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Are you paying a ‘loyalty tax’ at work? Here’s what it’s costing you

Are you paying a ‘loyalty tax’ at work? Here’s what it’s costing you

Job mobility is rising in Australia, with employees spending less time working the same job. The rate of people seeking new opportunities peaked in February 2022, with 9.5 per cent of employees changing jobs or businesses – the highest figure in a decade.

Women were more likely to change jobs during this period, with 10 per cent of women seeking a new role compared to 7.5 per cent of men.

This trend spanned almost all industries, with the societal and psychological aftermath of the pandemic considered a leading contributor.

Another potential cause is a loyalty tax, where employers provide fewer benefits and opportunities to long-serving employees than new hires.

Loyalty tax can take many forms, including lower salaries, fewer promotions, and reduced access to training and development programs.

How does a loyalty tax impact workers and businesses?

Companies may consciously or subconsciously impose a loyalty tax on dedicated and passionate staff because they assume they are less likely to leave and don’t need additional incentives to stay.

Furthermore, businesses with limited funds may struggle to raise salaries for existing staff to match starting offers for new talent.

But companies risk losing motivated and experienced workers if dedicated staff are not incentivised to stay.

Loyal employees can only endure stagnant reimbursement and sparse development opportunities for so long before they, too, look elsewhere.

If you’re a long-standing employee who can’t recall your last pay rise or promotion, here are some ways the loyalty taxing might impact you.

Financial loss from wage stagnation

A survey from recruitment company Hays found that almost two-thirds of employees reported benefiting financially from changing jobs.

Due to a skills shortage in 2022, new hires often received higher salary offers than usual, and more employers offered starting bonuses to attract and secure desired candidates.

This is excellent news for those looking to change jobs or companies. But the flip side is that those who remain in their current role could be financially disadvantaged due to stagnant wages, while their newer colleagues enjoy better salaries or benefits.

Missed progression opportunities

Loyalty tax can create a phenomenon where employees who have been with a company for a long time are overlooked for progression opportunities because they are doing their current role well.

They may miss out on internal promotions, secondments, or professional development opportunities like training or leadership roles because the company prefers them where they are.

It’s almost understandable how this happens. In times of turbulence and change, including staff turnover, employers may find comfort and rely upon a loyal employee’s consistent output. Therefore, they avoid investing time and resources in training them for a new role.

However, it’s also a recipe for frustrated employees who have demonstrated their value and commitment to the company.

It’s a tough pill to swallow that being ‘too good’ at your current job earns you inertia and monotony as a reward for your efforts.

If nothing in this dynamic changes, dedicated and hardworking team members can find themselves stuck in a hamster wheel of mundane and unrewarding careers.

Job description scope creep

If you consistently deliver high-quality work, managers may rely on you for additional tasks outside your job description.

Initially, knowing that your employer trusts and depends on you often feels benign or enjoyable.

But when it continues without corresponding salary or benefit increases, it can lead to dissatisfaction, additional stress, and a heightened risk of burnout.

You also risk losing time and energy for the parts of your role that matter most to you.

Are you paying a ‘loyalty tax’ at work? Here’s what it’s costing you

Doing all the ‘office housework’

Loyal employees may end up doing more than their fair share of office housework, including administrative tasks like taking notes, organising office events, or cleaning up after meetings.

People working in small businesses or rapidly growing start-ups may be particularly at risk of taking on these responsibilities without additional recognition or compensation.

While these tasks are necessary for the smooth running of the office, they can add to an already heavy workload and distract you from things that are more meaningful and beneficial for your career trajectory.

How to avoid the loyalty tax

Negotiating your working conditions to avoid paying a loyalty tax can be nerve-wracking. A strategic approach can help you feel more confident in advocating for yourself.

Here are some ways to ensure you receive the recognition and rewards you deserve for your dedication to your job.

1. Ask for a pay rise

Simply requesting a pay rise seems obvious, but it’s often the most overlooked way to get what you want.

Many people, particularly women, never ask for a pay rise and prefer to seek a higher-paying job elsewhere.

Requesting a pay rise comes with the risk of being rejected, which could put the fact that you are dissatisfied with your remuneration on your employer’s radar.

However, the cost of advertising and recruiting new staff is often sizeable. If you are a valued employee, in many cases, the company will do what it can to meet your demands or negotiate a mutually agreeable solution.

2. Review your salary regularly

Request a regular meeting with your boss to discuss your performance, including opportunities for two-way feedback.

Use this time to speak up about your achievements and the value you bring to the organisation.

If comfortable doing so, you can explicitly request that these meetings review your remuneration and other working conditions so that there is a dedicated time to raise concerns about your salary or non-monetary rewards.

3. Know the salary benchmarks in your industry

If you’ve been in the same role for several years, you may not realise how much your industry salary averages have increased since you started.

Reviewing your wages against salary guide tools or industry research is a great way to compare your situation with others in your field.

It can also give you the confidence and reassurance to speak up and request a pay rise.

4. Proactively update your skills and knowledge

If your organisation is hiring new talent with more recent education, training, or experience, seek ways to stay ahead of the curve.

Research professional development opportunities that give you an advantage and ask your organisation for support.

Some companies lack the means to fund formal training or education programs fully, but most will be able to offer some assistance, such as paid study leave or mentorship.

Explain to your boss how your development goals will empower you to make more significant long-term contributions and voice your ambitions about progressing within the company.

We all know that the squeaky wheel often gets the oil, so don’t assume quietly working hard will get your employer to take notice and start offering you the opportunities you desire.

5. Create strong working relationships

Build relationships with colleagues, mentors, and leaders across the organisation to create visibility for your work and expand your growth opportunities.

Sometimes, companies default to external recruitment rather than internal promotion. Building relationships within your company can lead to many unexpected opportunities to share your ambitions, hidden talents, skills, and interests with people who can help you get your foot in the door.

How we work and advance in our careers is evolving more quickly than ever. Knowing your worth and being proactive in ensuring your remuneration and working conditions align with your goals has never been more critical.

With the current labour shortage, now is the perfect time to advocate for yourself and to reap the rewards of being a loyal and dedicated worker.

Emma Lennon

Emma Lennon

Emma Lennon is a passionate writer, editor and community development professional. With over ten years’ experience in the disability, health and advocacy sectors, Emma is dedicated to creating work that highlights important social issues.