[US] Tech talent remains in demand but oversized salaries may disappear

In the US, the falling stock market and the subsequent punishment doled out to tech companies, in particular, could potentially reshape pay packages even though the demand for tech talent remains strong, CNBC reports.

Fresh waves of slumping stocks are hitting daily, together with hiring freezes and slowdowns, or outright layoffs from companies couldn’t hire people fast enough in 2021. Earlier this week, Spotify CEO Daniel Ek sent an email to employees explaining that the company is slowing hiring by 25 per cent. Crypto exchange Coinbase announced it was cutting 18 per cent of its workforce. Within the past month alone, Stitch Fix eliminated 330 positions, representing 15 per cent of its staff and buy-now-pay-later firm Klarna laid off 10 per cent of its global workforce.

These companies, and many others in tech, increased their headcounts rapidly during the pandemic but are now halting or cutting back the size of their workforce as surging inflation and economic uncertainty threaten growth. 

Though overall demand for tech talent remains strong - with US employers posting 1.1 million tech jobs during the first quarter, an increase of 43 per cent from a year earlier, according to information technology trade group CompTIA - the way compensation packages are structured is likely to change.

For start-ups and smaller companies, we will see more in the way of equity and less cash in job offers as these firms look to conserve money in a difficult time, according to Thanh Nguyen, founder and CEO of compensation benchmarking startup OpenComp.

Mr Nguyen says start-ups - that until recently were willing to pay anywhere from 15 per cent to 30 per cent more to get the right candidate - are starting to focus on preserving their own cash, especially if the previous funding round was more than six months ago.

“What we’re starting to see now is earlier stage companies being less aggressive on cash and more aggressive on equity for job offers because their cash burn is so paramount now,” he adds.

A blend of cash and equity has long been the practice for pay packages in tech, however, this equation is becoming risky. Companies that issued shares at their peak to entice employees aboard are now finding those shares worth a lot less.  

“There’s either going to be a huge amount of employee shakeout or a huge amount of loss because companies are going to have to cancel and re-issue those shares that are underwater, or regrant them and cause dilution to keep the talent on board,” Mr Nguyen said.

In May, Brex co-founder and co-CEO Henrique Dubugras said the company’s $250 million tender offer was a means to give employees “some liquidity to weather this storm.” 

Larger public companies like Apple, Meta, and Google are getting caught up in this same dilemma. Mr Nguyen believes there are going to be huge implications for the heavyweights that had massive hiring runs with equity grants when share prices were surging. “We’re going to start to see the implications of this beginning in third-quarter earnings reports,” he said.

The big gorilla in the room

The ongoing strength in tech hiring won’t disappear altogether but it is likely to narrow. Nicola Morini Bianzino - chief technology officer at EY - says people with AI, data, Web3 and cloud architecture skills will continue to find opportunities, describing them as the talent that can take “companies to the next level.”

Mr Nguyen adds that individuals with these skill sets are “highly valued and will be able to demand significant cash and equity.”

The pain will more likely be felt by tech generalists such as those in sales, operations or marketing. “As people moved around it up-levelled compensation by 10 per cent to 15 per cent across the board,” he says. In a recession, labour costs will start to stabilise and people will be more likely to stay in positions for longer, he adds.

“The recession is the big gorilla in the room,” Mr Nguyen said. “It has a big influence on whether people stay in jobs or go.”

Source: CNBC

(Links and quotes via original reporting)

In the US, the falling stock market and the subsequent punishment doled out to tech companies, in particular, could potentially reshape pay packages even though the demand for tech talent remains strong, CNBC reports.

Fresh waves of slumping stocks are hitting daily, together with hiring freezes and slowdowns, or outright layoffs from companies couldn’t hire people fast enough in 2021. Earlier this week, Spotify CEO Daniel Ek sent an email to employees explaining that the company is slowing hiring by 25 per cent. Crypto exchange Coinbase announced it was cutting 18 per cent of its workforce. Within the past month alone, Stitch Fix eliminated 330 positions, representing 15 per cent of its staff and buy-now-pay-later firm Klarna laid off 10 per cent of its global workforce.

These companies, and many others in tech, increased their headcounts rapidly during the pandemic but are now halting or cutting back the size of their workforce as surging inflation and economic uncertainty threaten growth. 

Though overall demand for tech talent remains strong - with US employers posting 1.1 million tech jobs during the first quarter, an increase of 43 per cent from a year earlier, according to information technology trade group CompTIA - the way compensation packages are structured is likely to change.

For start-ups and smaller companies, we will see more in the way of equity and less cash in job offers as these firms look to conserve money in a difficult time, according to Thanh Nguyen, founder and CEO of compensation benchmarking startup OpenComp.

Mr Nguyen says start-ups - that until recently were willing to pay anywhere from 15 per cent to 30 per cent more to get the right candidate - are starting to focus on preserving their own cash, especially if the previous funding round was more than six months ago.

“What we’re starting to see now is earlier stage companies being less aggressive on cash and more aggressive on equity for job offers because their cash burn is so paramount now,” he adds.

A blend of cash and equity has long been the practice for pay packages in tech, however, this equation is becoming risky. Companies that issued shares at their peak to entice employees aboard are now finding those shares worth a lot less.  

“There’s either going to be a huge amount of employee shakeout or a huge amount of loss because companies are going to have to cancel and re-issue those shares that are underwater, or regrant them and cause dilution to keep the talent on board,” Mr Nguyen said.

In May, Brex co-founder and co-CEO Henrique Dubugras said the company’s $250 million tender offer was a means to give employees “some liquidity to weather this storm.” 

Larger public companies like Apple, Meta, and Google are getting caught up in this same dilemma. Mr Nguyen believes there are going to be huge implications for the heavyweights that had massive hiring runs with equity grants when share prices were surging. “We’re going to start to see the implications of this beginning in third-quarter earnings reports,” he said.

The big gorilla in the room

The ongoing strength in tech hiring won’t disappear altogether but it is likely to narrow. Nicola Morini Bianzino - chief technology officer at EY - says people with AI, data, Web3 and cloud architecture skills will continue to find opportunities, describing them as the talent that can take “companies to the next level.”

Mr Nguyen adds that individuals with these skill sets are “highly valued and will be able to demand significant cash and equity.”

The pain will more likely be felt by tech generalists such as those in sales, operations or marketing. “As people moved around it up-levelled compensation by 10 per cent to 15 per cent across the board,” he says. In a recession, labour costs will start to stabilise and people will be more likely to stay in positions for longer, he adds.

“The recession is the big gorilla in the room,” Mr Nguyen said. “It has a big influence on whether people stay in jobs or go.”

Source: CNBC

(Links and quotes via original reporting)