High Performers Question Company’s Vow To Give Employees A 10% Raise Every Year Just For Being There
Roberta SA. | Canva Creative StudioGetting raises at work is something many employees admit would boost their productivity levels. Because of that, a Swedish company decided to promise employees a guaranteed raise every single year just for staying with the company.
In a LinkedIn post, co-founder Anton Osika of Lovable, an AI software company based in Stockholm with 200 employees worldwide, explained that employees would receive a 10% yearly raise on their work anniversary, but their plans drew some criticism from high-performing employees.
High performers questioned Lovable's decision to give employees a 10% raise every year just for being there.
"We just introduced a program at Lovable that gives each person in the team a 10% raise on their anniversary. Because people get more valuable the longer they stay, and they shouldn't have to worry about getting a raise or not," Osika wrote in his LinkedIn post.
The company made it clear that they're dedicated to retaining their employees rather than having a high turnover rate. By giving their employees a 10% raise, they're hoping that they'll recognize it as the reward it is and want to put that into the work they provide for the company. Despite the company's good intentions, many high-performing employees questioned whether it was what employees needed to boost morale.
"Oftentimes with programs like these, it can create incentive issues for your top-performing team members. For example, if I am a top performer contributing well above 10% value to the company but am getting the same compensation adjustment every year as the low and mid tier performers, it might make me throttle the value I can deliver for the company," one employee questioned.
Others wondered whether this was even a sustainable approach. This method, which is called peanut butter raises, often raises concerns about whether it's even fair in the first place.
Experts insisted that 'peanut butter raises' can sometimes cause more problems than good.
"Good management involves setting tough targets, evaluating employees against this and rewarding those that make their targets," Nick Bloom, an economist, told The New York Times. "This means some folks will get paid and others won’t."
For the most part, companies turn to peanut butter raises when they can't figure out who the actual top performers are, and managers who are trying to take the path of least resistance, Bloom continued. Generally, better management can identify its top performers and pay them accordingly.
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Kevin J. Murphy, an expert on compensation at the University of Southern California’s business school, told the NYT that peanut butter raises "send exactly the wrong signals," telling top performers that their employers "just don’t care that much." Just like any other initiative introduced in a work environment, like unlimited PTO and four-day work weeks, peanut butter raises need to be implemented carefully and thoughtfully.
Still, the idea that employees should receive raises is not necessarily a bad one. In fact, most employees feel that regular raises should be more common, especially as the cost of living continues to rise. But, there should be a balance between only rewarding perceived loyalty and dedicated performance that means something.
Nia Tipton is a staff writer with a bachelor's degree in creative writing and journalism who covers news and lifestyle topics that focus on psychology, relationships, and the human experience.
