Posted on January
19,
2022 by Bailey Crumpton. Tagged:
Resources for Entrepreneurs,
Colorado Culture,
For Clients
(Updated October 2023)
Successfully recruiting engineers, developers, data scientists, and other technologists is more important than ever, but also more difficult. CEO of HackerRank, Vivek Ravisankar recently told Fortune that while “we’ve seen salary convergence, or the removal of location-based pay scales, for C-suite executives over the last several years; this coming year, we will see the same trend pick up steam for individual developers’ salaries as the remote-first model and ongoing tech talent shortage will further drive this convergence.”
Convergence is the perfect word to describe today’s hiring market in tech. A combination of factors is creating a storm of converging elements, pushing leaders of startups and enterprises alike to create new strategies for securing technical talent moving forward. You might be wondering, what exactly do those strategies involve? How have they changed? We’ll discuss different viewpoints on where tech salaries are now, plus how to compete in a tight market.
Are Salaries Really Skyrocketing?
When it comes to entry-level techies seeking six figure salaries, the narrative certainly feels rooted in reality that tech salaries have ballooned to staggering levels since the start of the pandemic. Whether in response to the Great Resignation, inflation, or a different type of work and cultural revolution in the US, we saw companies making huge offers in ways they never have before in 2021 and 2022, with a major cooling of those efforts in '23.
We get it, the competition is real regardless of market conditions, but have salaries actually skyrocketing as much as it seems? Despite unrelenting growth for over 20 years in the industry, tech worker salary growth has actually been more uneven in the last few years. According to a study published by Harvard Business School, only five major cities experienced “exceptional” growth (New York City, Silicon Valley, San Francisco, Seattle and Washington, D.C.), while every other city nationally has seen salary growth slow or steady. Said otherwise, costly cities create their own bidding wars when it comes to tech wages.
Outside of those major cities however, and across the board, average tech salaries have actually cooled off by 1.1% in 2021, and this is due to several factors. Data from the following two years only supports the trend. For one, hiring in tech has become so challenging, that many companies have shifted their approach to hiring and training up more junior developers, and those relatively lower salaries have brought down the average.
So why does the environment for hiring feel much more dire than what the data shows? In truth, it’s a mixed bag, and also depends on what type of talent you’re looking for. While BWBacon’s salary data for 2021 and 2022 showed an average increase in salaries overall, 2023 has been an entirely different story and candidates are no longer in the driver's seat. When a looming recession started to creep to the forefront at the end of 2022, even economists couldn't agree if the inflation and jump in salaries we’re experiencing during the pandemic would be sustained or temporary. Yet another thing to consider is that these changes are another outcome of an exceptional and society-shifting time.
Stay Ahead Of Narrative Economics
A term coined by Nobel laureate Robert Shiller, narrative economics describes the phenomenon when a narrative, true or false, catches on quickly and compels people to overlook facts when making economic decisions. If all you’re hearing from articles, peers, and hiring managers is that salaries are through the roof, you may assume that wage jumps are the norm, instead of the exception. Think of the housing bubble or the dot-com boom, these narratives were so strong they impacted people’s decision making for years, even if economic conditions changed.
How does narrative economics apply to a crazy competitive tech hiring market? At least, it allows us the opportunity to step back and think about what has changed and what has not. Certainly, candidates have been more vocal and open about their desires and compensation. Employees and employers are both aware of this shift in dynamic. But beyond shifting relationships and the growing self-advocacy of workers, the numbers simply do not support an unusual or unprecedented rise in salaries.
With that in mind, we can comfortably dismiss the myth of outrageous salaries, and ask a better question: what gaps remain between current salaries and salary expectations of experienced and talented engineers? Have companies been underpaying their talent for a long time according to the market? Does competing with the formidable FAANG group make growth for smaller companies relatively unachievable?
If You Can’t Stand The Heat, Get Out Of The Kitchen
Ok, we admit that last question may have been a tad dramatic. While competing with big kahunas like Apple and Google is no joke, we’ve seen many small to mid-size companies find huge success and growth here in Colorado (and nationally.) Furthermore, the ongoing adoption of remote work only opens up the candidate pool and salary range for both small and big companies, pushing businesses to get creative about their recruiting and job requirements.
