Technical talent is still in demand, but oversized salaries are disappearing

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The falling stock market, and the punishment that is especially distributed to technology companies, is ready to reshape the wage packages despite the fact that the demand for technological talent is still strong.

Every day brings a new wave of falling stocks, layoffs and declines, or direct layoffs from companies that a year ago could not hire people fast enough. Earlier this week, Spotify CEO Daniel Ek sent an email to employees explaining that the company is slowing down employment by 25%. The cryptocurrency exchange Coinbase announced that it cut 18% of the workforce. And over the past month, Stitch Fix has eliminated 330 jobs, representing 15% of employees, and buy-now-pay-later firm Klarna laid off 10% of its global workforce.

These companies, and many others in technology, increased the number of employees rapidly during the pandemic, but are now stopping or reducing the size of their workforce as rising inflation and economic uncertainty threaten growth. And while overall demand for technical talent remains strong – during the first quarter, U.S. employers posted 1.1 million technical jobs, up 43% from a year earlier, according to information technology trading group CompTIA – the way compensation packages are structured is likely. to change.

For start-ups and smaller companies, expect to see more in the way of equity and less cash in job offers, as these companies seem to be saving money in a difficult time, says Thanh Nguyen, founder and CEO of Compensation Benchmarking Startup OpenComp.

He says start-ups – which until recently were willing to pay anywhere from 15% to 30% more to get the right candidate – are starting to focus on preserving their own money, especially if a previous round of funding was more than six months ago .

“What we’re starting to see now is that companies in earlier stages are less aggressive on cash and more aggressive on equity for job offers because their spending is so important now,” he adds.

While a mix of cash and equity has long been the practice for payroll packages in technology, this equation is starting to get a little tricky. Companies that issued shares at the top to lure employees on board now find these shares worth much less.

“It’s either going to be a huge amount of employee shakeout or a huge loss because companies have to cancel and reissue the shares that are under water, or give them back and cause dilution to keep the talent on board,” Nguyen said.

In May, Brex co-founder and co-CEO Henrique Dubugras said the company’s $ 250 million bid was a means of giving employees “some liquidity to cope with this storm.”

Larger public companies such as Apple, Meta and Google are caught in the same dilemma. Nguyen believes it will have major consequences for these heavyweights who had massive employment runs with equity contributions when stock prices rose. “We’re going to start seeing the implications of this beginning in third quarter results reports,” he says.

The “big gorilla in the room”

The ongoing strength of technology hires will not disappear, but it is likely to decline. Nicola Morini Bianzino, Chief Technology Officer at EY, says that people with skills in AI, data, Web3 and cloud architecture will continue to find opportunities, describing them as the talent who can take “companies to the next level”.

Nguyen adds that people with these skills are “highly valued and will be able to claim significant cash and equity.”

The pain will more likely be felt by technical generalists such as those in sales, operations or marketing. “As people moved around, the compensation increased by 10% to 15% across the board,” he says. In a recession, wage costs will begin to stabilize and people will be more likely to stay in positions longer, he adds.

“The recession is the big gorilla in space,” says Nguyen. “It has a big influence on whether people stay at work or go,” Nguyen adds.