Rewards That Aren’t Raises

By AustinMom

When we first start out in our careers, it is often all about the money as parents withdraw their financial support and our paychecks must cover all of our basic needs plus our desires. However, when pay exceeds those basic needs, do we value that raise or other rewards, such as more time off?

The article below opines that workers who are taking other rewards in lieu of raises may be hurting themselves in the long run. In my opinion, the article mixes some non-monetary and monetary benefits in the same category. For example, paid health insurance – assuming you will carry health insurance, shifting the cost from the employee (automatic payroll withdrawal) to employer paid does free up cash for the employee. Others, such as time off or access to a gym membership you won’t use (due to location or desire) do not impact your paycheck.

Has your company shifted to other rewards in lieu of raises? How has it affected you? How do you see it affecting the next generation of workers (including your kids)?

Companies have found something to give their workers instead of raises


127 thoughts on “Rewards That Aren’t Raises

  1. My company removed teleworking as an option, which was hands down the most valuable perk to me. So where before I was not particularly salary-sensitive, now I am. I do purchase additional days off, but may or may not use them in any given year. I get paid back if I don’t use them. There really are no other non-monetary benefits offered that I value. If I could go back to having a private office so that colleagues would not feel free to drop by and chat about their colon problems in detail, the infection they think they got from the men’s urinal, or that time of the month, that would be just a little slice of heaven, but that’s even less likely to happen than a return to teleworking.

  2. When Korn Ferry reached a major milestone this summer of a record $1 billion in annual sales, the company’s chief executive wanted to thank the employees. But instead of giving everyone more money, Burnison opted to make them work less: The company will be closed the Friday before Labor Day and the week between Christmas and New Year’s.

    I’d be curious to know if this results in any bottom line impact to a firm like Korn Ferry. I would bet that it doesn’t. If you gave everyone an extra 6 days of PTO that would have a bigger impact as you’d have people out at random times. But, if you have a coordinated period when everyone is off, especially at that time of the year, I bet the impact is fairly negligible.

  3. I agree Rhett. It is also likely that people will continue to work on their projects during their time off, so the company gets to look good, while not really giving anything up.

  4. Back in the day, definitely pre-crisis, when law firms were focused on retaining mid- to senior-level associates, we associates were asked what other perks we would want – 401k matching, gym memberships, etc. The number one answer: control over time, especially personal time. Nothing changed. I did swing a nice retention bonus. As soon as it hit my account I gave notice and left Biglaw.

  5. DH worked at a company that sent us a wine basket on our anniversary and other medium size gifts to him throughout the year – Columbia jacket for Christmas, high-end luggage for work anniversary. It probably cost them < 1k, but, oh my, did he feel loyalty to them. He traveled full time and was only in the office once or twice a year, so I think it was a way of building community. It didn't hurt that they would change his travel without question whenever he requested (depart from a different city, stay an extra night instead of taking the late flight home). Also, we were in a phase where the gifts were not just something we could easily go out and buy.

    On the other hand, when he recently moved to Giant Tech Company, there was a parade of sweatshirts, hats and shirts – as well as doc on site, free cafeteria, and lots of yoga. None of it felt very special. He now works for Very Big Computers and their philosophy seems to be to pay lots of money and not much else (our health insurance went from almost nothing to $700 month!).

    I think these things matter when they represent something that is otherwise unobtainable. Early in his career, DH was salaried and had a work crisis that he had to spend a Saturday in the office managing. This was far outside of the expectations of his meager pay. Two other coworkers, who were hourly came in and were paid double time to work along side him. The company realized it was a big deal for him to be there – and rewarded him with a generic thank you letter and a logo towel.

  6. i have worked at a place that does this and I agree with your assessment Rhett – it is not disruptive when everyone is off. The best part is you don’t come back to hundreds of emails and spend your first week back snowed under and trying to catch up.

  7. DH’s law firm just raised associate base salaries by 10% to 20% (bigger increases for the younger people), which people were of course excited about at first. But then it came to light that the older associates were basically making the same base as someone with 4 or 5 years less experience. It makes sense from a business standpoint, as the firm basically bills them out at the same rate, so they are all making the firm the same amount of money, but did not go over well. The firm said, but wait, older associates have the opportunity to earn a significant bonus payment on top of the base which the younger associates don’t. So it’s basically eat what you kill which would be fine if that was applied across the board. The younger associates are left saying but if I have a knock out year I can’t even earn an extra payment (unless it’s way off the charts) and the older associates are only invited to earn an extra payment at year’s end if they’re on a good team that makes money. So the base pay generosity is not as appreciated as I think the partners were expecting.

  8. I agree – but I also think that it is a HUGE perk to the employee, so being closed for more days is a win-win. One of the reasons that I feel very tied to my job even though I could make more $$ elsewhere is that we have a very generous holiday schedule and generous time off. It is invaluable to me as a working parent, and it would be extremely hard to give up my 15 paid holidays where the company is closed and 25 paid vacation days to go somewhere that have a more standard schedule. It is absolutely worth it to me to not have to worry so much about covering school breaks, vacations, days off to just relax, etc.

  9. “but did not go over well…So the base pay generosity is not as appreciated as I think the partners were expecting.”

    It happens:

    Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises.

    “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.

    A couple of days after the announcement, she decided to talk to Mr. Price.

    “He treated me as if I was being selfish and only thinking about myself,” she said. “That really hurt me. I was talking about not only me, but about everyone in my position.”

    Already approaching burnout from the relentless pace, she decided to quit.

    The new pay scale also helped push Grant Moran, 29, Gravity’s web developer, to leave. “I had a lot of mixed emotions,” he said. His own salary was bumped up to $50,000 from $41,000 (the first stage of the raise), but the policy was nevertheless disconcerting. “Now the people who were just clocking in and out were making the same as me,” he complained. “It shackles high performers to less motivated team members.”