That’s not to say you can throw compensation out the window if you’re hiring nationally, though. Your grandma waving a dishtowel may come to mind when you hear the expression, “if you can’t stand the heat, get out of the kitchen,” but it very much applies to hiring in a world on fire with acceleration, ideas, and investments. When it comes to recruiting, matching your salary ranges to market value is the best way to stay competitive, regardless of what type of talent you are seeking. With a 357% increase in remote IT job postings in 2021, companies basing salaries on location instead of market value will lose out on talent. It’s about finding a happy medium between market value and pie-in-the-sky offerings.
We’ve seen it more and more frequently since 2020, salaries that fall outside of market value are almost immediately rejected by candidates because they know they can get more elsewhere. As an agency, we do our best to pass on this feedback and strike a balance in between the two extremes. Basically, we make it our job to give that reality check to candidates and clients alike, whether they’re seeking far too much or paying far too little.
These days, candidates understand their value. Many candidates, whether active or passive, know that if they have a coveted skillset, and can be considered a senior resource with five or more years of experience, that they should be paid according to that value and demand. Be honest about where market value is now, or resign to trudging an uphill battle. Keep in mind that while comp is hugely important, giant enterprises (or startups) are not the right fit for every worker, and there are many elements that can entice talented people to work for your company that are not a Google-level salary. Like we said before, it’s a balance!
Money Matters, But It’s Not Everything
Throwing big dollars at talent is not the only approach to hiring new people and help them find success at your company. Leveraging data from LinkedIn, Microsoft Data Scientists predict that the economy’s capacity for digital jobs will expand by 149 million new jobs by 2025. With a jaw-dropping 29% compound annual growth rate worldwide over the next three years, software development accounts for two-thirds of that forecasted job capacity. They predict that 98 million of those jobs will be in Software development, 23 million for Cloud and data roles, 20 million roles in Data analysis, AI and ML, 6 million in Cyber security, and over one million in privacy and trust.
Put into context, those statistics are flabbergasting. With so much growth and many, many new jobs on the horizon, companies will have to do a lot more than ramp their hiring budgets to attract long-term employees. None of these ideas are silver bullet fixes for having a tight hiring budget, but every candidate is different in what they’re looking for when it comes to career growth, benefits, and working for a mission-driven company.
Here’s 7 big ideas for making what you’re offering the whole package…
- Stop Dipping Your Toes Into Remote Work
- Companies providing flexibility of schedule and autonomy will thrive in the future, it’s as simple as that. A flexible working schedule is the #1 most attractive aspect of a job for women (Gallup), and millennials have indicated in study after study that the freedom that comes with gig work through a more stable role is the ultimate sweet spot. CEO of Hired, Josh Brenner, said that “90% of technical job seekers on his company’s platform are open to remote work, and an increasing number are only considering fully remote jobs.” Clocking in remotely, setting your own hours, making doctors appointments during the week, taking care of kids all fall under more flexible policies, and it is what people want. If total remote work is not a possibility, that’s ok, find a way to bring hybrid or flex work into the picture. Adapting to allow greater flexibility for employees will shape your workplace culture for the future, and for the better.
- Companies providing flexibility of schedule and autonomy will thrive in the future, it’s as simple as that. A flexible working schedule is the #1 most attractive aspect of a job for women (Gallup), and millennials have indicated in study after study that the freedom that comes with gig work through a more stable role is the ultimate sweet spot. CEO of Hired, Josh Brenner, said that “90% of technical job seekers on his company’s platform are open to remote work, and an increasing number are only considering fully remote jobs.” Clocking in remotely, setting your own hours, making doctors appointments during the week, taking care of kids all fall under more flexible policies, and it is what people want. If total remote work is not a possibility, that’s ok, find a way to bring hybrid or flex work into the picture. Adapting to allow greater flexibility for employees will shape your workplace culture for the future, and for the better.
- Break Free From Old-School Thinking On Location
- We no longer live in a world where location is everything. On top of that, not every person wants to live in a major city or commute in order to work for a big tech company. Americans have always been mobile and exploratory when it comes to moving locations, but the widespread adoption of telecommuting has expanded our thinking even further. Do workers have to be in one location to be successful? Should someone be paid less simply because they’re located outside of the Bay Area or Denver? These are questions industry leaders are trying to answer, and opinions vary. In summation, relinquishing outdated thoughts about cost of living can allow more creative hiring practices to flourish. In a recent study on hiring, Tufts University highlighted six states, Georgia, Texas, Delaware, Virginia, Connecticut, and Maryland, that are “the most promising places to recruit tech workers based on three criteria: the presence of Black, Latinx, and female STEM graduates; cost of living; and digital infrastructure.” If you’re hoping to expand the diversity of your team by recruiting in other states, this is your sign to do so.
