A CEO recently found out the hard way how costly it can be to undervalue employees. According to a post shared on Reddit, a top-performing employee asked for a raise, was denied by the CEO, and promptly resigned. What followed shocked the management team, both financially and operationally. The post, written by a Vice President at the company, detailed how over five years the CEO had consistently been stingy with raises.
“Every year I would fight for my team, and could barely manage to get them a 1% to 3% increase, which is of course much less than they deserve,” the VP explained. One particular employee, hired four years ago at a mid-level salary, was described as a “rockstar” who handled the responsibilities of two departments, built new automated workflows, and reportedly saved the company about $300,000 a year. Despite all this, the employee’s raises remained negligible at just 1% to 2% per year.
Employee Quits After Raise Denial
The employee requested an 18% raise, which would still have left him as the lowest-paid person on the VP’s team. The VP fully supported this request and presented it to the CEO, who delayed for weeks and eventually refused. The employee had already secured a new position offering a 25% higher salary and resigned immediately. As the VP put it, “And honestly, I don’t blame him at all.”
This situation created frustration not just for the departing employee but also for management. The post noted, “I’m just so furious. And I wanted to let you know that there are people in management who also see these things that happen as completely illogical. The situation is really frustrating.”
Replacement Costs Triple
The fallout didn’t end there. The CEO, now faced with the void left by the employee, attempted to fill the role with two contractors at a combined cost of $18,000 per month. The VP highlighted the irony, saying, “The math itself is insane. You can’t build a strong team this way.”
Reddit users chimed in with similar experiences, noting that it is common for companies to pay multiple times more to replace good employees than it would have cost to retain them with a fair raise. One user shared, “Good to know. My bosses would not give me a raise even though I was doing four different jobs and running the place. I left and they have since hired three people to cover what I was doing at 5X the cost.”
Others pointed out that such situations often come down to corporate risk analysis, where management bets that employees will stay even if they are underpaid, and if a few leave, the company absorbs the higher replacement cost. Another Redditor wrote, “Sadly, this is typical risk analysis. Companies bet that employees won’t leave knowing they will have to pay up to replace them when they’re wrong. But they make it up in volume and percentages.”