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This happened some time ago as I was working for a small company that was later acquired by a giant multinational company. The small company used to be run by a single owner who had no rules for salaries. It majorly depended on your relationship with him, so the more he favored you the more you got paid.

After the acquisition he left the company and the management changed. Most of the employees left the company since they were under paid, but I decided to stay for a promise of a salary review.

During that time I got an offer from another small company that was almost 3 times my current salary. When I brought this offer to the new management they agreed to increase my salary, but refused to match the offer I had. The HR response was that they can't pay me more than my direct manager as this will break the company's salary hierarchy.

For big companies is this a rule of some kind? I mean my direct manager is also underpaid, but he is happy with it.

My direct manager will have access to my salary, but the main negotiations was with the HR and the upper management (CEO, IT manager). I brought them several surveys of the market salaries, but they ignored them.

Was there a way to convince the upper management that they shouldn't compare me to my direct manager?

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    What am I missing that is preventing you from taking the offer that is THREE TIMES your current salary? – enderland Oct 16 '15 at 15:57
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    @enderland because the other company was way worse in every other aspect (at least IMHO). Everybody was jumping off the wagon there, but my company didn't know that :) – Long Oct 16 '15 at 16:02
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    @Long, maybe that is why they have to pay three times a much. Not fair to compare companies on salary alone. Would you be happy if your current employer tripled your salary but took on all of the other negative aspects of the other company? – cdkMoose Oct 16 '15 at 21:11
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    @vsz Huh interesting. Just out of curiosity what country would that be? Haven't heard of any such law in western Europe or the US. – Voo Oct 16 '15 at 22:26
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    Worth noting: It's managers that established these rules, and managers that would need to rescind them. "I'm no conspiracy theorist, but..." – user2867314 Oct 19 '15 at 9:36
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In short, no, there was no way to convince them.

This is very 1970's thinking, especially in US companies. The idea was that you had to have all the skills of the people you manage in order to manage them effectively. Thus, the theory went, that everyone above you had more and more skill, thus more and more responsibility, and thus more pay was justified.

Obviously this is flawed thinking. Tech and professional sports completely blow that model out of the water, but if someone has it "in their head" that the world is supposed to work that way, then you can't break them out of that thinking.

These are the companies (meaning those that don't keep pace with market rates and "justify" it with anachronistic practices) that can't keep talented employees. Unless they have enormously deep pockets, they usually don't last long.

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    Do you have anything at all that backs up the claims you are making in this answer? – IDrinkandIKnowThings Oct 16 '15 at 17:28
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    Why sure, if we have to elaborate on the obvious, here you go: nflsalaries.org workplace.stackexchange.com/a/13043/9264 – Wesley Long Oct 16 '15 at 18:49
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    It's probably true that most folks would consider professional (and major college) sports to be an outlier in salary structures. As for tech, I've been in it for nearly 3 decades, and salary structures have generally followed the "Managers make more than techs" model. Admittedly, I'm in a rather traditional domain, but most people I know in other areas (including some start ups) aren't getting paid more than their managers. – GreenMatt Oct 16 '15 at 19:51
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    @GreenMatt: but the company in question isn't saying, "most people should be paid less than their managers", it's saying "not a single person can be paid more than their manager". – Steve Jessop Oct 16 '15 at 22:03
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    Some financial services firms definitely employ technologists getting paid more than their managers, but like the professional athelete examples, we're talking about those that are so clearly superstars, that their departures would severely affect the profits of the firm. – Chan-Ho Suh Oct 17 '15 at 2:01
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For big companies is this a rule of some kind?

It is more of a norm or a practice, which is generally followed in big, established(old) companies. So, they have their own career ladder, and the salary ranges defined according to it. So if you are in the company, then you would get paid according to that.

Was there a way to convince the upper management that they shouldn't compare me to my direct manager?

Yes, you can probably try to convince him during your performance review, or by meeting him regarding this. But, I'm pretty positive that he would ask you to stick to the norms, which the company has been observing since years and don't disturb them.

So, it is very unlikely that he would be getting convinced.

I brought them several surveys of the market salaries, but they ignored them.

That is exactly the problem with established companies. They have a system and regulations, and as the company is running smoothly, they are reluctant to tweak them, even though your argument seems reasonable and sensible to them.

  • It's not a small or big co. rule, it's an old ideology. Any 70+ guy will find it an absurd an employer earns more than his manager. Also note the reasoning for it will not be who is more skilled or easy to replace but the responsabilities or in other words:how much a bad decision from this guy will cost – jean May 7 '18 at 18:11
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For big companies is this a rule of some kind?

Different companies have different rules. I expect bigger companies to have this rule, since bigger companies tend to be older, and this sort of mindset was largely destroyed by the information age.

Was there a way to convince the upper management that they shouldn't compare me to my direct manager?

You should not have to, this is asinine.

The entire concept of a "salary hierarchy" implies that management is as valuable as the stuff that they're managing, and then some rather than being two distinct skills. Especially with the information age, that implication does not hold. Can your manager do your job? Can you do theirs? More and more, skilled specialists are far more rare than the managers who can organize them. As such, those skills become more valuable, even if you accept the tenuous argument that managers provide more value than individual contributors.

So you can make that argument. You can argue that you provide more value to the company than your manager. You can argue that by not paying competitive salaries, they're losing out on skilled talent. You can argue that the cost of replacing you is more than the manager due to skill rarity or increased domain knowledge.

But if they haven't realized the idiocy of this stance by now, I doubt one more argument will tip the scales.

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    Or maybe they realize that this is two distinct skills, and they value the ability to make a highly functioning team over the value of any single member of the team. – cdkMoose Oct 16 '15 at 21:14
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    @cdkMoose - sure, and that is why most managers make more than most individual contributors, the skill itself is more effective in providing value to the company. But to assume that all managers provide more value than their reports is naive. To codify it is short sighted. – Telastyn Oct 16 '15 at 21:50
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To be paid more than your manager, you need to convince t least your manager's manager that you are worth more to the company than your manager. Get out there and be the exceptional employee they can't afford to lose, and get yourself promoted to a position with a higher salary band -- chief architect, director of research, whatever it takes.

Or interview elsewhere and see if you can get a better offer.

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Something to add: there's a local large tech company in my area where the employees have an old saying, "it's the best first and third job you'll ever have"

Meaning: there's rules in place on how large your salary can be and how much you can be promoted to that apply to existing employees, but not necessarily to people hired from the outside.

For example, you might make $50k and your manager wants to promote you to a position where you can make $100k. However, the company has a rule: no more than a 50% pay increase. Which means you can't be raised to more than $75k. Crestfallen, you take a different job outside the company that offers you, say, $85k which is still less than the $100k you should have been promoted to but better than the $75k you were actually promoted to. After a few years though your original manager approaches you and can now successfully offer you the $100k because now you're no longer a current employee and so he can give you what the position deserves.

It may sound stupid, and in the short run it probably costs the company some good employees, but in the long run it saves money (which is good for the accountants, stock holders, etc.) It also has one added benefit: it helps curtail the notion that managers can give giant raises to people they like based on things other than skill. I once worked a job at a company that didn't have this rule and we got a new director of our division one day and he brought in his crew of fellow coworkers from his old division and gave them all management positions with enormous raises and bonuses, despite their complete lack of qualifications. You can probably guess what happened next.

So anyway the bottom line is that yes this is a thing, yes it may be antiquated or not properly account for highly demanded talent or what not but thems the breaks. You have to decide if you like the job or money more.

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