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5 tips to stay in budget when benchmarking engineering salaries

3 April 2024 , by Marcelle van Niekerk

After 2021’s hottest-ever tech hiring market, the recent downturn means many companies have to do more with fewer resources at hand. Salary band growth for many developers has stagnated as a result.

However, businesses still need to be conscious of developer’s salary expectations if they don’t want to lose out on top talent. According to the OfferZen’s latest developer nation report, inadequate compensation remains the biggest factor behind South African developers leaving their roles.

We recently sat down with Pieter Rautenbach, an Engineering Director at Takealot, to discuss how to benchmark tech salaries to ensure you keep your developers happy while sticking to your budget.

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Salary challenges for tech companies

Finding the right people and keeping top talent on board are the two major focus points for hiring managers in the tech space.

However, there are a few challenges involved in doing this:

Competition in the hiring market

While the tech hiring market has cooled significantly since its heights in 2021, the environment remains competitive and volatile.

South African developers are in demand in international markets, meaning that businesses are potentially having to compete with others who have far larger salary budgets and more attractive benefits.

“The biggest challenge is always finding the right people. It’s a very competitive environment, even before you get to the salary conversation. We’re competing with international companies, so it can be tricky to find great talent,” explained Pieter.

Economic constraints

49.8% of developers note that salary is the most important factor when it comes to considering new opportunities.

However, the tougher macroeconomic climate has meant that increases in senior developers’ salaries have just kept up with inflation, while junior and mid-range developers have essentially experienced salary cuts.

A lack of opportunities for career growth

A lack of career and growth opportunities are major reasons for developers leaving a job. According to Pieter, this is especially important for junior talent.

Despite this, in 2024 only 1 in 5 developers have access to training budgets to improve their skills. Plus, the number of developers who feel confident about their chances of growing at their company has fallen from 38% to 33% this year.

Staying in budget while hiring and retaining developers

The desire for more attractive packages on the developer side and tighter cash flow on the company-side makes it challenging for hiring managers to find and retain the right people while also managing their salary budget.

Fortunately, there are a few strategies you can use to ensure what you’re paying developers is competitive and attractive.

1. Create a roadmap

It’s important to have a plan before setting out to build or restructure a team. Outlining your strategy will help understand what your team needs to do to meet its outcomes and ensure you’re able to identify who you need on board to achieve those goals.

“We’re very much product driven, so we work with roadmaps. That helps us to understand how many people we need to perform that job. Then that dictates the sizes of your teams and how many developers you would need,” said Pieter.

“Where things really started clicking was when we defined a proper career framework within which people could operate, so that people could get an understanding of what the different jobs are that we have.”

2. Benchmark salaries

Benchmarking your salaries is the best way to gauge whether they’re competitive. That said, this can be a challenge in the tech industry where there isn’t much standardisation around role functions – or even titles.

Here, Pieter notes that it’s a good idea to use data from industry reports and perform your own research; for example, by analysing which recent offers for a particular role have been accepted and rejected by potential hires.

“There are formal frameworks, like the Paterson grading framework, that we use as an input. We do surveys and collect some of our own data and we use all of this to establish what the different bands are that we can attach to different roles,” he said.

Looking for salary data to help you benchmark market-related developer salaries? Download our 2024 Developer Salary Benchmarking Report

3. Communicate openly and honestly

Understanding what developers want and letting them know what you have to offer can help attract developers who genuinely want to work for your business.

Being open and honest in this context helps to ensure that those who aren’t interested drop off at an early stage in the recruitment process. This will save you loads of time and money in the long run.

“I think it's just about honesty and being open about what you have to offer. For some people, it really is about the opportunity, so they’re happy to take a bit of a cut if they come from a very high base. But, if you aren’t honest about it up front, you will potentially waste your own time, your interviewers’ time and the candidate’s time,” said Pieter.

This is especially true in terms of salary renegotiations. In this realm, Pieter lives by the rule that you should never take anyone by surprise.

“You shouldn't get surprises in a performance review. You need to build a consistent theme around how you talk about this and stick to that, because anything you say will set a certain expectation. People are going to remember what you said and you don’t want to backpedal.”

4. Offer good non-monetary benefits

Non-monetary benefits can make a huge difference when you’re creating remuneration packages that attract and retain talent. What’s needed here is to identify desirable perks that set your business apart without busting your budget.

“The question is: Where can you add things that don’t necessarily have a big impact on your bottom line, but are still valuable to an individual? There are often little things that you can do that have a higher value to the receiver than what it actually costs the company to give.”

For example, at Takealot, Pieter notes that birthday leave is a non-monetary benefit that many developers appreciate. “It’s just a single day, but it makes you feel good to know that on the day you can do what you want. It’s a nice feeling and it costs the company very little.”

5. Collaborate and negotiate

Hiring managers might come across developers whose salary expectations are out of their budgets but who would be a great fit for the team and company.

In these situations, Pieter recommends looking at your roadmap and overall budget to see where you could shift things to meet the developer’s expectations.

“You have to look at how you make up your team and sometimes you can redistribute your budget. We often bargain as managers, swapping out vacancies, because we don’t get allocated budget per role. We look at everything holistically and collaborate within that,” he said.

Want more data about what benefits to offer devs in 2024, and what measures could help drive retention this year? Get our 2024 Developer hiring & retention report jam-packed with these insights.

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