  10. “It has changed over the last 20 to 30 years as companies try to compensate workers in a way that matches their lifestyle.”

    Yeah, no. It has changed as companies try to decrease fixed expenses. A raise one year is part of the next year’s base pay, and through the magical power of compounding causes salaries to increase dramatically over a 20 or 30-year career. A bonus does not go into base salary and therefore, even if earned every year, does not benefit from compounding. And a bonus tied to corporate performance allows the company to pay even less when times are tight and more when it can afford to do so.

  11. Milo – I kind of agree with the less motivating aspect of it all.

    One of DH’s friends (who works crazy amounts of hours each year, like 2400/2500) was told he was not eligible for the extra “matrix payment” because his team wasn’t that profitable. His team takes a good amount of contingency cases so he’s spent the last year billing hundreds of thousands of dollars that probably won’t get paid. DH’s friend’s argument (which seems reasonable to me) was why wouldn’t you give me the chance to earn it? If he does end up earning enough to get the payment then he gets it and if he doesn’t then no harm done. It’s a real disincentive. And DH can get his payment probably billing around 1800 hours, so why would he really work more than that (the firm doesn’t really give bonuses on top of that payment unless you bill like 2200/2300 hours)? We just can’t get our heads around the whole thing.

  12. I agree with LfB. Also, some companies have made the choice to decrease the percentile at which they pay in the industry, so a company that used to “pay among the leaders” may choose to “pay market level salaries.” These choices are tied to profitability, but that’s usually tied to demand for your product. (If you are one of few companies that make Product X and the political party in power wants to buy lots of X, you will be more profitable than if they are voted out of office and Product X is no longer needed/wanted as much.) In most engineering areas, product development times are longer than demand fluctuations.

    I’ve been thinking about how the economy compares for people under 40 vs. over 40 and haven’t found an article or post to describe my thoughts, but this one does as well as anything. Traditional financial advice assumes you’ll get a raise (and so you should save part of it), etc. It assumes a positive return on savings after inflation. Neither of these is necessarily true anymore. How should financial planning change, if at all? Some of long-term financial health seems to be related to luck. One set of my great-grandparents lost their farm during the Depression and never recovered financially. The other set got a payment for having a pipeline go through their farm, which allowed them to pay their property taxes, and they ended up doing well.

    To me, what this article tells me is that it’s getting harder to increase your real income over time for a variety of reasons.

  13. A few times, due mainly to the unique rules for paying government employees, I could not be given a raise, but could be given a bonus. Even though the annual net was the same amount, it did not raise my base pay, which as LfB points out does not help your compounding. I was not as thrilled, but preferred the bonus to nothing.

    My experience is that parents raising kids who are school-age are more in favor of time off. In part, because of the amount of days school is out that require you to take time off. I have pointed out to our school more than once that if each parent has 2 weeks vacation, they would use it all up on school “holidays” that are not work holidays. Plus, most are one or two day time periods that don’t really allow for a real vacation – especially if the other parent is working that day.

    My current employer had a survey of what non-monetary benefits people would prefer. The intro to the survey clearly pointed out that management realized raises were preferred, but when they were not available, what was next. The top items were more time off, better parking (even if just for a month or a quarter), granting or increasing the amount of telework time.

  14. I think what you want is more related to stage of life/whether you are the breadwinner or the default parent. We got 4 or 5% raises the past two years, but then health benefits were raised about the same amount. Do I really care either way when I stay at this job for the better benefits/flexible schedule/holiday time off? Whereas DH’s job is what pays the bills and he has a wife that covers most of the kid stuff during the work week, so his priority would always be to make the most money.

  15. @WCE — I think you are dead-bang on. My maternal grandpa had two brothers; they stayed on the farm, he left. His dad wrote a will giving the other two the farm and giving him what was, at the time, an equivalent amount of cash. 30 years later when the dad died, the farm was worth a bundle, my grandpa got $5K, and the brothers basically never spoke again. But, you know, if that $5K had been in the right stock, and the farmland in a different area, the situations could have been reversed.

    I think the appeal of the whole man-in-the-grey-flannel-suit thing was the promise that you could escape that kind of economic insecurity of being wiped out because of not enough rain, or too much rain, or whatever. It was this implied contract: you do your job well, and you will get raises that exceed the inflation rate, and you and your family will be secure. I don’t know if that was ever reality — or if it was, it appears to have been based on some unsustainable assumptions — but we sure seem to have been moving in the other direction for the past @30-40 years. So I don’t know whether the apparent Millennial preference for these kinds of things is bad (i.e., a tax on people who are bad at math), or good (i.e., reflecting a clearer vision of the world as it currently is).

    But in any event, it requires new financial planning skills and new ways of thinking about life. Maybe it means renting instead of buying, so you can go wherever the next job is; or maybe it means you can buy earlier, because telecommuting is accepted in your field. It definitely means saving more, both so you have a cushion for the off times and because retirement is on you — but that is fundamentally harder when you see the money first and then have to choose to allocate it vs. when pension and healthcare costs were all sort of invisibly behind the scenes (yes, economically speaking, it was basically subtracted from your pay, but you weren’t aware of it — you were just offered salary net of pension/benefits — and didn’t have to make those decisions). And most of all, it requires developing the skill to see around corners, to envision where your job sector and the economy is going, to make sure you have the skills/knowledge to continue to be valuable.

  16. Some of long-term financial health seems to be related to luck.

    You sound more and more like a Sanders voter every day.

  17. Milo – I saw that when it came out, and really wanted to have a chat with Grant Moran, web developer making (we assume a market-rate) of 40,000. He was suddenly changed to 50,000 – with promises that it will be 70,000 in the next two years. He’s pissy that the people around him may be getting more than they deserve? So, the most rational thing is to quit his 50k job and go back to the market which prices him at 40k? Cutting of nose, etc., etc.

