In times of crisis, all decisions take on more weight and require more careful scrutiny. It’s no different with recruitment and employment. The vast majority of founders struggle with how the remuneration of current and new employees should be shaped.
Uncertain times bring further questions: should we plan rather conservatively, and leave the current rates unchanged? Or perhaps, planning long-term, should we meet the growing needs of employees privately struggling with inflation? Additionally, should we fight for the attention of candidates who have recently appeared on the labor market, affected by layoffs?
The years 2020 and 2021 have definitely spoiled the tech sector and aroused the appetite for even more in the future. There’s nothing surprising about that. The tech industry was at a peak – companies were obtaining impressive funding rounds, teams were often growing by 1000%, and the demand for engineers, developers and tech support increased by 150%. Huge demand for specialists made wages go up, and as it turned out, even the outbreak of war in Ukraine didn’t change that trend much in 2022.
According to our data, this is how salaries have grown in the most sought-after sectors of the technology industry over the past three years:
Inflation affects companies and workers
However, it’s impossible to pretend that the situation is simple, or that tech companies won’t be influenced by everything that is happening globally.
Even though inflation in the US slowed to 6.5%, as the US Labor Department announced in January, the situation is still far worse than the target. The ongoing consequences of the pandemic and Russian invasion of Ukraine made the situation even worse in Europe, with an inflation rate of 10.4% – higher than any other time.
Uncertain times obviously have remarkable implications for business, and even the strongest players in the tech industry have to face a new reality. What does this actually mean? Layoffs.
The impact of layoffs
A large wave of layoffs began in 2022, covering the entire United States, which set trends for the EU labor market. Even giants like Google, Microsoft, Amazon, Twitter or Netflix couldn’t escape, and their layoffs put over 70,000 employees on the job market.
This state of affairs caused a lot of doubts among many founders and hiring managers. Since so many people had to open to offers appearing on the labor market, regardless of whether they were dismissed or resigned for fear of the uncertain future of the company, can we leave the salary range unchanged or maybe even lower it?
The answer is: definitely not. It should be remembered that people who are open to work are really just a drop in the ocean of the tech industry’s needs. The shortage of professionals in the IT sector is still huge, and the fight for the right candidates hasn’t stopped.
Companies should be aware that they have to compete for the best people for their teams, so that at the end of 2023 and the beginning of 2024, they’ll have strong products and be ready to implement new ones.
Why not just be guided by information about layoffs and plan to freeze stakes? Paradoxically, tech has always been the answer to breakthroughs and crises, as exemplified by the pandemic and the number of technological solutions that emerged during it. Companies that make redundancies, change their strategies, and declare the development of other departments.
Despite this crisis or because of it, it’s also a time for innovation and especially people with high seniority and independence will be paid more and more in the upcoming months, not less.
So… rise or not to rise?
Both our data and economic experts estimate that salaries will increase by about 4-7% on average this year, while specialists in data science, cybersecurity or engineering leaders and managers will be able to count on remuneration up to 15% higher than in 2022*.
So if you care about attracting the best talent in these areas, you can’t go after the tempting idea that salaries don’t increase during a crisis. Especially in the technology industry, when your competitors know full well that a crisis is a perfect opportunity to regroup and strike out.