IT salaries continue to rise, but many tech workers are still well above the national median income, new research from compensation and salary data solutions company Paysa shows that many tech workers are still underpaid.
Paysa used machine learning and AI to examine more than five million resumes of tech and engineering professionals from their salary database and compared their education, experience, skills, work history and current salary to their market value for identical available roles, says Chris Bolte, CEO of Paysa.
The findings revealed that more than one-third of tech professionals -- nearly two million people -- are underpaid by 10 percent or more. As an example, Bolte says that, considering the average salary for a software engineer is $112,000.00, this translates into a minimum of $11,200.00, per person, per year in lost wages.
Furthermore, the findings indicate that within the next six months, seven percent of all tech and engineering workers will be due for a promotion with a salary increase of $17,756.00, on average.
Paysa's analysis also found that, overall, more than 78 percent of all technology and engineering workers (3.7 million), have a compelling reason to move to a new company and job within the next six months. They may be underpaid relative to the market, have missed their promotion window, have been at their present company for the past two years and/or are working at a company that is in serious decline, he says.
To improve engagement and retention rates, Bolte says companies would benefit from taking immediate action to more deeply engage their most important employees -- either with a raise, a promotion, expanded skills and responsibilities, or some other sort of recognition.
Keeping up with the market
It's not that companies underpay their talent deliberately, especially not mission-critical IT and engineering talent, Bolte says, it's a matter of understanding how quickly market value for these skills changes and keeping up with that.
"What happens is that companies bring people on at competitive rates -- they do understand that salary and compensation is a major, major draw. But once they're on board, companies don't tend to do much more than the standard yearly increase," Bolte says.
Take a hypothetical software engineer who joined a tech company three years ago at a starting salary of $100,000 annually, and who received a 3 percent raise for three years. That person's now making approximately $110,000, Bolte explains. But in those intervening years, the demand for tech talent has increased, and now the company is bringing on new software engineers at a market rate of $130,000 -- suddenly, the "veteran" engineer has a major motivation to start looking for a new position elsewhere to boost their salary, Bolte says.
"The market rates are rising so quickly, and companies are understandably keeping track of these rates when they bring in new talent, but they aren't being proactive about bringing everyone on their teams up to that same compensation level. That's a recipe for disaster. You will have lost all the goodwill in that relationship; they've already disengaged, they're looking for better opportunities, and they have gone through the emotional turmoil of searching for a new job. You simply cannot wait until your talent comes to you and says, 'I got a competing offer'," he says.
Making the investment in talent
Companies don't necessarily have to pay top-of-market rates, either. The recent Gallup State of the American Workforce study shows that 37 percent of the more than 195,000 professionals surveyed would leave for a salary increase of 20 percent or less; offering any kind of compensation boost goes a long way toward fostering engagement and loyalty, says Jennifer Selden, regional recruiting director for Randstad Technologies.
"Salary is still the biggest driver for talent when looking for new roles, but it's also important to know what's important to your audience. Work-life balance? Location? Remote work? Is talent interested in your brand, your mission, your values? Are there opportunities to work with cutting-edge technologies? What other factors can you use to incentivize your talent?" Selden says.
This is especially important in off-metro areas where cost of living is lower and therefore salaries aren't as exorbitant, she adds. In those cases, employers and employees must have open and honest discussions about what the market will bear and what skills and experience are worth, Selden says.
"Off-metro sourcing and remote work can open up lots of other talent pools, but the employer and employee are both responsible for making certain compromises when it comes to salary, benefits and compensation packages that are adequate for what the geographic market can bear," she says.
It can be as simple as acknowledging that your technical and engineering talent is underpaid relative to the market and offering an increase as a show of good faith, says Bolte, even if you can't budget for top-of-the-range increases.
"It makes a huge, huge impact for your employees if you can say, 'We realize the market has moved past where you are, salary-wise, and we value you. We can bring you up 'X far;' -- That's huge. Just being open and transparent, so your workforce knows that you're looking out for them and you are invested in keeping them on," Bolte says.