  18. What I have noticed is that middle managers are in danger. I know quite a few people who were doing well, got promoted but when they sort of distanced themselves from the daily nitty gritty they were laid off. Now, I sense that no one wants the promotion where they will have to be available, respond to emails, attend conference calls and then get laid off. So, there is stagnation where people don’t want to make so much money that they could get on the “makes too much money list – needs to be laid off list.

  19. I have not gotten a raise since I started this job. In fact, my salary was cut (during the recession) and hasn’t been increased back to the original level. WTF.

    Since my dept is expanding, I will see if we actually increase our rates to match the other depts in the firm. (Right now our rates run like 50-100/hr less than the other groups.) My boss is independently wealthy so has never needed the money, and I think that has played into how low his rate is – and mine is pegged to his, so it can’t go any higher. If that doesn’t happen I will have to think more about leaving, despite the flexibility that I have.

    The other crazy thing is that the “origination bonus” is tied to your hours, NOT to collections (as the term “origination bonus” would ordinarily imply), AND it has a really low cap. WTF?

    I can’t figure out whether the firm is paying too much money to the lateral income partners who come in as non-equity partners with deals, or whether the equity partners are keeping it all, or what, but all the people who are salaried are way underpaid compared to the rest of the firm. In one case, person A makes HALF of what person B makes (same area and experience level) – the difference being that person B was a lateral income partner.

  20. I guess the point is that I don’t care *at all* about perks except for the health insurance (and IIRC that is 1200/month pretax getting taken out of my paycheck), just give me more CASH.

  21. Phone post so please excuse typos

    My employer has paid raises 2-2.5% every year I’ve been there (since 2007) except for $0 in 2009. Then last year and this I also got small bonuses on top. So while not great pay advancement better than many.
    Biggest change is on the healthcare front. While I was an early adopter of the high deductible hsa approach this yr my employer started really pushing (via incentive like an initial $400 funding deposit) people to go that way. We’re saving a ton of benefits expense as people use healthcare less for very routine stuff that used to have say a $20 copay because now an office visit say $100 until the deductible, $3000 in my case, is met.
    Works great for us because we actually contribute to/fund the hsa but those who are just pocketing the difference between what they used to pay for employee share of premium like $400/mo and what they now have to pay (like $30) find they don’t have $100 to pay for the office visit.

  22. LfB / WCE – I think a takeaway (buzzword?) along the lines of financial conservatism and prudence is that you should always budget and spend keeping in mind how much you could realistically earn if your current gig dries up. The big pressure that LfB cites to always be looking around the corner applies more if you’re in a high-earning and volatile crowd, and you’re dependent on that income premium. But regardless of your earnings, if you know that you could basically sustain your lifestyle on $50k or $60k annually, you can sleep better at night. For all this pessimism, the unemployment rate is really low, especially for college grads.

    Maybe the reason I’m not nostalgic for the grey flannel suit (and a fedora) days is because none of my relatives, or DW’s relatives, were among that relatively limited socioeconomic class, yet life has gotten more and more affluent for us since the end of WWII. And for high earners, I’m not sure it’s all that realistic to expect steady income for 40 years of working LET ALONE guaranteed above-inflation annual raises. For what purpose? What additional value have you offered your employer between Year 37 and Year 38?

    Along these lines, Josh Kennon writes about the need for diversified capital, using Cecil the Lion as an example:

  23. Fred,

    Similar logic was used to justify the transition from pensions to 401ks. When people are in control things will be so much better and cheaper – everyone will be better off, win-win, etc. The reality is the experiment has been a total and complete failure for the vast majority of people. I wonder if the same will turn out to be true for the move toward HSAs. Will then end up the healthcare version of the 401k.

  24. “The reality is the experiment has been a total and complete failure for the vast majority of people.”

    Oh, come on now. It all depends on the alternative. Assuming you were among those privileged enough to have a pension through your job (and assuming that being stuck with the same employer for 30 or 40 years was of no hindrance whatsoever to your career advancement), what happens if your employer was Montgomery Ward or Kodak or Chrysler?

  25. as for HSAs, if an employee underfunds it one year, that’s probably a good motivator to make an appointment with HR and bump up the contribution the following year.

  26. I think a takeaway (buzzword?) along the lines of financial conservatism and prudence is that you should always budget and spend keeping in mind how much you could realistically earn if your current gig dries up.

    Is it in our national best interest to encourage more people to that? I’ve mentioned my friends and their new house and new baby where every nickle is spoken for. It seems like we’d be better off if people felt more secure.

  27. Rhett – I think we would be better off in the long term, because eventually, people get ahead of the curve, and they would feel more secure that way.

    Even *I* am planning to get a boat sometime, maybe next Spring.

  28. “The big pressure that LfB cites to always be looking around the corner applies more if you’re in a high-earning and volatile crowd, and you’re dependent on that income premium.”

    Eh, yeah, it definitely applies to them, but I was actually thinking more about the Uber driver — new, flexible opportunities, but low/inconsistent pay, and just as their new employer disrupted the existing highly-regulated world of taxis, someone else is around the corner to disrupt them (either through more regulation, e.g., the taxi-fication of Uber, or through another lower-cost competitor, or self-driving cars, etc. etc. etc.). It seems that even maintaining a low-wage job is more of a scramble now than it used to be — 20 years ago, your worst-case scenario was running the night shift at the 7-11 for minimum wage; now, it’s working for Starbucks with just-in-time scheduling, so your schedule changes day to day, you can’t moonlight with a second job, and you might not even get 40 hrs at the end of the day.

    So, Milo, tell me if I am reading this wrong, but my sense is that your frame of reference is sort of the standard MC job — the teacher, firefighter, policeman, etc. Your family has done well by that, and you make a valid point that it is still a viable path to a solid MC lifestyle. But from my perspective those career paths ARE the same kinds of “secure” jobs that are becoming more and more rare — they have unions, they meet a need that is not going to go away (or even disappear offshore or to another part of the country). It’s almost like the last bastion of the grey-flannel-suit-kind of security. And many of the “secure” facets of those kinds of job — e.g., pension, health insurance — are facing the same pressures from state budget constraints as companies are from their own economic pressures.

