---
title: "Why Companies Prefer to Hire New Staff at Higher Salaries Rather Than Give Raises to Existing Employees?"
description: "Many employees wonder why companies would rather pay higher salaries to attract new hires while letting long-serving staff leave than increase their wages. This article, based on insights from senior HR professionals, explains the reasons, including fear of triggering widespread pay raises, higher expectations for unknown talent, the ease of hiring new people versus adjusting salary rules, the replaceability of existing employees, and the catfish effect in the workplace."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2017-02-20"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/Pk3ExgO4eHIisar0e-BHLQ"
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# Why Companies Prefer to Hire New Staff at Higher Salaries Rather Than Give Raises to Existing Employees?

> Many employees wonder why companies would rather pay higher salaries to attract new hires while letting long-serving staff leave than increase their wages. This article, based on insights from senior HR professionals, explains the reasons, including fear of triggering widespread pay raises, higher expectations for unknown talent, the ease of hiring new people versus adjusting salary rules, the replaceability of existing employees, and the catfish effect in the workplace.

**Click the image for details**
Why do many companies prefer to pay higher salaries to recruit new people, watch their long-serving employees leave, and still not raise the wages of existing staff?
This is a common sentiment among veteran employees, but no one has ever explained in detail why. In response to this issue, we have compiled the most comprehensive answers with insights from senior HR professionals. Here they are one by one:
**Reason 1: Fear of triggering widespread pay raises for existing employees**
Because once a raise is given to an existing employee, it could trigger a large-scale demand for raises among other veteran employees, whereas new hires do not have this problem.
Suppose you give an employee a raise of more than 20%, but their position and workload remain unchanged. Then you have to consider the following three aspects:
1) What would peers at the same salary level think?
2) What would peers with similar abilities think?
3) What would people from other departments think?
If an employee's threat of "I'll quit if I don't get a raise" scares the boss, how can the boss lead the team in the future?
Unless it's about introducing new management concepts, this is a matter of balance, pros and cons, or a game theory issue. Hiring new employees has a smaller negative impact on the company; if veteran employees compete fiercely and there are limited slots, it may cause unfairness and affect company stability. So the boss has to resort to hiring new people.
Additionally, it could be a way to force veteran employees to resign, or because the management cost of veteran employees is high. If you raise the salary of one veteran employee, you might have to raise the salaries of a group of similar employees. In fact, the boss is the most astute HR manager.
**Reason 2: Higher expectations for unknown talent**
From the employer's perspective, people tend to have slightly higher expectations for unknown things. For example, a newcomer's ability might range from 80 to 120, and employers generally tend to evaluate them around 110. Plus, when submitting resumes and during interviews, candidates often package themselves, so newcomers often receive higher evaluations.
For employers, the knowledge and skills of veteran employees are no secret to the company, but the "secret skills" that newcomers possess are what employers covet.
However, things are relative. It turns out that employers' tolerance for newcomers is much lower than for veterans. Since expectations and pay are higher, employers tend to see newcomers as "saviors" who can solve all problems. Once they fail to meet expectations, disappointment is inevitable, and departure is also inevitable.
For veterans, although employers might think "no matter how hard you try, this is all you can do," they are much more likely to give a second chance when goals are not met.
...
On the flip side, for employees, every employee has two lines in their mind. The first is lower: the line at which you stay with the current company. The second is higher: the line at which you are willing to take risks and move. This is what Newton called inertia. Given that, the salary needed to keep a veteran employee is naturally lower than the cost of poaching another "veteran employee" from their previous employer.
The difference between a good employer and a bad one is that the former balances these relationships to satisfy most people, while the latter offends everyone, like "the ones who should come didn't, and the ones who shouldn't leave did."
**Reason 3: Hiring a new person is easier than adjusting salary rules**
Some companies have restrictions in their compensation policies, and changing them can be very troublesome. In such cases, hiring a new person might be easier than adjusting the salary rules. For individuals who are particularly important in certain aspects, special communication and coordination might be done, but for other employees, it may require long-term planning.
Additionally, companies may prefer to absorb "fresh blood." The old blood, although capable of doing the work, is also "metabolized" out, and this part of the "old blood" is somewhat less irreplaceable, so the inflow of "fresh blood" might be more beneficial for the enterprise.
**Reason 4: Veteran employees are replaceable**
This brings us back to the irreplaceability of veteran employees. The reason a company is willing to pay more to hire new people is that veteran employees are replaceable, and the company doesn't care whether you stay or leave. Once a veteran employee becomes irreplaceable, the company will consider their role and thus consider a pay raise.
**Reason 5: The catfish effect in the workplace**
Why do many companies prefer to let veteran employees leave without a raise but pay high salaries to new employees? This is the catfish effect in the workplace. Some senior leaders believe that in a company, veteran employees are like sardines: loyal but gradually becoming complacent and losing their fighting spirit. At this time, they need the stimulation of catfish, i.e., new employees, to ignite the creativity and competitiveness of veteran employees. So some companies think new employees are more driven and are willing to try absorbing external "fresh blood."
If you have been with the company for many years but your salary has never increased, and after multiple requests, leadership still refuses to give you a raise, it is likely that your work value does not meet the boss's expectations, or the company's overall compensation is low. If it's the former, you should first strive to improve your abilities and prove your value with excellent work performance. If it's the latter, it's advisable to resign and switch companies.
For company HR, as long as the salary system is set up scientifically and reasonably, there is no need to fear that giving a raise to one employee will trigger a large-scale demand for raises among veteran employees. Moreover, among veteran employees in every company, there are "old oxen" (hard workers), "old slickers" (slackers), "old incompetents," and also hidden gems.
The key lies in whether there is a model and mechanism to identify employee capabilities. If such a model and mechanism exist, and it can plan good career prospects and paths for promotion and salary increases for capable veteran employees, then the incompetent ones can leave. In this way, whether you give a raise to someone or not, at least everyone will be convinced and have nothing to say.
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