- We no longer live in a world where location is everything. On top of that, not every person wants to live in a major city or commute in order to work for a big tech company. Americans have always been mobile and exploratory when it comes to moving locations, but the widespread adoption of telecommuting has expanded our thinking even further. Do workers have to be in one location to be successful? Should someone be paid less simply because they’re located outside of the Bay Area or Denver? These are questions industry leaders are trying to answer, and opinions vary. In summation, relinquishing outdated thoughts about cost of living can allow more creative hiring practices to flourish. In a recent study on hiring, Tufts University highlighted six states, Georgia, Texas, Delaware, Virginia, Connecticut, and Maryland, that are “the most promising places to recruit tech workers based on three criteria: the presence of Black, Latinx, and female STEM graduates; cost of living; and digital infrastructure.” If you’re hoping to expand the diversity of your team by recruiting in other states, this is your sign to do so.
- Go Where The Talent Is
- Speaking of diversity, one surefire way to grow your pipeline of eligible candidates is to seek candidates in non-traditional spaces for recruiting. Embrace intersectionality, and aim to capture networks your talent acquisition team may not have explored before. Did you know ninety percent of adults with autism are unemployed? A disability does not always define someone’s ability to do great work. Or, consider recruiting from HBCU’s or organizations that support LGBTQ+ workers. Did you know that women are more than twice as likely to be hired for a job if there is more than one woman in the mix of prospective candidates? Something as simple as putting more than one diverse candidate in the mix can make a huge difference. To get the attention of millennials and Gen Z, lean into your use of social media and company branding. Create a story about your company’s history and goals, relying more on marketing collateral to further demonstrate why someone should come work for you.
- Speaking of diversity, one surefire way to grow your pipeline of eligible candidates is to seek candidates in non-traditional spaces for recruiting. Embrace intersectionality, and aim to capture networks your talent acquisition team may not have explored before. Did you know ninety percent of adults with autism are unemployed? A disability does not always define someone’s ability to do great work. Or, consider recruiting from HBCU’s or organizations that support LGBTQ+ workers. Did you know that women are more than twice as likely to be hired for a job if there is more than one woman in the mix of prospective candidates? Something as simple as putting more than one diverse candidate in the mix can make a huge difference. To get the attention of millennials and Gen Z, lean into your use of social media and company branding. Create a story about your company’s history and goals, relying more on marketing collateral to further demonstrate why someone should come work for you.
- Create A Memorable & Efficient Candidate Interview Experience
- Interview process really does matter. What is the quickest way to stop losing out on talent in a fast-moving market? Cut down on interview steps. A 2021 study by Forbes found that employers who provided an “excellent candidate experience” garnered a 99% job acceptance rate. 99%! On the flip side, organizations with a mediocre experience did not even crack a 90% acceptance rate. Get this, even if the offer is strong, 83% of candidates will turn it down if their interview experience was too drawn out or not transparent enough.
- When responding to how he thinks technical interviewing will change in coming years, CEO of SmartRecruiters, Jerome Ternynk, said recently that “traditional technical interview approaches will soon become a thing of the past. Candidates are more attracted toward those that explore real-world problems, challenges, and projects.” What he meant is that forward-thinking companies will shift their focus not only towards individuals’ personality traits, but also tests and questions based in more real-world scenarios and challenges. Developers and engineers grow weary of tech tests, especially when they’re already juggling multiple offers and interviews.
- What’s to be done for companies that feel assessments are a crucial step of that process? First, we suggest truly answering why, as that explanation can be used to convince someone that they should still take time out of their week to take your assessment. Second, if your “why” remains intact, can you offer to incentivize candidates to take your test? Some of our clients have found success (and less foot-dragging) for acknowledging how demanding online tests can be and offering to pay candidates to complete the work. After all, you do want this person to eventually work for you and pay them to do so.
- Interview process really does matter. What is the quickest way to stop losing out on talent in a fast-moving market? Cut down on interview steps. A 2021 study by Forbes found that employers who provided an “excellent candidate experience” garnered a 99% job acceptance rate. 99%! On the flip side, organizations with a mediocre experience did not even crack a 90% acceptance rate. Get this, even if the offer is strong, 83% of candidates will turn it down if their interview experience was too drawn out or not transparent enough.