    I’d also say that the very volatile nature of irregular pay makes it even harder to save. We all know the psychological studies that talk about how people save more when it is automatic, you’re not tempted by something you never see, opt-out 401(k)s vs. op-in, etc. And yet when your pay is highly variable, it forces you to make those decisions manually with every paycheck, which increases the likelihood of something else coming up and feeling more important that week or month. Not that that’s insurmountable — it just goes back to WCE’s point of needing a different approach to financial planning.

  29. and assuming that being stuck with the same employer for 30 or 40 years was of no hindrance whatsoever to your career advancement

    Under current rules the latest you can fully vest in a pension is 7 years. Some employers set full vesting at 3 years.

  30. I think we would be better off in the long term, because eventually, people get ahead of the curve

    Not while they also at the optimum age for having children.

  31. “But from my perspective those career paths ARE the same kinds of “secure” jobs that are becoming more and more rare ”

    How are they becoming more and more rare? Government has only grown.

    Uber lets people earn some income on their own schedule while they’re taking the necessary courses to be an X-ray tech or a speech pathologist. That wasn’t as practical when you had to purchase a taxi medallion from the city.

  32. “Not while they also at the optimum age for having children.”

    I’m not following the point of this.

  33. Government has only grown.

    About 2.7 million people worked for Uncle Sam in September, not including military. According to the Department of Labor, that’s the lowest number since 1966!

  34. Milo,

    Total federal employees, including the military in 1962 was 5,543,000. In 2014 it was 4,185,000.

  35. Rhett – that’s because they work for contractors now

    Isn’t that LfB’s point? They don’t have the civil service protections, pensions, etc.

  36. Interesting to not the decline in uniformed military. In 1962 there were 2.8 million, the number climbing to a presumably Vietnam era peak of 3.5 million in 1968. Today we are at 1.4 million.

  37. “They don’t have the civil service protections, pensions, etc.”

    But they get higher pay. And it’s still pretty secure, because the overall amount of work keeps growing. The point was about security.

  38. Milo,

    And it’s still pretty secure

    But not anything like as secure as being an actual federal employee.

  39. “’But from my perspective those career paths ARE the same kinds of “secure” jobs that are becoming more and more rare ‘

    How are they becoming more and more rare? Government has only grown.”

    Not saying the gov’t jobs are becoming rarer — was saying that the non-gov’t “secure” jobs (work 40 years, get raises, get your pension) are. Gov’t jobs seem to be the last bastion of that.

    “And it’s still pretty secure, because the overall amount of work keeps growing.”

    Macro, sure. Micro, not exactly. DH’s company has had probably 8 corporate “restructurings” over the past decade, including massive layoffs in particular areas when programs were canceled or a particular sector was not performing well. And I have other friends who are also contractors who have been forced to accept involuntary changes to their working conditions, like getting rid of the part-time position one mom needs to manage her autistic daughter. There was a *lot* of pain and insecurity as a result of the budget cutbacks following the 2008 crash — we were just lucky that DH works in an area that is currently very popular.

  40. I agree with WCE and LFB. Our income fluctuates a lot, and the type of work we do is not the most secure. We have tried to account for this by saving A LOT when we have steady paychecks and minimizing our expenses.

  41. Rhett, isn’t Sanders opposed to fossil fuel consumption AND nuclear energy AND from Vermont? Exactly how are the people of Vermont going to stay warm in winter- wood stoves?

  42. From the article: “Government data shows companies’ spending….”

    See? I’m not the only one who wants data to be a singular noun!

  43. Rhett – If I ever put in a pool, I think I would have one of those, but for big, random chunks of wood, not just pellets. There are YouTube videos of kids swimming in outdoor pools in the upper-Midwest, snow all around, water heated by an outdoor wood-burning boiler.

    But WCE is right. Anyone who is serious about reducing carbon emissions needs to get on board with nuclear. Obama hasn’t really helped that industry at all, despite his supposed desire for “bold action on climate change.” Stalling Yucca Mountain development was a stupid move.

  44. I just today got official notice of a whopping 2% raise, which I already knew about because the governor announced it for all state employees a few months ago. In previous jobs, I accepted lower than average compensation in exchange for more flexibility, but for this one I accepted even less money for what I hope will be more stability, good benefits, and opportunity for growth from my current 60K (soon to be $61,200!) to 80K at the next promotion level. But losing the flexibility to which I had become accustomed PLUS taking a pay cut is not fun – I’m basically entry-level all over again. We close down for the week between Christmas & New Year’s, but we have to save up annual leave to cover the days that aren’t official holidays. Since I started work in December last year and had not earned any leave time yet, I had to have my pay docked of a couple of those days. This is where the private sector would have probably been slightly more accommodating.

  45. WCE,

    Emissions such as NOx, SOx and volatile organic compounds from pellet burning equipment are in general very low in comparison to other forms of combustion heating

  46. Rhett, pellet stoves are better than wood stoves but nowhere close to natural gas. You also have the problem of pellet costs (made from wood waste) if you have a significant number of people start using pellet stoves. It’s sort of like promoting biodiesel as an alternative transportation fuel.

    (Yes, I think the MIT family uses a pellet stove, for those who are wondering.)

  47. Yes, I think the MIT family uses a pellet stove, for those who are wondering.

    Because we’re all as obsessed with them as you are.

  48. ouch. Well, I like hearing about the MIT family. Although I’m sure I’m probably the most guilty for talking about things that interest few, if any.

  49. I like hearing about MIT AND sea stories, and the floating hot tub has now shot to the top of my Powerball list (well, maybe #2 — it’s hard to top Hummel skeet).

    “This is where the private sector would have probably been slightly more accommodating.”

