Part 1 of 2
Software Engineering Salary Guides Were All Wrong in 2021- How We Got Here.
Each year, countless organizations release their projected salary guides to help you plan your hiring budgets. Some of the data they use are based on historical increases of salaries targeting about 3 – 4.5% to adjust for inflation, but in our experience, many are simply opportunities to capture your contact information as prospective clients.
I’m here to tell you that no one anticipated the level of salary increases that occurred this year, that most salary guides were wrong in 2021 and will likely be again in 2022.
In this article I will help you understand how we got here, how to prepare for 2022, and in the second part of this discussion, share several unique and important approaches on attracting A-Players for your engineering and executive teams.
I founded Technical Integrity in 2010 intent on bringing an incorruptible, ethical approach to building high-functioning executive and engineering teams for startups. I’ve been working in recruiting and professional placement in the software realm for more than twenty one years, and I’ve never seen a market quite like this one.
On January 3rd 2021, our phones began ringing off the hook. In years past, I often joked that Colorado startups didn’t really open their laptops until January 20th, but this year was to be very different.
The demand for specialized engineering talent has never been so frenzied. In 2021, most engineers have more than five interviews going at any given time and 3-4 offers to consider during what’s now being referred to as The Great Resignation.
According to a recent report by McKinsey, in the middle of 2021, 40% of survey respondents indicated that they would likely change roles in the next 3 – 6 months. Furthermore, 64% of employers surveyed indicated that they anticipated the attrition to stay at the same level or even increase over the next year.
This frenzied market for top engineering talent is due in part to several factors including:
- Perhaps most importantly- there’s a finite amount of truly seasoned engineering talent in North America (especially those who can lead and mentor younger engineers). While coding bootcamps like the awesome Turing School in Denver are absolutely playing a critical role beyond the traditional Computer Science degree, and will continue to help fill the void, the gap remains substantial between need, know-how and availability.
- The proliferation of cloud and mobile-first technologies, and a seemingly endless desire for more of each
- An aging baby-boomer workforce was among the first to get into engineering, but they are happy to be retiring and taking their skills with them
- A continued backlog of desired functionality and engineering work that was put on hold during the height of the pandemic.
According to the Bureau of Labor Statistics as of early 2021, the global talent shortage already amounted to 40 million skilled workers worldwide. By 2030, the global talent shortage is predicted to reach 85.2 million workers. Companies worldwide risk losing $8.4 trillion in revenue because of the shortage of skilled talent.
Our good friend Sha Ma, former VP Engineering at Github and Sendgrid, and currently at Catalyst Software says; “The market for tech talent is the most competitive I’ve ever seen in my career. Most candidates have multiple job offers on the table. People are looking for a change after the pandemic, and they are looking for companies that can offer them more flexibility and care about their overall wellbeing”.
This applies throughout North America. Our colleagues up north in British Columbia are reporting similar realities. According to the September 15, 2021 HR Tech Salary Report, “Salary increases in 2021 have blown past compensation budgets as Western Canadian tech companies increase salaries to attract and retain critical talent….This year’s median salary increase budget was only 3.5%. However, the actual applied increases were much higher. From 2020 to 2021, salaries saw a median increase of 4.8%. For common incumbents (the same employees from the same organizations in the same roles) the median salary increase was even higher at 5.4%. The IT subsector saw the highest increases with a change in median base salary of 6.4%”.
Let’s reflect on that for a second- six point four percent. Believe it or not, the data are trending easily into the double digits…stay tuned for more on that.
Closer to home, we spoke to local and national hiring leaders and asked for their reflections on the current state of hiring in tech- and how they have been responding.
One of our good friends (and yes, a direct competitor) Dave Bacon from BWBacon, alongside our colleagues at Access Ventures, went as far as to revise their 2021 salary projections mid year.
Dave said ; “This year, for the first time ever, we revised our annual salary survey mid-year. Having done the deep research into the data for salaries in technology at the beginning of the year, we saw that salaries were again on the rise, even through the pandemic. But never have we seen them rise this quickly to where after only a few months, we’re seeing compensation rise at a clip that makes our earlier findings already below market”.
Senior Manager of Talent Acquisition at Outside Interactive Elizabeth Catherwood adds further context ; “What we see in this market is compensation soaring as the balance shifts back to the candidate. Negotiations have been taken to a whole new level, not only with compensation, but other perks being offered from indefinite work from home, to sign-on bonuses, to additional vacation time and more. We’re currently in an engineering labor shortage and it has become apparent that it’s the employer that will need to adapt in order to attract and retain top-tier engineering talent”.
Another friendly competitor (or as we like to say; “coopetition”) Conor Swanson from Code Talent reports “We’re seeing offer economics and competition shift quickly. The dramatic increase in remote-work opportunities coupled with intentional geo-targeting of Colorado-based talent by more expensive markets is generating a level of demand and competition we haven’t seen in a long time. At any given moment, an engineer isn’t just considering 3-4 local opportunities, they are also inevitably exploring 3-4 positions that are 100% remote with companies paying above local salary ranges by an order of magnitude”.
We are here to tell you in good faith that you’ll need to again increase your salary projections and the benefits you offer for 2022.
Stay tuned for Part 2 of this series to help you with several unique approaches beyond the salary quotient in attracting top talent.
Make it a great one!
Dave Mayer
CEO and Founder
Technical Integrity
