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May 21, 2013 · 4:30 am

Tech Professionals’ Pay by the Numbers

data point tuesday_500

Dice, the career site for technology and engineering professionals, published their annual Tech Salary Survey in January. And as Chairman, President & CEO of Dice Holdings, Inc., Scot Melland observed, “The fact is you either pay to recruit or pay to retain and these days, at least for technology teams, companies are doing both.” The constant being pay.

According to the responses of 15,049 employed technology professionals between September 24 and November 16, 2012, tech professionals have garnered the biggest pay raise in a decade. The survey report is highly consumable and I recommend it to anyone involved with hiring or managing technology professionals.

The contents include:

10-year trend in tech salaries
Salary by employment type
Bonus trends
Salary by metro and region
Tech employee motivators
Tech salary satisfaction
Salary by industry
Salary for high paying skills
Average salary by experience and education level

The last section, average salary by experience level, is eye popping. Check it out.

First of all, we can tell by these salaries that STEM education pays off from a career opportunity perspective.

Second, we can tell by these salaries that the market perceives low supply.

Third, look at the high school graduates’ salary vs. vocational/tech school and some college salaries. What’s up with that?

Fourth, the year-over-year change in the salaries of military veterans vs. every other category is head snapping.

Let’s look at these observations. First, I think we can all agree that there’s no downside to focusing on STEM education. No downside for employers who perceive low supply and no downside for employees whose lifetime earnings are among the highest.

Second, supply vs. demand economic principles seem firmly in charge of these salary trends. We can debate whether or not there truly are skills shortages in the marketplace today. But it seems clear that the market believes there is a shortage and is paying accordingly.

Third, as we consider the counter-intuitive data showing high school graduates earning significantly more on average than votech grads and some college/associates’ degree holders, we might be seeing generational effects coming in to play. More recent high school graduates may have more current hardware and programming learning than those who attended the votech programs of the 1970’s, 1980’s and 1990’s. Certainly with the ability to connect to communities of interest via the social web, today’s high school students have a leg up on learning that their parents never had. Additionally, while employers aren’t spending the money they used to on internal training, technical training programs continue to be present.

Fourth, it appears that military veterans with current technology skills can enter the market at higher levels and command higher salaries. And I think we’d all agree that this is a very good thing.

This is a very useful snapshot of the salary landscape for a portion of our employees. Wouldn’t it be interesting to see the same data for other functional skillset areas? Like marketing, finance, or even HR?

What’s your budget?

Great sources of free and relevant talent management data are vendor research, white papers and blogs. Of course, vendors have a bias towards research and conclusions that support their cause, but that doesn’t make the research less interesting or actionable. It just means that the reader has to understand the context.

I read an interesting article in the May issue of Talent Management that referenced a survey done by Cornerstone OnDemand and Harris Interactive on performance management. I traced the survey results back to a post on the CSOD blog by Charles Coy. The survey data about the effectiveness of legacy performance management systems is interesting and not at all surprising. They don’t work and everyone knows it – employees and HR.

What was more interesting to me were the math and sources behind the potential price tag of $2 Ttrillion to U.S. employers in 2012 simply due to voluntary turnover. That’s right: $2 Trillion!

$2 Trillion is a big number. A very big number. Could it be true? If we take the stats one by one, it absolutely could be true. Take a look:

Here’s the equation where E = total employees and AW = their average wage (divide total salary cost by the number of FTEs):

(E x .15) x (AW x 2.5) = Total Turnover Cost

Try the math in your organization. If you have 350 employees and the average wage is $50,000 then

350 x .15 = 52
Average wage = $ 50,000.00
Average full replacement cost = $ 125,000.00

52 x $125,000 = $6,500,000.00

And what’s your budget?

But, you say, your voluntary turnover is only 8%, not 15%. Well, even if that’s true – and congratulations if it is – that’s still a lot of money.

28 x $125,000.00 = $3,500,000.00

And what’s your budget?

But, you say, that 2.5 times the average wage calculation for replacement costs is way too high. You don’t buy that the loss of an average employee means a potential loss of intellectual capital or client relationships. OK. How about the impact on internal relationships and getting things done? How about the productivity and morale of colleagues left behind? How about the experience and job skills that you’ve lost? Add in the hard costs of recruiting a new hire, the onboarding time, the training time to full productivity and you’ve still got a big number – even if you found and hired replacements really quickly. Try the math at 1.5 the average wage as the full replacement cost. With 8% turnover and 1.5 times the average wage, that’s still a big number

28 x $75,000.00 = $2,100.000.00

And what’s your budget?

And what if your voluntary turnover is higher than 15%? Or what if the training time to productivity is longer than average? Or what if you – like 52% of employers – can’t find the replacement talent quickly or at all? Then the impact will be greater. Much greater.

This is a useful discussion because it can help create a context for the broader conversation about the real cost of voluntary turnover and the cost savings in having an engaged workforce. It can be part of the rationale in a business case for investing in any of the levers that will increase retention and reduce turnover.

It’s almost budget time in most organizations. Financial resources are still scarce. As you plan your 2013 budget requests for more spending on talent management solutions, be prepared with fact and data. This might help.