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I see what you're saying, but if everybody is getting paid at the breakeven, or close to breakeven point, the company is going to be starved of capital it needs to grow, take bets, weather a bad sales cycle, etc. Also, how can a company give bonuses or raises to employees when all employees are already being paid what the value they are generating for the company is? You can play with how short of the breakeven point (or marginal benefit as you call it) the company pays at, but the closer you are, the less breathing room there is for the company. Secondly, the salary of an employee isn't the entire cost to the employer. I've seen some different ranges, but a random Boston Business Journal article [0] cited the total cost as 2.7x base salary. A CNN Money article cites 1.18x to 1.26x [1]. It's obviously really different on a case-by-case basis, but whatever that multiplier is has to be taken into account. Lastly, for many companies, engineers are worth far more than 150% of their salary as value to the company, on average [2]. Apple makes 1.87 million per employee, Microsoft at 732k, IBM at 244k. These are obviously huge tech giants, but they are employing quite a lot of the highly skilled employees that you think are being underpaid. I'm not interpreting your comment to mean that your idea should be adopted for everybody in every situation, but certainly in a lot of (most?) places it can't work. Many tech workers are not paid what their true value to their organizations are, but I'm not sure that's a problem in of itself. [0]: http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-... [1]: http://money.cnn.com/2013/02/28/smallbusiness/salary-benefit... [2]: http://www.businessinsider.com/see-how-much-tech-giants-like... |
> Also, how can a company give bonuses or raises to employees when all employees are already being paid what the value they are generating for the company is?
is a terrible argument. In the event that my boss determines that I deserve a bonus, I consider that an adjustment for mis-estimating my value when determining my original salary. If you pay me enough that you can't afford to pay out a bonus, then I don't need a bonus.
If you plan to pay out bonuses, given that the practical value of future money is less than current money, I prefer to simply have that bonus money added to my base salary from the beginning.
I realize that for many people there is a psychological factor involved; getting a bonus feels good, in a way that getting the same amount of money spread out throughout the year does not, and there is some value in that. But the ability to choose one payment option over the other should be open to a potential employee during negotiations. You should be able to offer the option of a higher salary in exchange for no possibility of bonuses.