The Loyalty Penalty: Why Your Long-Timers Are Quietly Planning Their Exit

Let’s talk about the elephant in the boardroom—the kind of issue that no one wants to admit, but everyone’s feeling:

Your most loyal employees are likely the most underpaid people in your company.

And I don’t mean underpaid because they’re “coasting” or because they’ve “lost their spark.” I mean, underpaid because the system—intentionally or not—forgot about them.

Seniority ≠ Stagnation

Here’s what’s happening in many organizations (especially in family businesses or companies that haven’t evolved their compensation strategies):

• New hires are entering with strong negotiation power, high market benchmarks, and inflated expectations.

• Veteran employees, on the other hand, are still running on cost-of-living raises (if they’re lucky), loyalty, and the occasional “thank you” email.

Over time, that creates a dangerous gap. I’ve seen senior staff—people who’ve been around for a decade or more—training new hires who walk in with salaries 15–20% higher than their own. Let that sink in.

And these aren’t just isolated stories. According to a 2022 study by Payscale, employees who change jobs see an average salary increase of 15%. Those who stay? Typically under 4%. The math writes its own conclusion.

From Trusted Team Member to Flight Risk

Let me paint you a real-world scenario I’ve seen more than once:

An employee who’s been with the company for 12 years—someone who knows the backend of the business like the palm of their hand—starts getting subtle signals that they’ve hit their “salary ceiling.” Meanwhile, a new hire joins their team at a noticeably higher rate. Same title. Less responsibility. Guess who’s updating their CV that night?

You can’t blame them. Inflation doesn’t wait for annual reviews. Family obligations don’t skip a year. Eventually, loyalty becomes too expensive.

What You're Really Losing When They Leave

I don’t care how smooth your onboarding process is—replacing a seasoned, embedded employee costs time, money, and energy. A report by IBM once estimated that replacing experienced staff can cost up to 150% of their annual salary. And that’s not even considering the “intangible ”debt”—institutional knowledge, cultural glue, and those quiet daily decisions that keep operations running.

Worse? Their departure sends a silent message to others. That loyalty is a dead-end. That staying hurts more than leaving.

Fixing It: Without Burning Your Budget

Now, I’m not here just to point fingers. Let’s talk solutions:

• Conduct Internal Salary Audits

  • Start by looking inward. If a new hire makes more than the person training them, that’s your cue to rebalance.

• Reward Tenure with More than Thanks

  • Loyalty should come with strategic compensation, role evolution, and recognition. Stagnation shouldn’t be the default.

• Create Transparent Pay Bands

  • Build compensation structures that account for both performance and tenure, not just “market value.”

• Tie Retention to Strategy

  • Pay is one part. Future visibility is another. Include loyal team members in growth plans, not just weekly updates.

Take notes from firms like HubSpot, which introduced salary transparency and equity reviews, not for PR, but because retention is a bottom-line issue.

What Message Are You Sending?

When your veterans leave, it’s rarely about one bad month or a tough boss. It’s the slow realization that jumping ship is the only way forward.

But it doesn’t have to be that way.

If you want to build a company that lasts, start by valuing the people who’ve already proven they’re here to stay. Loyalty is a currency—don’t devalue it.

Signing off,

Leo Khoury

Fractional COO & Strategic Advisor

Founder at SpartanSC.co