Deciphering corporate pay: Make more money

Do you want to make more money? Oh yeah – who doesn’t!

Do you have a clear plan for doing it?

You can make good money while working in a corporate role, but you need to understand how corporations pay people. This might seem boring at first, but knowledge is power.

Use these five facts to help you plan your career, make job decisions and negotiate for future opportunities.

Applying these five facts about corporate pay to your situation

These five facts assume we are talking about an exempt (salaried) position inside a large corporation in the United States. These facts differ for other types of organizations. For example, government jobs are tightly regulated, and their salary information is publicly available. Small companies often decide compensation without many guidelines and might include equity sharing and other incentives.

Even within large US-based corporations, these facts will differ and specific cases will vary. Knowledge and questions can help you uncover the secrets of compensation at your company!

A cheat sheet for your corporate pay: 5 Key facts

Fact 1: Different jobs pay differently

Different jobs pay differently – I know, this sounds like common sense. But I have talked to many people over the years that don’t understand this basic fact. College students sometimes don’t understand that their choice of major will impact their future paychecks. Employees at big companies sometimes don’t understand why certain jobs make more money than others. Let’s cover some basics:

Jobs in different functions pay different amounts. For example, a database manager in the Information Technology (IT) department is probably going to make more money than a Human Resources Manager or a Marketing Manager.

Jobs within a function pay different amounts. Consider Information Technology (IT). Within that function, a Cyber-security Manager will make more money than a Database Manager who will make more money than the Technical Writing Manager.

Money making jobs generally pay more than support roles. Corporations highly value their money-making employees, because they positively boost the bottom-line performance of the company. In some corporations, the people who make money are the Salespeople (who often get paid on commission). In other corporations, the money makers are programmers or consultants. The money makers get paid more because they bring more quantifiable value. Support functions like Finance, HR, and Marketing cost the company money instead of bringing in money, so they provide less bottom-line value.

Jobs pay more as you move up the ladder. A senior analyst will make more money than a junior analyst. The biggest jump in pay usually comes when you start managing other people. Leaders of people receive higher pay due to the complexity of their roles.

Fact 2: Base pay is just the start

You might have heard about executives getting rich through corporate jobs. Recent information shows that CEOs make an average of $17.2 million dollars a year – which is about $278 per every $1 an average worker makes. Click here to learn more from this article by Kate Gibson titled “CEOs rake in 940% more than 40 years ago, while average workers earn 12% more” from CBSnews.com.

CEOs do make enormous salaries, but the $17.2 million is not all base salary. Many executives actually make most of their money through bonuses and long-term incentives (LTIs).

Bonuses and LTIs can be far more lucrative than base salary. Many corporate roles qualify for these additional types of pay.

Bonuses

Bonuses are generally annual monetary awards tied to some type of metric like top line sales or operating income. If the company hits the metric, bonus-eligible people get a payout. The payout likely goes up or down depending on whether the company met, beat or slightly missed the metric.

The bonus is usually a percentage of salary, so people who have higher salaries get more. And higher-level jobs usually have a higher percentage target to start out.

For example, lower level roles might get 5-10% of your salary. Mid-level roles often receive 25-50% of their salary. Senior executives might get 75-150% of their salary. Within the same company, a junior employee earning $50,000 per year might get a $2500 bonus (5%). A senior executive earning $400,000 per year might get a $400,000 bonus (100%).

As you move up the ladder, your base salary increases and so does your bonus percentage.

Long-term Incentives (LTIs)

Long-term incentives (LTIs) are a type of compensation intended to motivate executives to stay with the company for a long time. They include programs like stock options, stock grants, and retirement matching. Corporations often start granting LTIs for mid-level roles such as Directors.

Similar to bonuses, LTIs are often awarded based on a percentage of salary. A Director might receive 25% of salary in stock every year, and a senior executive might receive 100% of salary in stock every year.

One catch with LTIs is that they usually vest over multiple years. Vesting means that the employee does not get the stock immediately – they receive parts of it over the next few years. Waiting for incentives to vest is a powerful motivation for staying with a company.

Fact 3: Your job sits in a band that controls how much you are paid

Every job in a corporation sits in a salary band that has a minimum, midpoint and maximum salary. Different for every role, the Compensation team sets salary bands based on the market cost of the job and the company’s compensation philosophy. Some companies prefer to pay most people at the mid-point. Others pay higher to get great talent.

You can become ineligible for raises. If you hit the top of the salary band for your job, you can max out and no longer be eligible for raises.  This frequently happens to people who stay in the same job at the same company for a long time.

