I'm being promoted and my salary is going to decrease

Question

I have been working at my current company for about three years. During the last two, I have been managing a small group of developers and several projects. These responsibilities came gradually, without any change in contract or salary.

Especially during the last year, my responsibilities have been rapidly increasing and my supervisor told me that a promotion was coming for me for the very good job done with them and finally the offer arrived.

Now, here is the catch. As a "regular" employee, as I am now, I'm paid my regular salary plus overtime (more or less 10% or my salary every month). With the new role, I won't be paid overtime and the actual salary increase I have been offered is so low that I would be making less money than what I'm making now. With the new contract, overtime would no longer be paid out, but is considered to be "included" in the total salary. So while I feel I should be compensated more because of this, I could not easily refuse to work overtime.

The "official" explanation I have been given for this situation is that I should see these two things as separate. In a way, I got a salary increase that is not that bad and on the other side I am given a promotion that opens new doors inside the company. On the other side I know that people inside the company with the same "level" I'm offered are paid much more and I'm very disappointed to think that I have been waiting years to get a promotion that is going to reduce my net salary.

At the moment, I have not accepted the offer and I'm trying to think what I can say to negotiate a better deal.

Is there something I can try to say in your opinion? Is this the case where a more aggressive approach may work? Possible actions would include threatening to leave (that is indeed possible) or to stop working overtime (not so easy).

Answer 1

My possibilities would be threatening to leave (that is indeed possible) or to stop working overtime (not so easy).

You're forgetting one possibility: you can refuse the promotion.¹ A promotion should be treated like any other job offer and that means you need to negotiate salary. You seem to have missed an essential step in this entire process.

Say the following to your manager or to the person who offered you the promotion.

I'm excited to hear that the promotion we talked about is on the table, but I'd like to get the chance to negotiate the particulars. As I mentioned I'd actually be taking home less per month while my responsibilities would increase and that's not something that I can accept in good conscience. Based on my research [which you need to do ASAP!] I think a salary of $X makes sense.

Then treat the resulting conversation like any other salary negotiation. Make sure you get the offer in writing and ensure that the person you're talking to can actually approve that salary. Your supervisor sounds a bit spineless so you may want to have the final offer approved by HR or upper management before you accept.

By the way, this is hogwash:

The "official" explanation I have being given for this situation is that I should see this 2 things as separate. In a way I got a salary increase that is not that bad and on the other side I am given a promotion that opens new doors inside the company

Opening doors? You've been in a management role for two years without promotion (or presumably a raise) and they have the gall to tell you this will finally "open doors"? No. If they deny your request to have an actual negotiation step or stick to a paltry raise then you need to hold firm as well. While I of course don't know the particulars of your situation, if your salary has remained stagnant for the past 2 to 3 years while you moved into a management role, a 10 or 20% raise wouldn't be that odd. I suspect that you're far below the market rate for your position.

Meanwhile, I'd suggest updating your resume. It's sounds like you're a valued employee and your immediate management loves you so this could just be HR or upper management trying to take advantage. But if you can't get a decent salary at your current company you shouldn't hold out hope that you'll get a raise "eventually". Some companies simply don't make a priority of paying people what they're worth and the only real solution to get a competitive salary is to move on.

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^{1 - One problem I see for your particular situation is that it may be a token promotion as you're basically already in a management role. If your responsibilities aren't set to change with this promotion then there's very little point in refusing it. You can still try to negotiate but you have less leverage in that discussion. If it doesn't pan out your best bet may be to take the promotion, get that title change and start job searching.}

Answer 2

One of my promotions way back cost me about 20% of my take-home pay, as I went from below manager (and got loads of overtime pay) to a manager with a better salary, but no overtime.

I needed to do that along the way though, as it was an essential step on the career path at that organisation, leading to a much better role, salary and future opportunities!

It was a challenge for a year, but well worth it.

You need to look at the pros and cons very carefully - and build in how much you trust the "opening doors" line. In the role I was in the career pathways were very well defined, so I had strong assurance over what would happen. Do you have that?

Answer 3

I have not accepted the offer and I'm trying to think what I can say to negotiate a better deal.

Is there something I can try to say in your opinion?

You can say that you are disappointed in the offer. And you can explain that this will leave you with a net decrease in salary, and that you would hope they could adjust the offer to at a minimum make you whole. If I were the manager, this would be a powerful argument.

Go into the discussion with a clear idea of what you want, what you are willing to settle for, and what you will do if you don't get it. You don't want to react emotionally, or without having thought the consequences through.

You can accept their final offer, refuse the offer, or (I suppose) quit on the spot.

Each of these options has consequences.

Accepting their final offer might give you less salary than you hoped, but you could always try to find a more lucrative job elsewhere and then leave.

Refusing the offer could retain your current salary. But it might mean that you won't be offered a promotion at this company again.

Quitting on the spot might make you feel better, but then you have no job and might be in financial difficulty if you can't find a new one quickly.

