Google offers 10% company-wide pay rise – but will it stop the departures?

Internet giant Google will give every single one of its employees worldwide a 10% pay rise, along with a $1,000 Christmas bonus, with chief executive Eric Schmidt saying he believes the firm has the best group of employees in the world and they deserve appropriate rewards.

But tech analysts say the move is more likely to be an effort to stop the haemorrhaging of staff to a range of start-ups and social networks, including Facebook, with the company frustrated at the loss of talented engineers.

The announcement comes just weeks after Google Australia employees Lars Rasmussen and Kate Vale said they would be leaving the company, with Rasmussen heading to Facebook after a personal invitation from chief executive Mark Zuckerberg.

Google Australia also recently lost Kate Vale, the local branch’s first employee. Both said the company’s size played a part in their decisions to leave, opting to work for smaller firms where they may have more sway over decisions.

Telsyte research director Foad Fadaghi says the decision to increase pay is not so much about being nice as it is an attempt to keep talented engineers from slipping away.

“This is a reflection of the challenges Google faces, particularly in the US, to keep its top engineers. It’s a nice bonus for the Australian staff, but it’s mainly targeting their US operations.”

Eric Schmidt sent a company-wide email earlier this week, explaining the bonus and praising the efforts of its workforce, which now counts over 23,000 employees.

“We believe we have the best employees in the world. Period. The brightest, most capable group of this size ever assembled. It’s why I’m excited to come to work every day, and I’m sure you feel the same way. We want to make sure that you feel rewarded for your hard work, and we want to continue to attract the best people to Google,” the email states, according to Business Insider.

“So that is why we’ve decided… to give all of you a 10% raise, effective January 1. This salary increase is global and across the board – everyone gets a raise, no matter their level, to recognise the contribution that each and every one of you makes to Google.”

But while Schmidt says the company has the best employees, this could also be why so many of them are being snapped up by start-ups and social networks. This includes Facebook, where between 12-20% of employees used to work at Google, according to various estimates.

Google’s Chrome team lost Matthew Papakipos earlier this year, while mobile expert Erick Tseng also left this year as well. Facebook’s current chef, Josef Desimone, was also recruited from Google.

Facebook offers its employees fairly attractive stock options, which could be part of the motivation to migrate.

There are two main problems: the first is that Google is now a huge company, and making things happen is much slower than it used to be. Employees who have been with the firm for a long time are no doubt frustrated with the changes.

The second issue is that Silicon Valley is bursting with life following a lean two years. Start-ups including Twitter, Zynga and Foursquare are growing bigger and are looking for more experienced engineers to join them – and where better to find more experienced engineers than Google?

In fact, GigaOm founder Om Malik points out on his website that job postings in Silicon Valley have increased by nearly 70% in the year to October. This comes alongside plans from social networks such as Facebook to expand and create new offices.

Twitter investor Chris Sacca told TechCrunch the growth of startups is causing this push, as companies begin to grow outside of a simple “friends and family” operation.

“There is no shortage of talent available for the very best companies that are reaching escape velocity. It seems harder for smaller companies who are looking to add employee six or seven to find recruits beyond their network of friends.”

Fadaghi agrees, and says Google could be reaching out to its newer staff, who do not have access to the same options original staff would have received.

“Many joined at a time where share options were not as lucrative as it was for early employees and thus salary rises and bonuses seem to be designed to keep staff happy and loyal,” he says.