The rise and rise of Software Engineering salaries: 3 tips to hiring without breaking the bank

You can’t switch the news on at the moment without hearing a continuous drum beat of monetary doom and gloom. A cost-of-living crisis, soaring inflation, an impending recession etc etc etc.

A group of people that will have felt this an awful lot less than most are software engineers.

For the last 12-18 months, the demand for software engineers has far outweighed the supply. There are a number of reasons for this, ranging from a post-Brexit exodus of talent, to increasingly remote-first working practices meaning engineers can pick-and-choose where they ply their trade from (not so good when you need people in the office), to an increasingly bullish financial services technology job market; full of investment, full of growth and scale and a demand for talent that’s never been seen before.

A sharp increase in job opportunities + a shrinking talent pool = a talent shortage.

This talent shortage means a sharp increase in competition and an inflation-busting increase in salary expectations.

If you’ve done any hiring of technical talent in the last couple of years, you already know this only too well.

In 2022, we saw software developer salaries increase on average by 15% when changing roles – almost double that of previous years. And that’s the average, pay rises of 30+% have been seen increasingly frequently.

But before we start turning these well-paid technologists into villains… in all honesty, who can blame them?

If a firm is willing to give you a significant uplift on your base salary, why wouldn’t you take it?

Whilst this is obviously all very good news for the engineers, it’s been less of a rosy time for the firms trying to hire them. Especially if growth and retention has been stable for a while and you’ve come into the hiring market expecting it to be the same as a couple of years ago.

So, unless you work in a world of unlimited budgets, you need to think seriously about what you’re offering to stand out from the competition and compete with eye-watering pay-rises.

1.????Skin in the game. Offering equity and/or LTIPs is a win for everyone as it means employees are engaged for the long-term and highly motivated for the business to do well. If the firm is growing, so is the pot and ultimately, if the employee leaves before ‘the event’ then it hasn’t actually cost you anything.

Of course, not every firm is going to be able to offer a share of the pie. In which case a clearly laid out bonus structure is the way to go. ‘If we achieve x and you achieve y, we’ll pay you z.’ Discretionary bonuses were all well and good in the contracts of yesterday, but if you’re not prepared (or able) to pay the increased base salaries then you need a clearly laid out path to achieving a competitive total compensation.

2.????Learning and development. If engineers aren’t moving their skillset forwards, it’s not just that they’re standing still, they’re being left behind. The rest of the industry never stops progressing and engineers need to be keeping up at the very least.

The prospect of a clear training programme is always attractive to technologists, but in these times of bumper pay-rises it needs to be even more compelling.

If you need to hire someone with skills A, B, C & D, previously the best hire would always have been someone with skills A, B & C and then you teach them D. This gives you someone who comes in and helps you with your requirements, but someone who is also going to be engaged with your business and likely to stay with you a lot longer. If you need to keep the salaries on offer under control, it’s worth considering what the absolute minimum requirements are (the A & B) and what can be taught (the C & D). Really focussing on hiring potential and offering a clear training and development path does wonders for accessing more affordable talent, as well as ensuring your hires stay with you longer-term.?

3.????The interview process. You have to make absolutely sure that you and your team are articulating points 1 & 2 during interview. Not so long ago, it was an accepted interviewer’s mindset that the candidates coming through would be 'lucky to work for us’ and ‘need to prove themselves worthy of a job here’. ‘Give them a technical test and see if it’s worth our time talking to them.’

Whilst at least some of this is still kind of true, it’s so important to ensure that you’re selling the role and opportunity. Active candidates will generally be involved in multiple interview processes, so expecting them to do a tech test before they’ve heard from you (not just the recruiter) how great your business is, is going to have a big impact on how many people actually bother to do your test.

As for passive candidates, those that aren’t looking and have been head-hunted for your role, they will need to hear very clearly why it would be worth the time and risk of changing jobs if there isn’t a significant salary bump on offer.

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The good news is that Harrington Starr have a great deal of experience in helping firms hire talent and we know it’s not just about who has the deepest pockets. The market is constantly changing and those who do well are the ones who are able to adapt, take advice and learn.

If you have any questions about hiring in software or data engineering, please don’t hesitate to reach out.