It turns out that deciding what a software developer is worth is a very challenging proposition because deciding which ones are good is an open problem. Probably the central open problem in our industry today. But salary conversations are largely not about that. In sufficiently large organizations they are about how well you, or your manager if they are good, play the game, and in smaller ones its about having the cash flow to back up outstanding liabilities.
In any case, I think its fair to characterize these approaches as a tactic, whether its a negotiation tactic or a real cost limitation varies from organization to organization but its not the employees job to worry about that. If you are in a good organization they are constantly making the value proposition to the company make sense, if not they aren't and you shouldn't feel guilty about either asking for more pay or leaving if it isn't provided.
This is very common. They often justify it with "In this company we're not paying as much, but we have greater freedom/cooler tech/<other benefit>". Well good for you. We have already established that we're a good fit, but I'm not working for 20% less than I can across the street.
The problematic behavior is when the people setting the pay bands get the value proposition wrong or they think they are paying market when they are not.
I also have an OK salary so this is partially about reducing risk and partially about giving something back.
The characterization of management as incompetents backastabbers is as childish as the one that says employees are lazy bums who should be grateful of their salary.
I asked a recruiter that placed me and he said he's usually taking 20-35% :D
Which is exactly why any developer in that situation needs to get out as soon as they can find a better position. Such a company is obviously not going to prosper in the long run.
The employee got an offer the next week somewhere else for +30%.
He gave his resignation letter to the manager right away. It didn't even occur to him to ask the company to make a counter offer (even though they may have).
[Just to say that sometimes, negotiation strategies can backfire, but managers don't seem to realize (or care about) that.]
Boss: HR won't give me the money for your raise.
Employee: I quit. I've been offered more money elsewhere.
Boss: No wait actually I can get that extra money
Employee: Too late, kthxbaiYou'll get more pay but you're stuck in the same company run by the same narrow minds.
I've accepted a counter offer twice, and both times I was glad that I did.
There could be many other reasons for a company not paying what you can get somewhere else. A very trivial one is the yearly update cycle: that may happen in January whereas you get an offer in June. Companies that hire don't align to the schedule of your current one.
And hiring companies inherently know asking somebody to quit and somewhere else carries a risk that needs some amount of kind of reward.
Hell, how can one personally even know what he/she is worth? There are so many factors at play. It'd be narrow minded to expect pricing perfection on something nobody really can get right.
You've got 2 companies you can work at. You should go to the one you prefer to work with. Maybe that's the one you already are in, maybe not.
Do what's best for yourself.
While you can certainly try to negotiate increases in compensation outside of this, I've never seen it happen successfully.
I've done it at least half a dozen times in my career. I was told "the maximum we can give is a $7k raise since there is a fixed pool for raises in the department."
I said if I quit and you have to replace me, not only will you have to hire 2 devs to replace me (as I pulled dev and sysops duty) and pay them market salaries, you will have to pay a recruiter 20-30%. They still wouldn't budge, so I got a counteroffer for $30k more than I was making, plus some other perks. They not only matched, they also matched for other devs on the team.
Do not fall for that fixed budget BS...the pie can always get bigger.
Getting a counteroffer is not the same as what the OP is suggesting. Using another job offer as a leverage for a raise is not recommended by most experts. Just google "Should i accept a counteroffer?". Mainly because you create bad blood at your current employer and you have to be ready to follow through on your threat. Also, that employer you just pushed right to the edge of hiring you is going to be mad you were just using them. There are entire top 10 lists about why it is a bad idea!
I have pleaded the entire "it would cost you thousands to train a new guy, and you will have to pay him to start what i'm asking for right now!" line to bosses before. They are unmoved by financial arguments. It's as if management just decided to take a hard line against "persuasive" raises across the board, nevermind the damage it costs to lose talent.
The notion that accepting counteroffers is always hurtful to your career is contested to say the least: See this [1] HN discussion from about a month ago.
Nothing personal, just business is the attitude you want when handling something as trivial as a salary negotiation.
If you can bring in more than you make they will pay - management doesn't care about another 10k. They know what the replacement cost is.
It worked out well for all parties, depending on how you look at it.