    Eh, not so much. Everywhere DH has ever worked shuts down between Christmas and New Year’s. And all of those places required him to use vacation days for the non-holiday days in there.

  50. “I like hearing about MIT AND sea stories”

    Well, good. I had decided to skip this comment before, for those reasons, but the OP about non-monetary benefits made me think of when we used to pull into a port for a few days, or up to a week. So imagine you’ve been underwater in a tube with 100-some other dudes for six weeks, and you finally get a break. You’re still going to have inport duty every few days, but the kicker is that, unless you’re one of the people required to share bunks (junior enlisted), the Navy is not going to pay for a hotel room for you. The assumption is that you can simply sleep on the boat. Yeah, you CAN. Shore power amps may only be able to service one of the four air conditioning units, and it’s 115 degrees in Bahrain in the shade, but no worries.

    Now, this was going on for me at the height of the Iraq War, and people were losing their legs in poorly armored Humvees, so it was something we didn’t feel right complaining about at the time. But paying out of pocket for our hotel rooms in Bahrain or Italy or wherever was just insulting. It REALLY rubbed me the wrong way.

  51. Rhett – I was just watching a Velocity show that made a visit to Jay Leno’s garage. He was showing off some of his steam cars.

  52. @Rhett — and if you fire it with wood pellets, then you get that little wisp of wood smoke smell that makes you feel like you’re sitting in front of a fire. Hot tub and fireplace all in one? Put me on the top of your customer list for that puppy.

    @Milo — you know, you should write that up as a counter-post to today’s topic — we’ve talked about the non-monetary rewards we like, we should kvetch and carp about all of the stupid/annoying disincentives, too. That particular incident would drive me guano — yes, I’m a tourist, that’s right, let me whip out my fanny pack. Talk about devaluing someone’s service.

  53. Milo,

    I assume it was even more galling because there were other instances of them spending obscene amounts of money on some random foolishness?

  54. The salary thing that always bugs me is when employers keep employees tied to their initial compensation scale and then bring in new hires with the same experience on a higher scale. Nursing is great at this. Hospitals put new grads on the new grad scale and give them their 1%or 2% annual raises. Then they’ll hire nurses with 1 or 2 years experience at a much higher rate than the former new grads who have been there for one or two years. And then they talk about how they don’t like to hire new grads because they don’t stick around for more than a year or two.

  55. DD, high tech employers were doing that with new engineers around 2000. I don’t know if it occurs in other industries.

  56. “obscene amounts of money on some random foolishness?”

    Hard to say, and I didn’t have much exposure to the budgeting process, or maybe I just don’t remember. there was the time that our supply officer had been jumping through all these hoops to get some piece of replacement computer hardware sent out to us, and maybe it cost $50k, and the drama surrounding getting this part had been a topic for weeks. Finally, we’re surfaced awaiting a delivery of food and ice cream and mail and whatever from a tug from Djibouti that’s also supposed to have this part, and they’re passing from the tug to us all these crates of vegetables and milk and whatnot, a big human chain of people on the deck in life vests, handing it down the line. And the box with this part comes out of the tug, they pass it, someone drops it, it bounces once, slides down the side into the ocean, and poof! Gone.

    I laughed so hard about that. It’s the little things.

  57. “I’ve been thinking about how the economy compares for people under 40 vs. over 40 ….. It assumes a positive return on savings after inflation.”

    Yeah, the 0.01% interest rate on the kids’ savings accounts made it hard for me to extoll the virtues of compounding.

  58. “Similar logic was used to justify the transition from pensions to 401ks. ”

    I don’t think that’s the case. My understanding is that it was an accounting issue that drove the transition.

    Mémé has mentioned this before, and it is consistent with my recollection from when 401ks were first rolled out.

  59. Finn,

    There were accounting and tax reasons why companies were eager to get rid of them certainly. But, they were sold to the public as a panacea (portability, security, high rates or return, etc.) which they turned out not to be for the vast majority of people.

  60. My admittedly vague recollection of something I didn’t really understand all that well in the first place is that there was some sort of change in GAAP (generally accepted accounting principles) that made them inconsistent with the way many companies accounted for retirement benefits. That change, combined with an IRS code that facilitated the 401k, pushed companies in that direction.

    But yes, my vague recollection is also that it was sold as a good thing for us. Given that I worked with a lot of future totebaggers, it probably was good for most of us. The HR folds really pushed everyone to not leave any company match on the table.

  61. Yeah, the 0.01% interest rate on the kids’ savings accounts made it hard for me to extoll the virtues of compounding.

    Our kids are getting a robust 0.1% on their savings accounts. I think they got a full 1% when they had enough saved to take out CDs. When my son cashed his in early to buy a laptop, the early termination fee was 87 cents or something like that.

  62. And totally off-topic, Toyota sucks and I will never buy an extended warranty on a vehicle ever again.

  63. Given that I worked with a lot of future totebaggers, it probably was good for most of us

    I’d be curious to see a study of that. From personal experience helping people with this, the number who keep all their retirement savings in a money market fund or make other terrible investment decisions has been surprisingly high. Think of the folks who went from stocks to gold in 2009 – they lost 50% in stocks then moved it to gold and lost another 50%.

  64. Milo, here’s the story: When we bought the Highlander four years ago we got the extended warranty after much negotiation and discussion about what it would cover. The sales guy specifically said it would cover things like the power sunroof and power hatch. About 5-6 weeks ago, the power hatch broke. You can see where this is headed.

    I took it in to the dealer, told the service guy we had the extended warranty. They call me later and say it’s not covered because it’s a known issue where the root cause is a hinge, and hinges are specifically excluded on the warranty. It’s a know issue with a service bulletin and everything, and the estimate for the repair is a tad over $3,000 becuae they have to replace the entire hatch. I tell them no way and pick it up.