Answer 4

This happens to all (or at least most) of us as we transition from a minor role in a med - big company to a larger one. It sucks, and you can always turn down the promotion, but you probably shouldn't. At one time, for example I was making $14.50 an hour. But I was an hourly employee and working 50 - 60 hours a week. So I would gross $797.50 - $1015 a week, or $41,000 - $52,000 a year. But the promotion I was offered included a jump to $19.00 an hour, but was salary. On the one hand, that's a $4.50 raise, all at one time. But, it also meant, to me, a likely pay reduction, or at least a breaking even.

If you're talking about a pay cut of a few thousand dollars annually, then you probably should take it. You say it's not easy for you to not work overtime— well, consider that you will be the new boss. Make it easy. If you don't want to do that, then implement some kind of flex time arrangement.

With your new "management" position comes the power and ability to implement these things and do things in a way that you feel is best. That's not to say you can go against the structure of the business, but you can find ways to get what you want and what the company wants.

Back to my example, as the new head of the department, I was able to shift everyone's hours from 6am-2:30pm with a half hour lunch to 1pm to 9pm with a 1 hour lunch (My department really hated mornings). Then a few months later I was able to get it so that everyone had 3 day weekends every week. Coming in later and getting 3 day weekends was totally worth the salary bump.

That said, if the promotion isn't a promotion and is just a raise, then it might be best to turn it down.

One other thing to consider. When you move from a "regular" employee to a "management" employee, usually the benefits are vastly different. You may wish to calculate that as well. Going back to my example, as a "manager" level employee, I was offered better 401k matching, a better health insurance plan (during the next enrollment period), and better vacation options.

Also, once you make the jump to salary, it's a very different world when it comes time for raises. Even if you're not doing anything different, you're seen as a more valuable employee.

Now I know you're moving from salary with a %10 pad to salary without a 10% pad, but consider what other things you gain when making your decision. Remember it's ok to say no, or to renegotiate.

Answer 5

The "official" explanation I have being given for this situation is that I should see this 2 things as separate.

That's not an entirely unreasonable position. I know that what matters to you at the end of the day is how much money is in your pocket, but the extra 10% you make in overtime really is extra money that you shouldn't be counting on. That 10% could go away tomorrow. If the new job comes with, say, a 5% increase, that's 5% that you can count on.

Whether you accept the promotion or not, things could change on the project such that you'll no longer have as much opportunity for overtime. The new manager might find some ways to make your work more efficient, so that you can get the same work done in less time. Or they might realize that since the company has been consistently paying out an extra 10% in overtime the group must be understaffed, and that hiring another person would actually reduce costs.

So, if you were managing your group, could you find ways to make things more efficient? Could you reduce the total amount of overtime that the company has to pay? Could you manage the group in a way that ensured that projects get done with high quality and reasonably accurate time estimates, so that overtime isn't required? Do you think you could push back against demands from upper management to constantly do more with fixed staff?

If you do a good job as manager, then 6 months or a year from now you'll have good results that you can point to, and that alone is evidence that you might deserve a salary increase. If you can show that you decrease costs by making the group more efficient, then that's an even more compelling argument in your favor.

We can't tell you whether to take the current offer, ask for more, or turn it down. But your success as manager will depend in part on your ability to consider things from the perspective of the company and to understand how your role in the group will have changed. Try to take a long view and understand the potential of this opportunity rather than focusing just on your current bottom line. Good luck!

Answer 6

You need to work out one thing before you go too much further in this, particularly if you're going to take the suggestion many others here have suggested and refuse the promotion.

You need to find out whether refusing the promotion would mean you would be leaving the company soon. It is not uncommon in situations like this for the company to prefer to move people to a different pay scheme, and if they don't want to be in the new pay scheme to end their contracts at the earliest opportunity.

At a job I held a few years ago, a coworker who was a consultant was offered to be brought on as a full time employee (he'd been there five or so years at that point). With that brings all of the advantages of FTE status (in the USA, so, not much) but of course a pay cut (even after tax considerations; he was a full time employee of a consulting firm, so a W2 employee of his ultimate employer with (mediocre) benefits).

He eventually decided to refuse the status change, as I probably would have, and had his contract not renewed six months later. The company was moving to reduce its dependence on onshore consultants (moving to FTE + offshore model), hence the job offer. This wasn't a shock to him as he knew this was their goal, but it's something you should be aware is possible in your situation as well.

Even if they aren't globally changing these things, if it's just in your situation, it's still possible that refusing a promotion could signal that you won't have further prospects in the company, and might not have a position at some point in the future. It's very likely that you will not have a long-term future if you refuse the promotion, of course; but be aware of the short-term consequences, and get your resumé ready.

That doesn't mean I wouldn't still refuse the promotion - I almost certainly would, unless I determined it would lead to me getting better offers from other companies, and I would almost certainly leave as soon as I reasonably could - but just be aware of the possibility that job search could have some urgency.

Answer 7

If it is a large company with a lot of room for advancement, then maybe consider it, otherwise, the main alternative is to vote with your feet.

Unfortunately, it is difficult to solve underpayment problems. Even if you twist their arm, the additional amount they will offer you will be pretty small and once you do that you get perceived as a "difficult" employee. Think about it: if you demand more money when they promote you, what effect do you think that will have on their willingness to promote you again?