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Overcome the loyalty tax


The concept of 'loyalty tax' might not be familiar to everyone, but it's a critical factor in career growth discussions.


It refers to the often slower salary progression experienced by long-term employees compared to the more favorable packages offered to new hires.

For instance, let's consider my client, Sarah (fiction name to protect her identity), who has been with her company for over five years, receiving consistent but small annual raises. Meanwhile, a new employee, is hired for a similar role at a 20% higher salary, highlighting the tangible impact of the loyalty tax.


Is loyalty in your workplace reciprocated with growth and recongition?

In 2024, a challenging year for many businesses navigating tight budgets, the dialogue around loyalty and performance in the workplace is more critical than ever, for both leadership and team members.


As a leadership and career coach, I observe both sides of the "loyalty tax" phenomenon and offer insights to navigate these waters effectively.


how do you overcome the loyalty tax?


Here's how both leadership and employees can overcome the loyalty tax.


For Employers and Managers:

  • Engage in Open Communication:

    • Initiate transparent discussions about the company's financial health.

    • Clearly explain the constraints impacting salary increases or promotions.

  • Recognize and Develop Talent:

    • Offer alternative growth opportunities such as professional development courses, mentorship programs, or leadership roles on projects.

    • Create a culture where effort and achievement are recognized, even if the budget is tight.

  • Foster a Feedback-Rich Environment:

    • Encourage regular feedback sessions, ensuring every team member feels valued and heard.

    • Use feedback to guide development and recognize contributions effectively.



For Employees:

  • Demonstrate Initiative:

    • Volunteer for projects that align with strategic company goals.

    • Propose innovative solutions to current challenges, showcasing your problem-solving skills.

  • Invest in Your Growth:

    • Seek out professional development opportunities, whether offered internally or externally.

    • Continuously update and expand your skill set to remain an indispensable asset.

  • Showcase Your Value:

    • Regularly communicate your achievements and contributions to your managers.

    • Be proactive in discussing your career path and future goals with leadership.

  • Consider Broader Perspectives:

    • Understand the company's position and challenges. It can provide context for decisions affecting promotions and raises.

    • Engage in constructive dialogue about your career development within the company's current constraints.


Both leaders and employees play pivotal roles in this equation.


Leaders must cultivate an environment where performance and growth are recognized and rewarded, while employees should proactively showcase their value.


Together, navigating the delicate balance of loyalty and professional development can lead to sustainable success for individuals and organizations alike.






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