    I called Toyota Financial, who the warranty is through, and explain that I bought the warranty because I was specifically told it would cover stuff like this. They say they can’t speak to what I was told but hinges are clearly excluded so no go. So I called Toyota corporate customer service and explain my issue. A week later, they call me back and say Toyota will pay for 50% of the parts, knocking the cost down to about $2,000.

    So I do some googling and find the contact info for the Toytota customer service VP and shoot them an email. I get a call back within an hour from someone telling me they will look into it. A week later she calls back and says Toyota will cover 75% of the entire cost, knocking it down to about $770. She also said Toyota Financial is a separate entity and I can take it up with their escalation department.

    I call the TF escalation deparatment and have a chat with someone there. He repeats the party line that he doesn’t know what I was told and he can only go by the contract and hinges are excluded. I ask for a refund since the policy was misrepresented to me, and he says he can give me a prorated refund for the remainder (minus a $25 service charge), which is about $100 at this point, and if I have issues about how the policy was presented to me, I need to take it up the dealer. He also tells me it’s their platinum warranty and really great coverage, except hinges and some other things are excluded.

    So I resign myself to my fate and take it in to get fixed. They said it would be 7-10 days for the repair and they refused to provide a loaner, so I had to pay $490 for a rental. I called on Monday (day 7) and they said it would be ready yesterday. I called Tuesday afternoon to see if was ready. The person who answered said she had to transfer me to someone who could help. Someone picks up, I explain why I’m calling, and he tells me he’s not in the shop and has no way to find out and will call me back the next day. That was really helpful. So I call back and get someone else. She finally is able to tell me that the repair is done and it is going to QC and cleaning, and won’t be ready until today.

    I get a call this morning from someone telling me it’s ready for pickup. I head over about an hour later at lunch, return the rental, and find the service rep. I give him my name, he responds “Did she tell you it was ready? I still need to do some paperwork on it. You can have a seat inside.” About 20 minutes later, he finally comes to get me. I pay and get the keys. I get in the car and start it up, and the low tire pressure light is on. You can’t miss the damn light and they couldn’t bother to put air in the fricking tires. It was a final insult on top of everything else.

  65. And I did seriously consider just not getting it fixed, because it really isn’t a big deal to open and close it by hand. But it was starting to not close quite right and that would probably have gotten worse over time.

  66. That’s horrible.

    You probably know how I feel about extended warranties in general. They fall under the Thou Shalt Never Buy Insurance against an event that is not financially devastating. We once stupidly bought the Protection Plan on some furniture that was supposed to cover Absolutely Everything. In a few years, the cheap leather had really worn down in some spots, so I tried to call, but the warranty company had gone out of business. The huge furniture retailer that had sold it was still operating, of course, but that doesn’t help.

    With Honda and Acura, you can’t get an oil change at the dealership without getting a follow-up phone call from someone ensuring that you are totally, 100% satisfied with your experience, and if there’s any reason why, when Corporate calls, you can’t give them all 5’s, please let them know now and work it out, because anything less than a 5 on a survey may as well be 0… I thought I had heard that Toyota was doing the same thing.

    I’m a little scared of the power hatch and doors on the van, for this reason. I wonder how reasonable it is to think that they can be problem-free for the likely 15 years of ownership.

    At least you got the repair price way down. That’s a lot more than most people could hope for.

  67. “At least you got the repair price way down. That’s a lot more than most people could hope for.”

    Yes, it sounds as if you fought it well and more than most. But, how FRUSTRATING. I feel a slow burn just reading your story. I’m the kind of person that would probably not fight as much just to avoid the frustration, although sometimes this kind of stuff does fire me up for battle.

    So I guess there’s some language in the warranty that excludes any “known issue”. Sheesh!

  68. Interesting discussion about bonus vs. raise, and the compounding outlook for younger workers. A millennial I know has what I think is an unusual situation at his first job in the media industry. With his initial offer he was told he was eligible for a bonus, but no specific parameters were given. Later on he learns:
    He gets a COL bump in his salary several times a year. However, he loses it if he shows up late even one day.
    Every three months, at least for the first year or so, he can take a test that if he passes qualifies him for a significant (around 10%) raise. The tests cover aspects of the rather technical area of his work. Essentially, he can potentially bump up his base salary by about one-third within the first year. Now, these tests may be super difficult, so maybe not. However, given that this person was a NMF, it seems a perfect fit for him!
    His starting salary was not bad, probably in line with industry averages. His employer is a small shop, seemingly with a founder/boss who’s a bit eccentric. If this kid does well in the first couple of years at this job, he’ll be in a good position either for advancement or looking elsewhere. It’s a good start, IMO. He would really like more flexibility to work from home, but as was pointed out before, money is more of a priority right now.

  69. IIRC, his COL bump is calculated every pay period. He mentioned this in explaining how he could game the system, deciding to be late every day that period if he wants to forego that particular minuscule raise. Of course, we agreed that’s not really a smart thing to do.

  70. The boss has a particular thing about his staff showing up early, related to deadlines of their line of work.

  71. “So I guess there’s some language in the warranty that excludes any “known issue”. ”

    Yeah, that’d make me want to say “It’s a known issue? Awesome! That will make it easier to fix.”

    My car’s A/C compressor catastrophically failing at 50,000 miles has been a well-known issue that they ended up fixing at no cost (out of warranty). And now I do a quick Google search and there are claims of people who had bought the extended warranty and were told that their warranty did not cover it.

  72. DD, that is a very frustrating experience.

    Acura is changing, and I don’t think they are as customer focused as they used to be several years ago. I took our car in last week for a routine service visit. It was really just an oil change. The dealer now has something called accelerated service so I met a person that was based in the service area instead of someone at a desk in the office.

    It didn’t seem like a big deal until I received a recall notice the very next day in the mail. We didn’t receive anything by email, and the dealer never mentioned the recall to me when I made the appointment, or when I was there. I sent an email to the head of service because this never would have happened with the service guy that we used to see at the dealer. The head of service agreed, and he apologized. While he thanked me for letting him know about this blip in their new accelerated service, I still have to bring the car back.

