Total Compensation for IT Professionals is Expected to Increase Sharply as the Demand for Talent Exceeds Supply
Over the past few years, we as a nation have been overwhelmed with a constant deluge of information regarding how bad the economy is and how high unemployment rates are. While to an extent this is true as there are several specific factors that nearly crippled many aspects of our economy, the reality is that only a portion of this is significant as far as the Houston economy is concerned. Looking at the country as a whole is not an entirely accurate view of the state of the Houston economy. In fact, the good news is that in looking at the economy in Houston, we see a much different picture than that of the nation’s economy as a whole.
Houston’s economy generally has been significantly stronger than what the media leads us to believe. For instance, unemployment rates for IT professionals here are 3-6 percent lower than the national or state averages; additionally, the quantity of higher-level jobs is greater than a year ago. We’re also hearing that IT opportunities, besides being more plentiful, are generally better in terms of quality than what would be found in most cities across the country.
As the hiring of IT professionals has increased over the last year and now exceeds supply, salaries and total compensation has increased sharply. This has impacted the ability of many companies to attract and retain top talent.
“Where are all of the good IT people?”
This is the question we get asked the most; where can the top talent be found? The answer to this question is somewhat more complex than one would like to hear. A simple answer would be to say that the “good IT people” are working. Obviously, this isn’t the entirety of the situation, as unfortunate as it is. While there is a pool of good people that does exist, this pool is a lot smaller than most generally believe. Two factors in particular most likely contribute to this shrinking pool.
The first of these factors is outsourcing. While not a new issue, outsourcing continues to impact IT employment. For a more detailed look at the outsourcing issue, read our recent article on the JDA website at www.jdapsi.com. The second factor, which may surprise you, pertains to college enrollment of IT majors. The number of new college graduates entering the IT field has fallen by a staggering 80 percent from its peak in 2000. The ramifications of this have been brutal, resulting in a severe shortage of doer-level professionals with 2-8 years experience.
As demand for IT staff has increased, so has the cost to hire them and the difficulty to retain them. Having dealt for 2+ years with a slow employment market, there is pent-up demand on the part of many IT professionals for change in order to advance and diversify their skills. This has subsequently resulted in a churning effect with increased turnover. On a long-term basis, this will impact a company’s ability to groom and develop their future leaders as more baby boomers hit retirement age and we look to younger workers with current skills.
Total Compensation is Key
All of the turnover activity previously delayed that is now occurring is causing base salaries to rise from what we saw a year ago. Base compensation is projected to increase from 0-4 percent to 3-6 percent. While this may not appear to be an incredibly large statistic, total compensation has, in fact, risen substantially. Bonuses are projected to increase from 0-15 percent to 0-30 percent at the staff level and from 0-50 percent to 0-100 percent at the executive level. The largest increases have occurred alongside a change in jobs.
It now takes an increase of 10-25 percent to make a move happen, compared to 0-20 percent during the prior year. We are also seeing an increase in non-cash incentives, including more vacation time, opportunities to work from home, and paid training and certifications. This is in contrast to the desire that most companies have to reduce employee cost by reducing benefits such as 401k matches, and increasing health insurance deductibles and employee share of premiums. All of this is putting those companies with rich benefits packages at a distinct advantage as more employees look at total compensation.
The War for Talent is On!
As the economy recovers and companies resume hiring, finding and retaining top talent will get even more difficult. Having the resources of JDA Professional Services, Inc. as your recruiter of choice for full-time and contract IT staffing will help you build a great IT department.
If you would like more information about this survey, or would like to discuss your current hiring objectives, please contact James Del Monte, President of JDA, at 713- 548-5444 or via email at jdel (at) jdapsi (dot) com.
1. “2011 IT Executive Survey”, JDA Professional Services, Inc., 4th quarter 2010.
JDA Professional Services, Inc. conducted an annual survey of Houston-area IT executives in the 4th quarter of 2010. The survey responses were provided by more than 90 Houston-area IT executives from companies whose IT departments range in size from 10 to over 100 employees.