To raise or not to raise - that is the question

I am not a business owner. And not an executive director. I, as well as all programmers, the hired worker. Therefore, the decision to raise the salaries of their subordinates is not made by me. But I give recommendations. And listen to them or not.

I reason like this.

How much should a programmer pay? As a rule, the market "fork" of remuneration for a specific qualification is known and ranges from X to 1.5 * X. You can take the risk and pay for the lower bar - X. However, the possibility of getting 1.5 times more for the same work is likely to outweigh all the other motives that keep the fighter on my team. The situation is aggravated by the fact that aggressive “bounty hunters” are making the gap in the fork even more, in order to outbid qualified personnel more quickly. Do I have to pay for the top bar, especially if it is too high? And maybe you should pay more?
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In advance, I apologize for the tediousness and excessive detail of the following presentation in the style - "as for housewives." Many times I tried to explain my vision of the approach to solving this issue to people who were supposed to decide on salary increase, but they did not always understand me. Or maybe just did not want?

Programmers are interchangeable, but this replacement has a well-defined price (see figure).

Picture. The price of replacing the programmer V.Pupkin by the programmer I.Ivanov

Let us try to determine the price for replacing the programmer V.Pupkin with the programmer I.Ivanov.

Suppose that Vasily has been successfully working in our team for a long time. The qualifications, experience and productivity of his work are constantly growing, while his salary remains unchanged at 2000 cu. Finally, Vasily ends his patience and he left our company at the moment of Tu . But the incredible happened. Our gallant personnel service at the same moment (!) For the same salary (!!) found a replacement for him in the person of I. Ivanov, equivalent in experience and qualification (!!!). I note that this is a very, very optimistic scenario.

Whether Ivan will start from the first day to bring the same income of the company, as V. Pupkin? Will not start. Moreover, before he starts to bring at least some income, there will be only losses from him. The cost of internally training. The cost of working time of other project participants, usually the most valuable, to consult and bring it into context. And finally, at the moment of time Tn I. Ivanov will begin to bring the same income that V. Pupkin would bring. As a result of this replacement, the company will suffer losses equal to the area of ​​the shaded curvilinear triangle.

Perform an approximate estimate of the magnitude of these losses. To do this, we will replace the calculation of the area of ​​the curvilinear figure with the calculation of the area of ​​the right triangle ABC .

Find the leg AB . First, find the value of the segment between the points Tu and B. We take into account that the cost of a programmer’s unit of working time is made up of his salary and overhead costs (salary of the management, system administrators, cleaners, rent, electricity, etc.). Let overhead costs make up 200% of V. Pupkin's salary. Then the cost price of V.Pupkin’s working month will be 6000 USD Since we argue about a successful business, we have the right to assume that its profitability is 25%. Consequently, the company had to receive a monthly income from the work of Vasily, somewhere, 7500 cu. This is the desired length of the segment between the points Tu and B. In order to estimate the interval between points A and TU , suppose that at the initial stage of the adaptation of a new employee, his colleague with an equal salary spent 20% of his working time on helping him, therefore the company did not receive additional income equal to 0.2 * 7500 USD Thus, the length of the desired segment between points A and Tu is 1500 cu Consequently, the desired length of the segment AB will be equal to 9000 USD

The size of the leg BC = Tn - Tu - the time of I.Ivanov's adaptation depends on the complexity of the work that V. Pupkin worked and the role he played in the project team. Take an average of 6 months. Thus, according to our estimation, the total loss of the company as a result of the replacement of Vasily will amount to 9000 * 6/2 = 27000 cu, equal to the area of ​​our approximating triangle. And this is in the implementation of the most optimistic scenario.

So, how much to pay? Let the present value of qualifications and experience of V. Pupkin in the market of programmer's workforce be estimated by a remuneration from 2,000 to 3,000 cu. It is obvious that, under other favorable conditions, the probability of Vasya’s departure to a competitor is inversely proportional to his income, and varies from 1.0 to 0.0 in the range of market offers. If we do not raise Vasily’s salary, then with a probability almost equal to 1.0, in the next 6 months the company will receive less income by $ 27,000. If we invest in Vasya - our human capital, and raise our monthly salary to $ 3000, then he is guaranteed to work in our company. At the same time, in the next 6 months we will lose not $ 27,000, but only $ 6,000.

What's next? And then the next certification and the new revision of the contract of employment.

You should not take the above described as a guide to action, as an algorithm for calculating the competitive salary of your programmers. Life is much more complicated and diverse than any model. All the above, should be perceived only as an approach to how to think about the answer to the question: "To raise or not to raise the salary of V. Pupkin?"