Internal promotions can make you underpaid. If you stay at the same company and have a series of promotions over the years, you might end up in the low end of the range for your current job. Companies often offer less money to internal promotions than they would to external hires for the same role.

Rules exist that prevent the company from raising one person’s salary more than a certain amount with a promotion – regardless of the job they are being moved into. Over time, this restricts the employee’s salary and they end up in the low end of the range. This is why it is important to know the salary bands for jobs at your company. That knowledge gives you the power to negotiate and get the money you deserve.

Negotiate when hired. You should negotiate your salary when you enter a company. As an external hire, you have an opportunity to negotiate and get a solid salary for your role. Later, as an internal, you face other rules and restrictions (see above) that limit your ability to negotiate.

Learn your salary range. Many companies do not disclose pay bands to employees. They keep the information quiet, so they don’t have to answer questions about why employees are paid differently. Sometimes you can find the information through methods like these:

• Check your company intranet to see if salary bands are published. They might be listed in an HR section or a Compensation section.
• Look at recruiting ads for your role. Sometimes they indicate ranges or target compensation.
• Ask. If you can’t find salary ranges, ask your boss or ask your HR Manager. Sometimes ranges are not published, but they are available upon request.

Fact 4: The company restricts salary decisions

Over the years, I’ve talked to many employees who expect frequent raises or want salaries to match jobs in other places like Silicon Valley. They get frustrated and feel that their boss is not paying for their value.

In reality, corporations restrict how much individual leaders can change pay.

Companies control salary increases. They restrict salaries to bands and set annual budgets for increases. Managers generally cannot give off-cycle raises. Compensation is reviewed and changed once a year at performance review time.

2-3% a year is a standard corporate raise, so you won’t see big jumps by staying in place. You will increase your salary faster by getting promotions or moving to other companies.

Fact 5: Your total compensation includes elements beyond base pay

If you want to make more money, look beyond your paycheck. Your company probably talks about total compensation or total rewards, because it offers other benefits. Some of these extra benefits provide real money.

If your company provides an annual letter or online site where you can see your total compensation, spend some time reviewing it to understand your benefits.

Some other compensation elements:

• Cost of health insurance. You might pay several hundred dollars a month for health insurance. Your company is probably paying two to three times that amount for your health coverage every month.
• 401K match. Many companies match your contributions to your 401K or other retirement plan. That is free money. You should contribute enough to get the full match. You know you need to save for retirement. Start now. This guide can help.
• Stock purchase. For some public companies, you can purchase company stock for a 10-15% discount using a regular payroll deduction. Sign up and it happens automatically. You can build a stock portfolio over time with very little effort.
• Tuition reimbursement. If you are finishing a degree, you can often get several thousands of dollars per year to help cover the cost of tuition. Some companies are even starting to help supplement the payment of student loans.
• Learning programs. Large companies offer learning and development programs. This includes in-person training and online learning. Spend some time to discover what is offered. These programs are often under-utilized by employees, but they can boost your career. For instance, many online corporate universities offer training and related books needed to get key certifications.

In my last company, employees could take all of the prep work needed to get a full PMI (Project Management Institute) certification. Instead of paying about $5000 for an external program, they could prep for the certification for free. Free! The certification benefits the employee and stays with him or her. That time investment could boost that employee’s career for years.

Hopefully this article provided some new information about corporate pay and compensation. Take your new knowledge and figure out how to use it to your benefit. See below for some questions to ask yourself and for some additional resources.

Questions to ask about corporate pay:

• Do I want to make more money? If yes, will my current career plan get me to the salary I want?
• What are the money-making jobs in your company? Are you in a money-making job or a cost center?
• What is the pay band for my role? Where does my salary fall in the band?
• Am I eligible for an annual bonus? If not, what level in the company becomes eligible?
• Am I eligible for long term incentives? If not, what level in the company becomes eligible?
• What other programs (like 401K matches and stock purchase plans) are available to me that can help my financial situation?
• What can I do to provide value to the company?
• What can I do to move into a role at a higher level?

Additional resources

In this post, I provided five basic facts about corporate compensation. For more information about topics like setting salary bands and negotiating salary, check out these links:

Find a basic overview of executive compensation at Wikipedia.org. Click here.

To learn more about salary bands (and related pay grades), check out this article called “How Does a Pay Grade Work?” at The Balance Careers.

For information about how individual jobs get priced through market comparisons, The Balance Careers offers this article called “How is Compensation Determined for an Employee”, and it includes a nifty Infographic.  

Career Contessa provides this article regarding salary negotiations called “Everything You Need to Know about Salary, Negotiation and Budgeting”.

Use this easy guide to set up your 401K and start retirements savings: “How to set up your 401(k) in three easy steps” from Acorns.com.