Tech salaries look set to stall in 2023

Tech salaries have surged in recent years, but a leading recruiter has warned that salaries are “starting to stabilise” as widespread economic challenges force companies to tweak their strategic plans and reassess their hiring requirements.

Despite a continued appetite to invest in “paramount” critical technology functions – for example, infrastructure, governance, and development – many companies are likely to dial down their staffing intentions in other areas in 2023, Australian recruitment firm Robert Half director Andrew Brushfield has warned.

“The tech hiring climate is still robust and employers are constantly hunting for highly skilled technology professionals to help grow and secure their company,” he explained.

When it comes to ‘non-crucial’ or ‘nice-to-have’ projects, however, “we see contracts not being renewed and businesses not expanding their teams.”

This overall cooling of demand – dovetailing with the loss of tens of thousands of jobs at downsizing tech giants – has shifted the balance of power away from job seekers, who have become more conservative about switching roles than they were a year ago.

“The idea of a potential recession and an increase in tech layoffs across the industry has placed a heightened emphasis on job security,” Brushfield said, warning that past eye-watering salaries may be harder to come by and noting that “salary alone is not enough to get a candidate over the line.”

The recent CW Jobs Confidence Index 2022, for one, found that just 77 per cent of the more than 1,500 surveyed tech workers and IT decision-makers said they feel confident in the current state of the UK tech industry.

This was down from 89 per cent in 2019, and had declined every year since as general uncertainty dominated public discourse and career plans.

Although “highly skilled technology talent remain well positioned to negotiate their needs with employers”, Brushfield said – particularly in shortage-hit areas like cyber security – companies wanting to recruit other types of tech talent need to do more than just throw bags of money at potential hires.

“Amid a time of uncertainty in the tech industry,” he explained, “candidates are willing to move roles if they are met with a reasonable starting salary for their skills, a degree of flexibility that fosters work-life balance, and an indication of job security.”

Reversal of fortunes

The newfound importance of job security coming out of the pandemic is in diametric opposition to workers’ nonchalance going into it, when the majority of workers said they were more concerned about being able to work remotely and having access to online communication and collaboration tools.

At that point, many contractors were chasing the money and repeatedly changing jobs – something that required little additional effort since everybody was working from home.

Many candidates have been acclimatised to “skyrocketing” salaries – one recent Robert Half analysis found CIOs are prepared to pay an average 30 per cent premium to attract the right candidates – and “with many employers previously paying above the market rate,” Brushfield said, many are still “occasionally asking for unrealistic salaries”.

That made for complex negotiations during hiring, with employers eager to contain costs while facing the very real impact of issues like retirement, changes to government skilled visa policies, and ongoing challenges filling a cyber and general tech skills gap that has, by some accounts, left Australia “unprepared for the future”.

The need to balance strategy and hiring plans is likely to make next year markedly different than other recent years, Brushfield said.

“Companies are unlikely to further increase salaries in 2023,” he explained, “and will instead turn to other remuneration incentives including tenure-based or sign-on and completion bonuses.

“The labour market is still tight, which keeps in-demand tech talent in the driver’s seat.”