According to our 2023-24 Global Salary Planning Report, median salaries for IT roles have increased more than that 5%, with many mid-level roles increasing above 10%. The simple fact is: most organisations haven’t had the budget to match inflationary pay increases.
Despite this, we’ve seen pay for roles in the tech industry increase considerably. Aspire even reported that salaries have increased by as much as 30% in the past year for some IT roles in the UK.
Google’s Biggest Lay-off in 25 Years
The tech sector has have a difficult period, with many large organisations making significant redundancies. After seeing some unprecedented growth through the pandemic, Google had to say goodbye to over 12,000 jobs last year.
Amazon and Meta also made some large sacrifices, with a combined 10,000 employees being laid off. And X (formerly Twitter) made over half of their workforce redundant.
The Rise of AI
However, while we have seen some unprecedented turnover in large corporations, there has been a lot of technological innovation going on at the same time. For example, increasing use of AI and digitisation across many industries has meant that certain tech roles are now in high demand.
AI has revolutionised the way businesses operate, enabling automation, streamlining processes, and enhancing productivity. As a result, more companies are actively seeking professionals with expertise in this area to stay ahead in the competitive market.
Reed reported that software developers, test analysts, and front-end developers saw the biggest salary increases over the last 12 months.
This demand for tech roles has created a competitive job market where companies are willing to offer higher salaries to attract top talent. A similar trend is expected to continue as innovations advance and play an even more significant role in various industries.
Pay Progression for Incumbent Employees
Cendex’s latest pay trends report compares salary progression for employees who were in the same role for 12 months with those who changed roles or companies during 2023. They reported an average growth of 6.2% for incumbent employees (an individual who is currently employed).
This highlights the potential issues and legal risks of paying significantly higher salaries to external candidates.
As mentioned, the demand for tech roles has created a competitive market. This is where we see a significant rise in salaries to attract talent. However, if these organisations are not offering their loyal employees a similar level of pay and the opportunity for pay progression, they will struggle to retain them.
Not only that, but they could find themselves at risk of non-compliance if they do not offer equal pay for equal work. According to the Equality Act 2010, companies must provide equal pay for like work, work of equal value, and work rated as equivalent. Paying a significant amount more to external hires could lead to people in the same role being paid vastly different salaries.
Considerations for Your Organisation
To effectively manage employee salaries in light of these trends, we should consider two key factors:
- Can you still manage all roles, including IT, within the same pay range?
If you have a reward framework and set pay ranges, some adjustments may be required.
If you use the same structure for jobs in every department, you may end up having to offer slightly higher pay across your other functions to make up for the fact that IT jobs have raised the average salary.
On the plus side, you will have a much simpler pay framework that is easier to manage and communicate to your employees.
- Do you need separate pay ranges?
If you’re no longer able to manage your technology roles in the same way, then you could use a separate pay range for them compared to the rest of the organisation. This enables you to be a lot more aligned with the external market and will likely improve your chances of attracting and retaining your tech employees.
However, you again need to balance this with clear employee communication because of the change in internal equity. People who might be sitting at the same level within the organisation are now subject to different pay ranges.
This is justified because it’s driven by the external market, but it’s a message that you need to deliver carefully to your employees.
Learning From the Tech Industry
The trends we’ve seen over the past year highlight the importance of taking a data-driven approach to salary planning. Blindly matching inflated salaries without regard for specific talent needs, budgets, and internal equity considerations is unlikely to be sustainable.
You may determine that separate pay ranges make sense for highly competitive roles. Or you may find you’re able to retain top talent by emphasising your values, culture, and career development opportunities.
The key is flexibility—being attuned to the external market while crafting a total reward strategy aligned with your business objectives. Click to download the 2023-2024 Global Salary Planning Report and view the complete breakdown by industry and country.