When it comes to the rarified air of high-tech, there’s a certain mystique surrounding pay practices, particularly as they relate to location, job type, and pay for performance. Employers of all sizes and in all fields want to know how and why these companies compensate their people the way that they do. Why? Largely because they are looking for insight into what they’re supposed to be paying their own high-tech employees.
To cut through the uncertainties, theories, and, yes, the mystery, here are results from a study that can help you get to the truth about pay in the high-tech world so that you can experience competitive success.
The Study
The leading global HR consultant Mercer looked at high-tech pay practices, including industry variations as well as those across organizations.
The study, which included U.S. employees only, set out to determine:
- The truth about compensation practices among high-tech employers
- How pay drivers vary among industry segments (e-commerce versus hardware, for example)
- The extent of cross-company variation. For example, whether pay for performance is employed across all tech types.
The Data
Study data include info such as the type of work, employee job level, tenure, and employee performance. Because the data architecture is standardized across the database, an entry-level professional in industrial design, say, is the same across employers.
Key Findings
The robust study produced some key findings and implications when it comes to high-tech pay practices. To wit:
- While high tech overall rewards experience, different employers and segments hold tenure in a different light. That’s why you must think about how much value you place on experience and tenure as compared to your competitors. During recruitment, potential employees and their would-be employers may mull point-in-time benchmarking to get candidates in the door. Once these people are hired, however, they will examine where their pay is headed, compared to other companies, and how their employers value them.
- While high-tech has a formidable pay-for-performance model, some segments reward performance more than others. Those segments include, but aren’t limited to, software/SaaS and computer/hardware. Such disparities are strongest in target data computer (TDC). When it comes to employee compensation, if your business is up against tech companies, get ready to shell out for performance, particularly when it comes to bonus and equity awards.
- Pay differences can largely be explained by job level and function. That’s particularly evident among senior professional and senior management ranks. You shouldn’t hesitate to compensate senior professionals at least as much, if not more, as some managers and even executives.
- Bay area employees tend to make more than those in other regions. Having said that, geographical differences may not be as pronounced as you may think. When putting together salary paradigms, and employing any kind of geographical differential, factor in competitive labor markets. Remember that, from a national average, the discount or premium of pay will invariably be different for, say, software engineers then for positions that are less in demand.
When pay practices in high-tech are discussed, the conversations are typically centered around high-level trends or job-specific case studies. The study cited here should help get you to the truth about pay in the high-tech world, and in so doing, help you to make sound, fact-based decisions about how to compensate your tech employees.
As you’re mulling your approach to paying tech employees, you may want to consider contacting Mercer, the firm that conducted and analyzed this study. One of its consultants can help guide you through the strategic decisions you must make to stay on top.
