Salaries: What can we expect?
Over the past couple of years, we have seen tech salaries reach new highs as employers navigated a candidate-short market and really having to compete to attract & retain talent.
2022 was the year where it seemed like every company was looking to fill the gaps in their businesses and as a result we saw climbing salaries, aggressive hiring plans and mass layoffs all within the same year. Of course, this is due of number of factors, one of which was inflation. To give abit of context, the rate of inflation reached 10.7% in November 2022 in the UK, and in Europe it reached 10.1% in the same month.
But before we look at what the salary trends of 2023 are potentially looking like, let’s quickly recap on 2022.
According to Hired’s 2022 State of Tech Salaries report:
Global increase in salaries across nearly all tech roles, driven primarily by the growth in salaries of experienced professionals (3+ years of experience)
Engineering Management roles paid the highest among tech roles across the US, UK and Canada. In the UK, full-time engineering management roles saw an average salary of £113,358, up from £107,205 in 2021 – a 7.93% increase YoY
The salary gap is closing between start-ups and enterprise organisations Salary levels at corporates (companies with 300+ employees) versus start-ups (companies with <300 employees) in the UK narrowed to the smallest pay difference to date since 2019, with corporates paying just 4.53% more on average (£84,061 vs. £80,419)
Despite the current economic climate, remote/flexible work remains a top priority for employees 54% of respondents would immediately start looking for a new role if asked to fully return to the office and only 33% of respondents would trade remote-work for a fully in-person role with a higher salary.
So what can we expect to see in 2023?
To raise salaries or not is a question many employers have been wrestling with this year as companies want to remain competitive while ensuring they have enough cash in the bank to survive a tougher macroeconomic environment.
According to experts interviewed by CIO Dive, we can expect to see “salaries to continue rising even amid tech industry layoffs and an economic slowdown. Businesses know that in order to reach their technology goals, they require the talent that builds, supports and drives these initiatives”.
This is also echoed by Josh Brenner, Hired CEO stating “We’re seeing salaries rise globally as employers expand their talent pools and candidates find more opportunities outside their backyards.” During this period of uncertainty, we will see more of an efficient growth strategy being utilised in contract to the hyper-growth we’ve previously experienced.
A recent report by WTW- We Transform Tomorrow on 2023 Employee Pay Trends breaks down how we can potentially expect to see salaries increase within 2023.
It is always good to remember that salary budgets are dependent on a number of factors. Employers should ensure a transparent salary increase process as well as emphasize the connection between salary increases and business performance.
Fig 1: Average Salary increase budgets for 2021 and 2022 vs 2023 projections across the top 15 largest economies in the world.
Fig 2: Extract of projected 2023 salary increase forecast across Europe. Full report on global forecast can be found here. In Europe, projections for 2023 salary increases are also well above 2022 actuals with the highest increases in Belgium (10.5%), the United Kingdom (5.1%), Germany (4.6%) and Spain (3.6%). The jump in the Belgian salary increase is due to the automatic wage indexation tied to inflation, which is unique from the rest of the eurozone.
Whilst much of the research points out that we can expect to see salaries continue to rise this year, it’s important to mention that salaries alone are not the only factors to consider when attracting & retaining talent. It is important to take a total rewards perspective. Base salary adjustments are just one piece of the puzzle. Consider other important components of the employer-employee benefits including:
Bonuses
Long-term incentives
Health and wellness benefits
Career progression
Learning and development opportunities
Continuing diversity, equity and inclusion initiatives
And so to summarise: Yes, salaries are projected to increase but more importantly, be responsive and attentive to what’s important to your employees!