How to react to employer offering way less than what my manager recommended for as raise?

Question

I'm firstly going to give you some background.

I work for a west coast USA startup that performed extremely well this year (it doubled the last year income record). I work remotely from Europe and I've been working there for a little more than one year.

I just finished my bi-yearly performance review, I think I "constantly met and exceded the expectations" but I don't have yet the results of it.

My manager told me he asked the management a raise of X, which is approx the 20% of my current salary. He said he wanted to give me that much because I had not an increase in salary in my past performance interview (because I did join just 4 months before it) and because I was a key piece to deliver a huge project the company worked on during the past two quarters.

The reply from the management was that they were willing to give me Y (6%), because considering the country where I live, I already earn much more than the average.
While this is true, they never mentioned any distinction in salary related to the country of residence of the employees when they hired me, nor during the whole year.
Also, I already earn way less than my colleagues that live in the states (at least 35% less).

My manager refused their offer and now is trying to negotiate to give me more.

The questions are:

1. Is it common to pay remote employees an amount correlated to the place where they live?

2. Should I accept the 6% of raise or this may sign the beginning of a future filled with very low raises because year after year I'll earn way more than "the average"?

3. (Bonus question) How can I help my manager to make him land a good deal for me ?

Answer 1

Is it common to pay remote employees an amount correlated to the place where they live?

In my experience it is very common for US employers to pay employees commensurate with wages that are market-driven within their locale. That is the reasoning behind a lot of outsourcing decisions - go where the labor is cheaper.

Should I accept the 6% of raise or this may sign the beginning of a future filled with very low raises because year after year I'll earn way more than "the average"?

That depends on what your alternatives are for "accepting" this raise.

If you mean "quit and find a new job that pays more", then you should do that only if you strongly feel that this is no longer the right job for you - considering financial and non-financial aspects.

If you mean "refuse the raise and hope you get more", I'm not sure that will work. In companies where I have worked, refusing a raise would likely mean you get less (ie, no raise at all).

Answer 2

Is it common to pay remote employees an amount correlated to the place where they live?

In the United States, it is common that compensation is adjusted to reflect the cost of living for an employee. I have had colleagues who moved to work remote and had their compensation lowered because the cost of living in Kansas is much lower than New York City.

Should I accept the 6% of raise or this may sign the beginning of a future filled with very low raises because year after year I'll earn way more than "the average"?

This is up to you. 6% raise is higher than inflation in the US, so if you were in the US, that would be a good raise. However, thinking long-term, it seems like the "board" doesn't quite understand the value you bring to the company yet. Perhaps there are politics involved, but it seems like you and your manager have a good relationship - I would consult with him. You could take a risk and ask HR to re-evaluate your current duties/skills against what the job description has - obviously if you are doing more or have a higher skill set, then you should be compensated appropriately. However, do take into consideration that the results might come back and your compensation could be adjusted down.

(Bonus question) How can I help my manager to make him land a good deal for me?

Work with him to come up with a list of all of your accomplishments and contributions to the company. Then perhaps consider re-approaching the "board" to re-evaluate.

Answer 3

Your boss made a severe error. He should never have told you any amount except the approved raise amount. If you dispute the raise and say you were promised 20%, there is a strong possibility that you will get no raise and your boss will get fired for making promises that he was not authorized to make. Almost certainly, you will not get more than the current offer.

However, the good news is your boss is an ally for you. That means he may try to help you find a way to get more money since he believes you deserve it. Consider if there is a promotion or title change that you can make. A new position often means a salary raise. You might have to wait a few months so that the current raise is no longer a factor in management's decision though.

As far as what people in another geographic location make? That is irrelevant. Companies generally try to pay market rates for the geographic location of the employee.

6% is a good raise, be happy with it. The 20% figure was smoke, it was never a real possibility.

Answer 4

Talk to your boss. You were lead to believe deserve a much higher raise. Your boss is the one who will suffer the most if he thinks you are doing such a great, but loses you to another job because of his mistake. They've risked losing your trust.

In the future, you should ask how your salary, bonus and any potential raises are determined. Don't leave things up to what is common. Companies and managers who won't be comfortable discussing this during a salary negotiation are either being evasive and/or weak leaders.