Are tech salaries inflated or are they really being paid less than they should be? Our CEO Nico analyzes the two main currents of opinion today.
I read a lot on social media, strong complaints regarding the market salaries being paid to programmers vs. the revenue the company generates and what it can afford to pay. And I’ve been able to unify it into two very disparate ideas:
- On one hand, there are those who say that the fault relies on the companies because they are not able to generate more revenue and therefore pay what they pay (little).
- On the other hand, those who say that developers’ salaries are too inflated and that they want to charge a fortune for what they contribute and produce vs. their expertise.
Are they right in their conjectures and hypotheses? I am going to analyze it from my experience.
The fault relies within the companies that don’t generate more revenue
What company would not want to generate more revenue if it had the chance? What company would not want to be able to pay more competitive salaries if it had the economic resources?
The problem at the end of the day is who do I compete with to get that tech talent? Depending on my market, my target audience and my competitive advantage (as well as my ambitions and resources), I will be able to opt for one level of income or another. But it is not the same to be in the Spanish, European, American or global market. They are different realities, different volumes and different revenues.
Following the same philosophy, how many Spanish companies ( in techs or other sectors) can compete in revenue / capitalization with the top American, Chinese or other countries with global impact? Almost none, not to say less than five. This is the root of the problem. We all want to grow, but if we do not go to a global market it is very difficult to compete and talent becomes global, not local. And so the equal relationship between talent and remuneration breaks down. The size of the market or our company, in this case, does matter.
Blaming poor earning capacity as the reason for paying too little seems to me to be a pretty meaningless idea. We all want more and we have to adapt to our possibilities.
What seems much more interesting to me is where we have to put our focus with our economic resources. Depending on what the differential value of the company is, it is key that we invest in that area and/or talent. This is what will make our company take off or become more efficient. This is where investing in tech talent comes into play, if it is going to be differential.
The market for tech professionals is inflated
On this point there is also a lot of debate, although there shouldn’t be. The tech market is a clear example of the law of supply and demand. There is a shortage of tech talent for Spanish, European and global needs. And in this case that will always benefit the developer. Although, according to our data, the developer knows the salary he wants to charge… and look how companies always offer more for his value.
If you want more data like this you can download our “Salaries Report 2022”.
It is also true that there are 12-18 interesting months ahead with the massive layoffs that are taking place in the big American tech companies. This is in addition to the companies and startups in Europe and Spain that are doing the same and the economic crisis in which we are in and its corresponding inflation. Does this mean a total availability of tech profiles? No, since there will continue to be more demand for profiles than supply. Most likely, you will select better top talent and salaries will adjust a little more, but nothing out of the law of supply and demand.
Deserved salary vs. tech value
Another point that, in my opinion, should not be debated, is whether the market should determine salaries. The debate is more interesting if it focuses on relating what dev brings (generates value and revenue) vs. the costs of having it.
There is a problem here. We are expanding teams and oversizing areas (because revenues or funding rounds allow it) but we find it difficult to observe in detail the process improvement, cost reduction, revenue increase, etc. …. that all these new acquisitions can generate. It is necessary to leave behind a short-sighted vision and look beyond, assessing the weight of decisions on whether or not to acquire more talent.
Are you a start-up or are you a star?
Finally, another key element is to understand your positioning within the ecosystem in terms of talent.
You can’t expect to sign top talent if multinationals pay significantly more than you do. Especially in the medium term (18 months maximum) when they can pay at least +50% of what you can. But you can be a “quarry”: bet on young talent that grows in your company generating a bond between you. And yes, he may end up going to one of the “stars”. It is the law of the market, the best thing to do is to assume it and compete within your possibilities.
Conclusion: Benefit from the problem
Ultimately, the income is what it is and so are the salaries. Thinking that these points are the “cause” of the problem I don’t think is the way to go and it is better to turn it around: go deeper into what your advantages can be to compete in the tech talent market.
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