Now that compensation season has passed for the major firms and most of the belly aching has died down, we’ll present some thoughts from a friend of GC and a Big 4 senior manager who shared the following with us earlier in the summer.
Hey Caleb,
A few of us were talking today at lunch about compensation and how we like reading how much everyone bitches about what % raise they got and what they feel they should have been entitled too. An A1 thinks they deserve a $10,000 raise, and that would make them happy, c’mon give us a break?
It is easy to understand this is a prime area to feel you have been cheated in, however, we thought it might be interesting for some net dollar comparisons, post-tax effect, for those complainers who feel they were cheated with their raise %.
Interesting idea, we thought. Our muse suggested the following assumptions: 1) 40% tax rate – federal and state combined 2) 24 annual paychecks.
Our friend/source continues:
Would be interesting to see and shed a different light on a cash pay basis what the real difference is in pay for those who think they got cheated from a 8% raise and only got 6% or something, does the $35 per paycheck really require a personal vendetta or hours of frustrated Facebook status updates? Probably not.
My guess is that on an after-tax, per paycheck basis, some of these raises are equivalent to cutting out the morning Starbucks run, or latest iTunes download.
So we decided to dust off the Excel skills and crunch a few numbers to see if our Senior Manager friend was onto something.
We took a humdrum salary of $70k and applied the 8%, 6% comparison and tabled it:
| Salary | $70,000 | $70,000 | |
|---|---|---|---|
| % Raise | 8% | 6% | |
| $ Raise (Annual) | $5,600 | $4,200 | |
| Taxes withheld | 40% | 40% | |
| Net Raise | $3,360 | $2,520 | |
| 24 | 24 | ||
| Net $/paycheck | $140 | $105 |
BFD you say? You got a 6% raise while some clown who couldn’t audit their way out of a paper bag got 14%? Fine, we’ll take a look at that too:
| Salary | $70,000 | $70,000 |
|---|---|---|
| % Raise | 14% | 6% |
| $ Raise (Annual) | $9,800 | $4,200 |
| Taxes withheld | 40% | 40% |
| Net Raise | $5,880 | $2,520 |
| 24 | 24 | |
| Net $/paycheck | $245 | $105 |
So let’s say you’re the average shmo with the 6% raise and your friend/sworn enemy is getting the 14%. Are you really spitfire pissed that you’re missing out on $280 a month? We’re not talking life-changing sums here. If you’re consistently average over your career, maybe this will add up but hopefully your better sense will grab ahold and you’ll either A) step up your game B) move on with your life C) eliminate the competition (not condoning violence here, just pointing out that it’s a variable in the equation and maybe that it’s an option).
Rebuttal? Agree? Let it rip.