- Embrace ‘Build Vs. Buy’ As A Talent Strategy
- 35% of developers in the US have less than 5 years of experience. As demand for tech resources increases, more and more people are jumping into the field and upskilling themselves. What does this mean for growing companies? Developing and training for in-demand skillsets rather than hiring for them could help close the 70% talent gap between supply and demand (Cision 2021.) Therefore, building versus buying talent is a viable business strategy when senior engineers are being fought over. In this way, a company can hire two mid-level resources more affordably, and shape their skills into exactly what the company is looking for. Rather than beating your head against the wall trying to hire the same narrow group of people with ten years of experience in a certain technology, lean into the idea of training and developing hungry software engineers to shine and succeed. Hello leadership opportunities!
- 35% of developers in the US have less than 5 years of experience. As demand for tech resources increases, more and more people are jumping into the field and upskilling themselves. What does this mean for growing companies? Developing and training for in-demand skillsets rather than hiring for them could help close the 70% talent gap between supply and demand (Cision 2021.) Therefore, building versus buying talent is a viable business strategy when senior engineers are being fought over. In this way, a company can hire two mid-level resources more affordably, and shape their skills into exactly what the company is looking for. Rather than beating your head against the wall trying to hire the same narrow group of people with ten years of experience in a certain technology, lean into the idea of training and developing hungry software engineers to shine and succeed. Hello leadership opportunities!
- Be Prepared To Sweeten The Deal
- Is your company increasing its budgets for salaries in 2022? 41% of organizations nationwide are planning for higher salary budgets in 2022 than they did in 2021, according to a National Salary Budget Survey by Salary.com. For perspective, the survey highlighted that in 2020, less than 10% of companies planned for a higher salary budget increase than the year before that. This tells us that narrative economics aside; employees will be paid more moving forward, even if the change is incremental. In conjunction with higher salaries, 2021 saw sign-on bonuses happening at five times the rate as in 2020. What this tells us is that adding that cherry on top, even as a one-time offer, still has an impact on candidates’ decisions, and is viewed favorably by most. Companies that sweeten their offers with sign-on bonuses, equity, and special perks are more likely to close the deal.
- Is your company increasing its budgets for salaries in 2022? 41% of organizations nationwide are planning for higher salary budgets in 2022 than they did in 2021, according to a National Salary Budget Survey by Salary.com. For perspective, the survey highlighted that in 2020, less than 10% of companies planned for a higher salary budget increase than the year before that. This tells us that narrative economics aside; employees will be paid more moving forward, even if the change is incremental. In conjunction with higher salaries, 2021 saw sign-on bonuses happening at five times the rate as in 2020. What this tells us is that adding that cherry on top, even as a one-time offer, still has an impact on candidates’ decisions, and is viewed favorably by most. Companies that sweeten their offers with sign-on bonuses, equity, and special perks are more likely to close the deal.
- Throw The Kitchen Sink At Making An Offer
- Related to sweetening the deal, when we say “throw the kitchen sink” at making an offer, we mean think of anything and everything that makes working for your company amazing. Anything goes here, but impactful additional offers include mentorship (to mentor or be mentored), career growth and training opportunities, employee resource groups, floating holidays, paid parental leave, remote and hybrid work, company ski days, wellness budgets, office equipment, and more. Perks are changing and evolving, so it’s important to sell your company and emphasize why it’s great to come work for you.
Leave No Stone Unturned
Wrapping up his thoughts on what the current market means for recruiting going into 2024, Matt Milano, President of Motion Recruitment, said, "technologists want the whole package. Alongside compensation, IT professionals list technical challenges and flexibility for hours or better work/life balance among what matters most in a job offer, as well as company culture and advancement opportunities."
The theme here is consistent. When candidates are juggling multiple interviews and offers, compensation matters, but also all the other elements that are added on to an offer beyond base compensation. A great interview process along with specially curated perks can make the difference between someone accepting your offer or going with another. What’s the good news? Expansion into global talent pools and remote work allow many opportunities for teams to grow in ways they never have before. Lean into the growing emphasis on employee happiness and personal development, and continue to find new ways to elevate the employee experience.
Here at BWBacon Group, we know and live what you are experiencing as an employer or job seeker in Denver, Boulder, Dallas, San Francisco, New York City or any of the other cities we work in. We believe great recruiting starts and ends with understanding people.
If you have any questions about living, working or playing any of the areas we serve, please contact us. We are happy to help. Seize the day, every day, that’s what we say!