Applied HR Strategies (AHRS) Client Alert. Technology Pay Rates Rising Faster than the General Labor Market Winter 2014 Update
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1 Applied HR Strategies (AHRS) Client Alert Technology Pay Rates Rising Faster than the General Labor Market Winter 2014 Update Applied HR Strategies, Inc. (AHRS) Kirkland, WA
2 AHRS Client Alert: Pay Rates in Technology Roles are Rising Much Faster than in the Overall Labor Market Despite the generally tepid economic recovery, since early 2011 we have been advising our clients that pay levels for technology professionals are rising considerably faster than the labor market as a whole, and thus companies need to act to stay on top of this rising and hypercompetitive labor market. Initially though, we had to rely largely on our informal market observations and client reports in reaching these assessments, as the predicted rise hadn't been fully reflected in the salary survey data yet (it doesn t show up fully in the data until it s already happened). In the past year and a half we have been diving into this issue more deeply, and we now have full "proof" of these trends. This note is an update to similar alert that we sent out to our clients and colleagues in the fall of 2013, but with additional insights and statistics. AHRS looked closely at the past three years of data from the Northwest Technology Survey (a survey of pay in benchmark technology jobs in the Northwest conducted by Milliman, in association with AHRS), as well as the three years of data from the Culpepper Technology Survey. We have found that base pay rates for technology jobs are indeed rising at a substantially quicker pace than for the overall northwest labor market. Base pay medians for technology jobs from the summer of 2011 to summer 2012 were up 5.2% in the Northwest Technology Survey and 4.3% in the Culpepper Technology Survey. These trends continued in 2013 and into 2014, with data from most recent edition of the Northwest Technology Survey showing a 4.3% year-over-year increase and Culpepper with a 3.8% change, vs. much lower rates of increase (2.2% to 2.5%) for general industry jobs in the Northwest over the same time period (see table 1). Recently updated data is in orange. Table 1 - Base Pay Growth Trends in Technology Jobs in the Northwest Job Category and Data Source Benchmark general industry jobs Milliman northwest general industry surveys Software and database development roles Culpepper Technology Survey (Seattle area) Benchmark technology jobs Northwest Technology Survey Software development management roles manager and director levels Culpepper Technology Survey Technology management roles for manager and director levels NW Technology Survey Change in Median Base Pay Change in Median Base Pay % 2.2% 4.3% 3.8% 5.2% 4.3% 4.2% 4.3% 8.8% 6.0% Comments Slow, but steady improvement in the overall labor market in the Northwest. Strong demand relative to supply keeps pushing up pay at above-average rates. Demand exceeds supply in many key job families, maintaining solid pay growth rates. As the technology sector grows, management talent to lead and manage this increasingly-dynamic industry sector is in short supply. Demand for technology managers and leaders exceed the supply, and the money is following this shortage. AHRS Client Alert Winter 2014 Update Page 1
3 We also discussed general pay trends with the survey group at Milliman, to learn what they are seeing in the overall northwest labor market. Milliman says that base pay medians were up only 2.2% year-over-year for their northwest general market salary surveys they conducted in the spring of 2013 and a 2.5% increase in the time periods. Thus, pay levels for benchmark technology jobs are rising at much quicker pace overall, ranging from to 3.8% to 5.2% annual increase (depending on data source and time comparison period) vs. 2.2% to 2.5% for the general market. Pay growth rates are even stronger for experienced technology managers than for many non-management roles. For managers and directors in software development, base pay medians increased 4.2% between 2011 and 2012 and 4.3% in the time frames, according to Seattle area data from the Culpepper Technology Survey. The Northwest Technology Survey shows even higher growth rates for technology managers. For all manager and director roles in the survey, median base pay levels increased 8.8% year-over-year. While the 8%+ growth rate may be a bit of an aberration (in part due to changes in the survey itself), the pay rates for this same group continued upwards by 6% in the 2012 to 2013 period. We are continuing to see strong demand for these roles, and thus we still expect to see a higher than normal growth rate in pay for this group, despite the rapid increases that have already taken place. Some technology job families are growing at a faster rate than others, based on larger trends in the marketplace. For instance, we are seeing a very strong demand for software engineers, mobile applications developers, high-end IT-related engineers and others, with pay rate jumps as much as 10% annualized. Some job families, such as those tied to older "legacy" systems (mainframe computing systems, etc.) though are seeing slower pay growth rates (but still mostly higher than for the overall labor market). These are some of the "micro-climates" ( mini labor markets within the larger overall market) in an overall very strong marketplace for technology professionals. Base pay for senior level non-management