How to set salaries that attract and retain top talent

The past two years in the tech industry haven’t been easy. Global economic woes have meant there’s less funding floating around the market. This has affected developer salaries and annual increases.

According to the OfferZen 2024 State of the Software Developer Nation report, 1 in 3 developers are looking for a new role and a better salary is contributing to their leaving. But companies are having a tough time meeting developer expectations with less budget and fewer resources.

OfferZen’s former Head of Engineering Nic Botes recently sat down with Marius Croucamp, Vice President of Engineering at Fraxion, and Ross Pickford, Head of People at Global Kinetic, to answer the all-important question: How can companies and developers navigate salary conversations to successfully find the right fit?

Step 1: Understand the current tech market

The tech hiring market has been steadily cooling since its post-COVID peak. Although it seems that we’ve passed through the worst of the downturn, things haven’t returned to normal and both developer salaries and the volume of available roles reflect that.

“The market hasn’t been great for the IT sector particularly. We’ve seen quite a few companies doing retrenchments, downsizing and freezing of roles. So there are a lot of people on the market competing for fewer roles,” said Ross.

He also noted that, in this environment, it’s crucial to have a good grasp of your needs as a business as well as the specific skills that a candidate has.

“When the market’s tight and everyone is fighting over one candidate, it’s important to understand the depth of your needs as well as the developers’ breadth of skills. That puts you in a position where you know exactly where they’ll fit in and what you can give them, so you can create an attractive offer,” he added.

Patience is another important factor here, according to Marius. While there are different tactics you can use to make a hire faster, it’s generally a better idea to wait for the right candidate.

“Ultimately, you need to look longer to find the talent you want. There are different strategies you can implement, like hiring two intermediates to fill a senior role or go with someone who’s less of a culture fit, but that’s typically a bad idea. I'd rather just take it on the chin and wait until you can place the right resource in your team,” he said.

Step 2: Benchmark salaries effectively

Benchmarking is a good place to start figuring out what salaries to offer developers. It enables you to understand salary trends so that you can make competitive and attractive offers. Fortunately, there are a variety of resources available to help you benchmark.

“We use OfferZen reports, Payscale comparisons, the ITWeb Salary Survey, job boards and then we benchmark against ourselves. We also look at what candidates have been earning because, when you hire, you typically ask for a payslip, so we can see what’s going on in the market,” explained Ross.

Although he noted that Fraxion uses similar tools for benchmarking, Marius cautioned not to put too much weight behind a payslip, as a developer may have been underpaid for their level of experience or capabilities in previous roles.

“We had a developer come in whose salary had stagnated for a few years, so they had missed a few salary jumps and they were also looking to make the next move ‘up’ in their career. They were upfront about that and explained why their expected salary looked like such a big jump. We understood and were happy to accommodate,” he said.

Another thing to consider is the industry you’re hiring in. Failing to do this could see you putting far too much – or too little – on offer.

“What we’ve seen that plays quite a big role in benchmarking is the industry. Tech firms in different industries will have very different budgets. For example, salaries in the financial sector tend to be quite high but service-based businesses will offer less,” added Ross.

Step 3: Build trust through transparency

Having Transparent salary structures that are communicated to candidates helps to build trust. They also mitigate any potential disappointment or feelings of being lowballed when you present your offer. But this communication is, of course, a two-way street.

“Honesty and openness are key from both sides,” said Ross. “I think a great analogy is a first date. The interview process is the first part of our relationship. You have to have honest discussions early on. Talk about the salary, talk about the benefits, talk about the expectations.

“For example, at Global Kinetic, we work with salary bands. So although we do our best to match what a candidate is asking for, if you’re a senior or a junior with a certain amount of experience and certain skills, we have a ceiling in mind. That’s something that we share upfront – not necessarily the values for the band, but the fact that the bands exist.

“Then, from the candidate, you want to hear what they’re wanting to achieve, not just in terms of money, but career goals, how they want to grow at the company or if they might want to move laterally.”

Marius pointed out that being clear about both your and the candidate’s expectations can help everyone avoid being “left with a bad taste in their mouth” because of ongoing negotiations after an offer is made.

“You want to start the relationship on the right note. Make sure you know what salary the candidate wants and that they know what you are offering; you don’t want to waste anyone’s time,” he said.

After the hire: Tips for retaining top talent in a competitive market

Salaries are the number one driving factor for developers looking for new jobs, but that doesn’t mean money is the only thing in your retention arsenal. Ross pointed out that you should focus on the “happiness triangle” when someone comes to work for you.

“You want to be sure that they’re satisfied with their salary, that they enjoy the people they’re working with and they enjoy the work they’re doing. Then there are other things like learning, training and development, and access to the right tools to do your job. If you can get those right, then your value proposition is better than your competitors,” he explained.

Culture is another critical factor. Developers are known to value being in an environment that enables them to fully explore their potential. And if they don’t get that from your business, they’re likely to move on.

“A lot will come down to culture. If a developer doesn’t feel like they’re in the right space, they’ll find reasons to move on. A big non-salary benefit you can offer is, of course, work from home. But aside from that, you need to figure out what kind of benefits your culture allows for that to differentiate you in the market,” said Marius.

“Essentially, you want to create an environment where, if they feel like they’re not earning enough, they’d rather talk it through and explore all of the potential opportunities within the company.”

For more developer hiring, retention and salary tips, download our Developer Hiring & Retention Report or our Salary Benchmarking Report.