term seller’s market. Very common at any given time for certain skills

Unattractive employer – Companies that develop a poor industry reputation may resort to paying (and advertising) compensation above market in order to attract candidates. Other than promises of a brighter tomorrow, the easiest element to quickly alter is usually pay. A firm’s infamy may be the result of overworked staff, bad press, or even accumulating technical debt, and public opinion often remains negative long after the ills are repaired. Common

Poor benefits, limited perks – Job seekers tend to focus on salary and not overall value when comparing job offers. Part of this is ego-driven, as you are unlikely to brag about your firm’s high 401(k) match or insurance premium contribution at a cocktail party. Some companies recognize this and will scale back benefit offerings in order to maximize cash compensation and promote the perception that they are paying above market rate. This is not exactly overpaying when we consider the total package, but the statistics and surveys that provide market data primarily depend on cash compensation. Rare

Long employment tenure – Large organizations that schedule regular cost-of-living and salary increases into employment contracts often find themselves paying above market rate. Somewhat common for large firms

Compensated to take a chance on something risky – Startups that do not offer any form of equity or options to new hires may find themselves overpaying for talent. Employees that remain during or immediately after an acquisition will often be offered retention bonuses, which may indicate the company’s acknowledgment of uncertainty for future employment. Common

Counteroffer (upon resignation) or pre-emptive counteroffer (they knew you were looking) – Counteroffers may just be a corrective measure for long-term retention that bring an employee up to market rate, but in some instances a counteroffer is a method for only the short-term retention of an employee due to the inopportune timing of their resignation. In the latter case, compensation is often forced above market rate to ensure retention and project stability. The employee’s value temporarily spikes during key moments in a project, and a resignation with counteroffer at any key moment can result in overpayment. Once the project/goal is attained, the employee’s value returns to market rate but salary does not. Rare

CONCLUSION

Being overpaid is only a problem when you aren’t aware of it or sometimes when seeking new work. Research market rates for your skills and keep tabs on compensation trends in the industry. If you receive multiple offers below what you perceive as your market value, get some professional opinions from recruiters or colleagues.

career

Published at DZone with permission of Dave Fecak, DZone MVB. See the original article here.

Opinions expressed by DZone contributors are their own.

Trending

  • Revolutionizing Algorithmic Trading: The Power of Reinforcement Learning
  • Personalized Code Searches Using OpenGrok
  • How To Use Geo-Partitioning to Comply With Data Regulations and Deliver Low Latency Globally
  • Manifold vs. Lombok: Enhancing Java With Property Support

Comments

Partner Resources

X

ABOUT US

  • About DZone
  • Send feedback
  • Careers
  • Sitemap

ADVERTISE

  • Advertise with DZone

CONTRIBUTE ON DZONE

  • Article Submission Guidelines
  • Become a Contributor
  • Visit the Writers' Zone

LEGAL

  • Terms of Service
  • Privacy Policy

CONTACT US

  • 600 Park Offices Drive
  • Suite 300
  • Durham, NC 27709
  • support@dzone.com

Let's be friends: