Should I overpay or underpay staff?

Hi Aunty B,

I have been reading your column since the SmartCompany site launched a few years ago and I’m a big fan of yours.

I am a founder and CTO of an internet company which is in the top 100 sites in Australia. I do not have a lot of experience in the corporate world as I founded my business upon graduating from uni in 2005. We have gone through all the stages from start up to acquisition. We were acquired by a public company in 2008.

Anyway, my question is that I have several developers who have been with us since the early stages. Due to their work experience, their wages were relatively low as they had just graduated before we hired them. Currently they’re are on 60k.

Since the acquisition, our clients are willing to pay top dollar to hire top developers. All the new developers are on around 70k to 90k. However, I have since found out that they are not as good as our long-term developers who are only getting 60k. Our old developers are much smarter than the new developers and I believe that whether they are smart or not has nothing to do with their working experience.

I am not sure if we are actually underpaying our old developers OR are we overpaying the new developers?

Although our old developers are more capable than the new developers, they do not have extensive experience like the new developers who used to work in large company.

What do you think?

Cheers,
Kelvin

Dear Kelvin,

You are asking the wrong question. The question is who are the right people to have on the bus for the next stage of development? Where do you want to go? What is your business plan? What is your vision? Then you need to establish the best team that may well include some of the old developers who know the business inside out and have the “smarts”.

Plus a few of the new developers who can bring some outside skills and knowledge.

You then need to look at the skills they are bringing and reward them accordingly. If one of the old faithful clearly has better skills and is a good team player and a leader then give him a title and reward him accordingly.

It is also easy to ask around and find out how much developers with that kind of experience are being paid. I am sure our readers will be able to tell you whether $60,000 or $80,000 is the norm for good developers.

But do be aware. Start ups do tend to keep wages as low as possible – because they have to. And loyal staff who love the culture do tend to accept slightly lower wages with an expectation that they will be rewarded in the long run.

What you want to avoid is the faithful long termers finding out that their less talented new workmates are being paid more than they are.

If you do decide to increase the salaries of the old faithfuls make sure you increase their responsibilities and KPIs as well!

Good luck,
Your Aunty B

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