IT professionals reached new salary heights last year as businesses waged war on attrition. Tech workers had ample work opportunities thanks to high demand, and businesses were quick to pay a premium for workers with the most sought-after skills.
In 2023, that salary ceiling will keep rising even amid tech industry layoffs and an economic slowdown, according to experts. Businesses know that in order to reach their technology goals, they require the talent that builds, supports and drives these initiatives.
IT salary and compensation strategies will be marked by competitive salary ranges, better transparency thanks to legislation and a decoupling of compensation from location — putting more emphasis on skills rather than cost-of-living metrics.
Here are three trends that will impact IT professionals’ salary outlook and businesses’ compensation strategy:
Decoupling compensation from location
A byproduct of an increase in remote work, businesses will continue to value the skills of a candidate above their location, according to Lily Mok, VP analyst at Gartner.
“If [candidates] have the right skills that the organization is looking for, they can actually get higher pay than they previously could in their local market,” Mok said.
Many tech workers moved away from traditional talent hubs during the pandemic, and in order to keep those workers, businesses did not adjust their salaries in accordance to cost of living differences.
This has seeped into hiring efforts as a way for businesses to prevent poaching, according to Mok.
“There is a shift in how we look at the compensation strategy as a whole and determining factors,” Mok said. “Location is no longer a driving factor in how [businesses] price out roles.”
Glimmers of this trend were seen last year in analysis of IT salaries across the country. Inland states gained ground on coastal states that have traditionally held the highest tech wages, according to the 2022 IT Skills and Salary report by Skillsoft.
California, Virginia and Connecticut all reported lower average annual salaries than the year before and dropped from the top five spots, according to the report, which surveyed nearly 8,000 IT staff members and decision makers.
Competitive compensation remains a driving factor
While business appetite for tech talent is begginging to cool, organizations still need to hire for critical skills and positions. These workers have many opportunities, and high salaries remain a driving decision factor.
The majority of workers that switched jobs from April 2021 to March 2022 — 60% — experienced salary hikes, according to a Pew Research Center survey. Fewer than half of workers who remained with their employer during the same period saw salary increases.
“Competitive compensation has and continues to remain as that lever that every business can use to attract talent,” Alisia Genzler, group president and chief client officer at Randstad Technologies, said.
More open and honest conversations about compensation
As salary transparency laws increase visibility of compensation structures, workers and businesses have better access to data detailing average ranges for roles and skills across industries and locations.
“You need to ensure that you’re educating yourself on what is happening in the marketplace and assume that the types of people you’re hiring are doing the same thing,” Genzler said. “When we talk to our clients, specifically about transparency laws and things like that, they are watching it very closely and making sure that they understand what that impact means for them.”
Oftentimes businesses do not want to approach the higher end of the salary ranges they provide, Drew Sussberg, VP of operations at Motion Recruitment, said. This can create confusion and result in workers becoming disillusioned or put off.
“If a tech worker sees what their current company is marketing for the pay range, and they feel like they are worth that range and they’re not making that, then they should certainly have an open an honest conversation with their direct boss,” Sussberg said.
Large salary ranges are still quite common despite those impacts. For example, Netflix included a salary range of $90,000 – $900,000 for a software engineer role. Websites and tools, such as Comprehensive.io, can track tech salaries and identify trends in the market.
