Hello again everyone! Today I will be a writing part 2 of my 10-part discussion on the topic on Achieving Personal Financial Freedom, titled: Job security is a myth.
As this is a continuation post, do make sure to check my previous post about: Time is Money
I am pretty sure you have been exchanging your time for some amount of money. If you are no longer doing so, good for you! If you still are, do read on.
Imagine a scene where you are changing your cash for another currency. What happens during the trade?
- You give your base currency to the money changer, let’s say 100 US dollars.
- The money changer then gives you the currency you want, let’s say 400 Malaysian Ringgit (as of 28 February 2017).
During this trade, what happened? Based on the official exchange rates, you should be getting a fair value of 445 Malaysian Ringgit for the 100 US dollars. Where then did the balance 45 go? They are the profits of the money changer. I mean, they do need to make some money for a living right?
How is this linked to swapping time with money? Before we go further, lets peer into the minds of how businesses and bosses, and see what they see.
As a company and as the owner of a company, there is only 1 single rule: Make more money. Every action the company makes, it must be an action that makes the company more money.
Now, lets imagine a scenario, where you are lucky enough to be employed by company ABC. Imagine they offer you a salary of $ 10,000 per month (good for you?). Add in the fact that companies are smarter now, with benefits such as medical leaves, a good working environment, maybe even a coffee machine or a pool table!
Now, do you really think, your work is only worth that much? Let’s work out the math below:
For hiring a new person, the following basic criteria must be met:
- The person must make his/her salary for himself through the value created from the work.
- The person must create at minimum, an additional multiple of their salary for the company as profits. If the boss is a simple, nice guy, that’s where it ends. But usually they don’t do that.
- The person must create an additional multiple for the shareholders, employees, and other amenities provided by the company (example: to pay for the computer they are using, the office chairs, the air-conditioning bills, the rent, etc). The multiple is easily justified, as the higher salary you command, the more amenities you usually incur. Did you really think those company flights, drivers, travelling allowances are free? Think again.
Based on the above, we know that only 33.3% of your intangible, non-renewable time is paid to you by your company. The rest are “commissions” to be made by the company.
If the person still creates anything else, even better! Let’s go back to the example of $10,000 salary per month. Based on the above, the very minimum the employee must generate would be $30,000 every month for the company. What if the employee generates $50,000 a month? That is an excess of $20,000 a month, coming up to $240,000 a year.
For starters, the company will definitely be happy! In fact, more than happy to give the employee a bonus of course! But will they be giving you the bonus of $240,000 that you deserve? No way. Based on HR metrics, the figure usually comes up to a maximum of 10%, which means a year-end bonus of $24,000. (approximately 2 months of the $10,000 salary).
For other smarter companies, they will provide you with better amenities, such as a brand new office space, a new computer and monitor, business flights and etc. I’m sure many of you know what I meant. The exclusive privileges that one gets for being a top performer. But what are these all about? They don’t really exchange any extra time for you. Instead, what the companies are doing is to spend the additional time you have exchanged, for perks that do not benefit you. However as the company shower these perks on you, the company will get additional credits and benefits due to the expenditure incurred. In conclusion, these perks exists purely to burn your precious time away.
Take note as well that the company will be happy for that employee for that financial year only. The employee must repeat the same process for the next year, otherwise no further benefits will be given, instead the benefits will most likely be removed, the employee reprimanded, or in worse cases, fired! What then does “job security” really stand for?
Do recall in my previous post that time is an intangible and a non-renewable resource. I am going to conclude today’s story by asking you the same question again as before, is your most valuable asset being spent wisely? Are you getting maximum value out of your intangible time? Keep asking yourself, are you selling yourself short?
Good luck in achieving financial freedom, and I will see you in my next post!