engineers in the hottest job families (various high-end engineers, mobile device SW engineers, etc.) has now crested the $100,000 per year level, not including other forms of compensation (bonus, stock, etc.). No wonder so many parents wish their kids would study engineering and other so-called STEM occupations! Pay growth in the now less-rarified $100k+ air is a bit more muted in some job families (i.e., non-mobile SW engineers, for instance), despite the generally high demand, than for the up-and-comer talent in these same job families. See Table 2, below, for an overview of the pay growth (and demand) trends for some benchmark technology job families. Most of the hot job families are following the direction of technology product and usage trends. With much of technology moving from in-house installations to socalled cloud-based applications and services, and/or applications and services accessed via mobile devices, the professionals that develop these technologies and tools (mobile applications developers, web developers, etc.) and help manage our usage of them (i.e., network engineers) are leading the pack in terms of job demand and pay growth. AHRS Client Alert Winter 2014 Update Page 2
4 Table 2 - Base Pay Growth Trends in Benchmark Technology Job Families in the Northwest Hot Job Families Solid/Steady Demand A Bit Soft (relative to others) Technology managers and directors Application engineers Hardware and desktop support Mobile software application developers SW developers/engineers Data/voice communications Network engineering and administration Data security Computer operators SW Developers in Test ( SDET ) Database developers/administrators Help desk specialists Web developers Web designers/content producers Implementation specialists Account managers (technical) Product support engineers Some sales engineers Similarly, job families that aren t doing as well are mostly a reflection of technology trends as well as what is happening in the marketplace for technology products and services. We see slowly diminishing demand for some jobs like implementation specialists (as fewer products are installed at customer locations) and even some sales engineers, as more selling and product demonstration work is done via the Web, and sometimes by less trained staff. As more applications and services move to the so-called cloud, and laptops and mobile devices become the primary computing tools for many workers, there is a diminishing need for desktop support personnel, computer operators, and other job families that support more legacy systems. So what's a company to do if they are seeking to attract and retain these high-demand technology professionals? First, make sure you have the latest pay data and do frequent pay benchmarking for key technology jobs families (at least once a year while the market is trending up more quickly than the overall market). You can t act in a purposeful way, if you don t really know where your company stands competitively. Second, consider or reconsider your compensation strategy and competitive market positioning. If you don t have a compensation strategy, think about what you're trying to accomplish with your compensation programs, how you want to position yourself in the marketplace and what your top priorities are (attract the best talent, or to maintain labor costs as low as possible, for instance). Once you have a well thought-out compensation strategy, then you can develop a plan to get where you want to be, while considering your company s resources and other priorities. AHRS Client Alert Winter 2014 Update Page 3
5 Once you know where you are (see bullet #1) and know how you want to position yourself relative to the market (see bullet #2), you can then begin to develop a plan to get your company to where it wants to be. This may require additional cost and/or competitive analysis, but now that you know the outline of the plan, you can work to figure out what it would take to implement it. Companies that find themselves well off their desired compensation strategy and market positioning may need to develop a longer-term (>1 year) plan to achieve desired levels. Technology professionals tend to be more aware of their market value than most other professionals, so employers can't afford to not be fully aware of what's going on in the marketplace for these key jobs. It is important to then take appropriate action based on this information and their company s compensation strategy and resources. Later in 2014, AHRS will be offering a half-day workshop covering compensation trends (including a more detailed look at this data), as well as hands on training for merit and salary planning (including soft copy templates for your use back at the office). We will also cover alternative strategies for competing in hot labor markets, such as in the technology industry currently. While the date(s) for these training sessions have not been determined as of this writing, please see our training page ( for more information and to register, once we have announced dates and locations. If you have any questions or wish to discuss this information further, please feel free to reach out to me ( or doug@appliedhrstrategies.com) or to Jill Odegard ( or jill@appliedhrstrategies.com). Until then, the best for a successful 2014! Doug Sayed Doug Sayed, SPHR, GRP, CCP Applied HR Strategies, Inc. doug@appliedhrstrategies.com Web: Phone: AHRS Client Alert Winter 2014 Update Page 4
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