Management was a little out of touch with market rate salaries, since they weren't tech guys (once the CEO referred to engineering as "black magic" since he didn't understand it). So while they were shocked at an offer I was able to get in a few days, they understood that engineers are in an enviable position in the job market.
This was 2013 and I was making $110k in Los Angeles, and they were offering $117k. The counteroffer was for $130k plus perks valued at about $10k (401k plus match, extra week of vacation, etc). So they matched at $140k.
I stayed there and after a year I got a promotion to director of engineering and a raise to $155k + up to $25k bonus. A few months later I renegotiated to have the bonus removed and the base salary increased to $175k.
During the time after I pulled my stunt I expanded on a pet project using sentiment analysis and that became the core of a new product that is now 40% of their revenue.
In December 2015 I left to work as a remote freelancer, which would have happened eventually regardless.
"During the time after I pulled my stunt I expanded on a pet project using sentiment analysis and that became the core of a new product that is now 40% of their revenue."
This is the most important number you give! Very important to understand the need to point to concrete revenue generated (or costs cut) when negotiating a raise. Otherwise, management will probably just call your bluff.
You don't need some enormous revenue or productivity win on the board to ask for a raise (although it helps). It just needs to be less hassle for them to pay you a raise than to replace you. In most cases it's really that simple.
What was your negotiating strategy here? Did you just say "I'm going to make the bonus anyway, please let's just write it in now", or was it more "I might leave if we can't work this out"?
The new developer needs to familiarise himself with everything and what happens if he's actually worse than you?
Of course no sane boss will ever tell you this. Just nag them and don't accept "no" for an answer.
Anecdote: We had a guy show up, he claimed that we had to do a rewrite. We spent 2 years catching up to the base product. Complete waste of time, had to fire him 1 year into the rewrite. Gained no value from it. He was simply too arrogant, vain, and/or unskilled to bother to read other people's code.
There are two problems there, from what I can ascertain:
1. The guy wanting to rewrite your product.
2. Management that allowed him to do so without proper motivation and/or cost-benefit analysis.
They decided to rewrite the code from scratch."
From the employer point of view, keeping someone aboard who is willing to jump on every opportunity for leverage is also a risk. You might want to have the fiercest of negotiators in sales, but the same thing is not a trait you want to see in developers. Bad for their earnings, but that's how it is. The most capable developer in the world would not be a someone you want as an employee if you suspect that he could use his powers for extortion tactics. (It's bad enough already that the worst developers become "irreplaceable" without even trying)
Bigger orgs manage compensation seperately and usually only gives management limited levers to pull to affect changes. They do this to manage costs, avoid internal competition and because they don't trust line management.
Workers are a cog in the wheel in these orgs, and treating shiny cogs better is ultimately worse for the org.
If our across the board raise rate is 3% and I give you 5%, I had to give someone else 1%. In practice, I would like take 0.25-1% from more people to spread the pain out some.
If there was someone performing at a level that made me feel it was okay not to give them a raise, I might grab it all from them. But doing this pretty much means they will leave in 3-6mos or I will wind up letting them go sooner. They were likely already on a PIP or we've had serious performance discussions throughout the year.
It's not a tactic, it's simply the way it is. not giving a raise to someone is a signal that puts the wheels in motion for them to be gone. Your relationship with them will be tested, likely broken. If I want to keep everyone on my team, barring extraordinary circumstances, I need to generally even them out. Evened out seems to settle between 2.75 and 3.25%.
What most people don't say is that a good company will have set aside a pool of money for retention. It could be a salary correction because someone got in cheap and we recognize that we need to adjust them up more than a simple raise- most of the time it's the emergency money I can go to the CEO and beg for in order to match that offer you got if I really want to keep you and think you'll be happy to stay.
Double effective because now first line are insulated from negotiations and grunts don't know who are the negotiatiors they need to talk to.
I am a bit pejorative to that tactic because if answered correctly, it actually harms the salesman: proclaiming you cant give X salaries means that they dont respect market rates and thus an employee is incentivized to leave to someone that does. Their inability to give raises is a showing of weakness not of strength.