    No email, no survey, no calls from Acura.

  73. “No email, no survey, no calls from Acura.”

    Maybe they’re giving it up because someone finally realized that it’s ludicrous to develop a metric that asks multiple questions with “On a scale of 1 to 5…” but then score it as 5=sat and <5=fail. It's like the dumb idea of some marketing douche who speaks in platitudes like "100% satisfaction is our only option."

    I've heard at least one engineer comment about that system that "no, I'm not playing along. If some aspect only deserved a 4, that's what they're getting."

  74. Milo,

    It’s interesting how that theory works with Uber ratings. IIRC you have a choice of 1 to 5 stars and if the drivers average falls below a 4.6 for any length of time he’s out. Same sort of thing applies to grade inflation as well where the information is still being conveyed but rather than look at the first number 1.8, 2.5, 3.6 you now have to look at the second number – 3.1, 3.4, 3.9.

  75. At least with Uber, while a 4 average might be unacceptable, a single “4” review is not as mathematically damaging as a “1.”

    But yeah, I agree, the inflation aspect helps nobody in the long run. Enough of the customers know about it–I’ve only used Uber a few times, and I knew about it–and it makes them feel too guilty to give an objective rating.

  76. Denver Dad, is that Stevinson Toyota on Havana? I hate them with a round, shiny hate.

  77. @401(k)s: I can’t talk about the changes in the tax laws, but I do know that 401(k)s are much cheaper for companies than pensions, because most of the money is contributed by the employee, not the employer, and the employer does not have to guarantee that those funds are sufficient to meet the promised benefit levels for @40 years. So it frees up a lot of capital.

    But IIRC, Rhett is correct about how they were sold; the idea is that pensions were weighted down with low-return bonds and fixed assets, because they had an obligation to remain solvent and pay current benefits to old people, so younger people pre-retirement would do better if they could direct their own investments and invest more heavily in stocks. Same argument that was made to privatize SS. Of course, this was before most big pension funds dove into more aggressive investments, and before companies learned that those funds represented a nice chunk of cash they could use for other things by changing their projections to assume much higher future returns based on stock market vs. bond figures. But perhaps the biggest problem is that they didn’t make the investments mandatory, like the pension was.

    It’s all part of the same cycle. When the stock market is raging, people worry more about missing the upside than about the downside risks, so everyone clamors to get into the hot thing and scoffs at things like bonds and pensions that are designed to trade the upside for a secure income stream. And then when everything crashes, it’s “how could [my pension fund/my advisor/[insert 3rd party here] have been so stupid and invested so aggressively?”

  78. At least you got the repair price way down. That’s a lot more than most people could hope for.

    I know. But the other thing that ticks me off is that this is clearly a known defect with the hinges – the service bulletin they gave me even says it’s covered under the factory warranty if found within 3 yrs/36,000 miles – and the hinges probably started to fail by then. But nobody is going to notice the half-milimeter gap until it manifests by the power hatch rod breaking off. So IMO, this should have been fully covered even without an extended warranty because it’s a known defect.

    Toyota used to do the same thing with surveys but I don’t know if they still do. We’ll see if I get one.

    RMS, it’s AutoNation Toyota on Arapahoe.

  79. ARGH, DD, I feel your pain. SO frustrating.

    So, legal frolic and detour, I suspect the issue is that the warranty is issued by a different company. The way a warranty would typically work is that the seller would disclose anything he knows about, and the warranty would cover the unknowns (think about home warranties, for ex.). This warranty is written the same way — it specifically excludes things that the warranty company knows have been an issue in the past (hinges), and may include another general exception for other “known” problems. But the problem here is that any initial disclosure of “known” problems has occurred between the warranty company and Toyota — you, the buyer, were cut out of the loop.

    If this was a known design defect, then Toyota is the responsible party; the problem is that their liability is limited by the warranty that they provide, which has expired. There are ways around this, but it involves hard-to-prove things like fraud and inadequate disclosure, so usually your only recourse is the customer service angle, like here. If it is a big enough issue, and they think they have enough exposure because they clearly knew about the issue and didn’t do anything to fix it, you’re likely to get an accommodation, but it takes a lot of persistence. In that event, the extended warranty becomes an obstacle, because it allows each company to cast responsibility on the other.

    This is one of the reasons I am with Milo and just don’t buy extended warranties. I’m also too much of a lawyer — if I see something called “known issues” or specific exclusions, I’m going to assume that’s there because they know something I don’t, and so I’m going to want a full, binding list of what that includes — in writing, because contracts *always* say that they are the sum total of the deal, and that they trump any prior oral representations. And of course that would be a complete nonstarter from the company’s side, so I just don’t even bother.

    Plus, you know, thanks to BMW and Acura, I *hate* dealing with this kind of crap with car dealers; even if I ultimately win, I’d rather just not deal with the hassle. Just give me the car at the best price I can get and leave me alone.

  80. Just as a quick tie-in to other discussions, this would probably be something that MMM would just fix himself by watching a few YouTube videos and ordering a couple parts.

    We don’t have time for that, of course, and we like to say “Oh, I’d much rather outsource and blah blah blah” BUT, this is an example where outsourcing isn’t always so simple and easy. It possibly involves a lot more hassle and mental aggravation than just fixing the hinge and rod oneself.

    Just a thought.

  81. Milo,

    I doubt DD spent more time and aggravation fighting with Toyota as he would have trying to replace the hatch himself.

  82. I have had my van for about 8 years now. The power sliding doors just started to give trouble. I had to have the motor operating the doors replaced. The power hatch still works fine. I was told that the drain on my battery was due to the power sliding doors and hatch. I haven’t confirmed this. I don’t put a lot of miles on my van. I am constantly getting offers to sell it from this or that dealer.

  83. LfB, you were right about BMW. I thought of you when they told me it would take 45 days to get a new strut. The car had 1000 miles on it, and they had to order the part from Germany.
    I thought someone walked here with the part because I’ve never waited that long for a part on any other car.

    It is fun to drive, but I’m so glad we leased. I dont feel stuck if I end up wanting something else to drive.

  84. LfB – My answer was naïve. I expected all the other respondents to keep going along the line of reasoning described in the follow-up explanation.

    Question for you. Let’s assume you and I have definite plans to meet in NYC at noon next Monday, we just haven’t set a location. Then our line of communication is lost, but we’re each confident that the other still plans to meet.

    Where are you going to wait?

    ” I was told that the drain on my battery was due to the power sliding doors and hatch.”

    Interesting. I just replaced the battery on our van, somewhat prematurely, I thought, at not quite four years old. It stranded me at Costco with no jumper cables. AAA kind of annoyed me. They promised 35 minutes for someone to be out there; 30 minutes later, I get a call from the local towing company to confirm that I need a jump start, and yes, our guy will be there in about 30 minutes.

    I was waiting with the hood up just to make it more obvious for the truck to find me, and while I was waiting, three young’ish men (each separately/independently), all of them black, approached to ask if there was anything they could do to help (but none had jumper cables).

    The fourth person did have cables, and I canceled the truck. But interesting about the demographics, I thought. It was not in line with the total sample of people in the parking lot.

  85. Rhett – Yes. It was in a Bryson book I read recently. It’s a little more obvious when we each know that the other is coming from out of town, but apparently, even when professors survey their students who are already in the area, that’s the same overwhelming answer. And listening to the book, it’s what I told myself before he revealed it.

  86. Dang, I’d have been hanging out at the Empire State Building, wondering where everyone was.

    But I made the same mistake: I overestimated people’s willingness to continue to line of reasoning. I guessed 3, figuring that not everyone would actually take it all the way down to 1 (I also didn’t realize 0 was a possible answer).

  87. Yeah, I said 1, not realizing 0 was possible.

    I’m a little worried about the people who answered anything above 67.

  88. Dang, I’d have been hanging out at the Empire State Building, wondering where everyone was.

    That was my first thought but you need tickets and there is a line, etc at the Empire State Building. The clock at Grand Central is famous, easy to get to, indoors and there are no access restrictions.

  89. Rhett, the warranty is through Toyotal Financial, which as I’ve come to learn, is a completely separately entity from Toyota. The language is that it covers everything except what is specifically excluded, and hinges are listed as a specific exclusion. Yes I know that makes them correct in not covering it, but my point was that the issue from my perspective was the power hatch broke, and I was told specifically that the power hatch was covered. I know, they aren’t going to say “well, it depends on what causes things to break because they might not be covered depending on what the root problem is” because then nobody is going to buy an extended warranty, but I feel that I was blatantly lied to. And I know, I shouldn’t be surprised that a car salesman would lie.

    As for fixing it myself, there was no way a layperson could do it and do it right. The hatch door needed to be replaced due to stress from the hinge not being in perfect alignment, so then you need to paint it to match the color, which is why it’s a week to repair. I did replace the side mirror myself (thanks to a youtube video) when it was knocked off in a hit and run, but this is well beyond the capabilities of most people.

  90. And the really funny thing was when I was in the middle of all this, I got a call from someone at the dealership asking if I wanted to trade it in. He said they had a customer who was looking for a used Highlander in the same color as mine, and they would be happy to put me in a new one for the same payment as we have now.

  91. LfB – that early line made me suspicious, too, but I think he’s more writing about how they should be financed and controlled in the future, not that they shouldn’t exist.

    Now, if he had been trying to go all new-Urbanist, anti-McMansion, anti-yard, everyone-should-want-an-urban-life, I’d be right there with you.

  92. @Milo — probably Harborplace. Or Camden Yards. But they’re close enough you can jog back and forth if you guess the wrong one. :-)

  93. Definitely the Inner Harbor. I was going to say the part outside by the water where it’s like a little pavilion of steps where the musicians usually perform.

    My second choice would have been the bridge right near Hard Rock Café.

  94. Milo, isn’t the answer “clock at Grand Central” out dated?

    Certainly the current answer is “in front of the Trump Tower.”

  95. “Interesting. I just replaced the battery on our van, somewhat prematurely, I thought, at not quite four years old. It stranded me at Costco with no jumper cables. ”

    If your battery is going to die, I cannot think of a better place for it to happen. Just walk into the store and buy a new battery, swap it out, then take the old one right in for the core credit.

    Whenever we get a new car, I always do some setup. There are a few things I make sure to keep I the car, including jumper cables, spare quart of oil, first aid kit, spare T-shirt, some basic tools, flashlight, pens, tire pressure gauge, flares, reusable shopping bags, pump, windshield shade, cell phone charger, feminine products. When our kids were very young, the list was a lot longer.

    The jumper cables and tire pump in my car have been used on other peoples’ cars many more times than for mine.

  96. Finn, I’m with you on the jumper cables. IMO they are a requirement to have in the car. It annoys me to no end when I see someone asking people for a jump and they don’t have cables.

  97. Yeah, in case I’m wearing a nice shirt, and need to do something that would make me get dirty and/or sweaty.

    I can also use it to wipe my hands if they get greasy.

  98. When I lived on the continent, I also had an old waterproof jacket to wear while putting on chains. I also kept chains in the car, as well as a folding shovel and an emergency blanket.

  99. Milo, I consider jumper cables to be the equivalent of a spare tire. It’s a basic requirement to have them. If you had a flat tire, you wouldn’t try to flag someone down for help and then ask if you could use their spare.

  100. Of course. Be prepared.

    Wouldn’t you have appreciated if one of those black kids (perhaps former Boy Scouts?) had jumper cables?

  101. I actually assumed I had cables in the car, with the spare tire. I figured they were included. But to be clear, I wasn’t asking anyone, other than AAA. They offered. And they were adults.

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