The Tech Salary Guide – How Much Should You Pay Your Engineers?

by Cheyenne Richards

With the world’s ever-expanding appetite for great engineering talent, hiring is becoming a larger and larger challenge for tech companies. Never has it been more critical to know just how much you should pay that promising candidate.

If you’re a startup — How do your tech salaries compete with more traditional IT firms? Where in the world is the cheapest place to source talent? And if you’re bootstrapping development, which are the least expensive programming languages to work with?

If you’re an IT firm — Are freelance or in-house resources more cost effective? What is a benchmark career path for an engineer?

Whatever your situation, the following insights from the Compass.co Research October 2014 survey of engineers around the globe, may prove helpful. In addition to data from our own members, for this report we reached across the web for comparison data from oDeskElanceToptalGlassdoorAngelList and Payscale. In the process, we owe a special shout-out to the folks at Elance-oDesk and Toptal, who helped us access and interpret their data.

The data have been visualized in the Infographic below by Anna and Mark Vital from Funders and Founders.

Here are the critical findings.

1. How geography matters

In the US, startups pay 13 percent more than traditional IT firms (defined as companies with 500 or more employees with established business models who develop IT systems and services, i.e.: IBM, JP Morgan Chase, Verizon). However, in Europe (except for the UK), startups and traditional IT firms pay the same.
If remote work is an option, you may find more willing candidates in Brazil, Mexico, Belarus and Ukraine, where remote work for foreign businesses pays more than local businesses. If you’re a local business in one of those countries, you may have to work that much harder to keep talent on staff.
As for engineers on the move, a recent Silicon Valley Competitiveness and Innovation Project report helped quantify the extent of the massive global migration, showing a stunning 70% of software developers in the area are foreign born.
2. How product and lifecycle matter
Across the board, consumer-oriented companies pay an average of 20% less than enterprise-oriented companies. And for startups, post series B engineering tech salaries increase by almost 100%, the largest tech salary jump in the lifecycle of a startup.
3. How skills matter
Back-end engineers cost 35% more than front-end, and those who can code in C, Hadoop and Objective-C command the highest tech salaries of skill types. As far as roles, data scientists and software architects are the highest paid in the market. At the same time, high demand is giving a special boost to tech salaries of mobile developers and front-end engineers.
4. How experience matters
Engineers with a CS degree command about 15% more and those with real-world experience see about a 20% tech salary increase after three years, then large increases at around the seven and 20 year marks.
5. How equity matters
CTOs at startups receive 30% less in pay than a VP of Engineering but receives 6.5 times more equity. As for the vesting schedule, 63% of the startups we surveyed assert the typical vesting period of 48 months, while 12% fully vest in 36 months and 8% in just 24 months.
As the best hiring scenarios are always win-win for the employer and employee, the following infographic shows you these and many more details from the perspective of your target: the ambitious engineer.
Methodology:
For the Compass.co Research Salary data, we conducted a survey of 421 startup executives and engineers who work within startups, including salaries and benefits. To compare these responses with other markets, we partnered with Elance-oDesk and Toptal to include comparisons to freelancer earnings. We then used public data from Glassdoor, Angellist and Payscale to complement our data and compare startup jobs to those in IT firms. All Data were collected in the last 3-12 months. The data in this post are averages. We did not highlight individual outliers e.g. 500k annual salary at large tech company for an HBase expert.
For a more accurate comparison, roles, skills and positions data is from engineers working at US companies only.
Correction:
After the infographic had been complete we found out that Toptal and Elance-Odesk had calculated their yearly tech salaries differently and are therefor not directly comparable. Toptal had calculated their yearly salary by multiplying the average hourly salary for freelancers with long-term projects (3 Months or more) with 1400 hours. They found that 1400 was the typical amount of time worked by freelancers on their platform. Elance-Odesk had calculated their yearly salary by multiplying the hourly salary of freelancers that worked an average of 40h/week with 2000 hours.
  • Gabriel Kent

    This is great. Thx.

  • Nghia Vuong

    Hello, this is great! I have a few questions that came up during the reading.

    #1. I see that system architects get paid better (and also for working on back-end). Can you create an engineering type vs years of experience plot? Is it just that more experienced engineers are allowed to take lead roles and therefore paid better due to their experience?

    #2. What are the relative population sizes for engineers? Are they valued for their skills or is it simply market supply/demand rarity?

    #3. I see that C++ is listed as a highly paid skill, but Objective-C pre-supposes knowledge of C++ to some degree. Is C++ a distinct search criteria by companies or is it simply that high paying (talented) engineers just happen to know C++?

    #4. I’m also trying to correlate cost of living adjustments to office location. Is the salary for US in Silicon valley adjusted so that the take-home amount is less than say New York? What about Texas?

    #5. The equity scale plot is somewhat uninformative. Does it imply that only those 3 roles get large real percentages of the company’s equity? How does that relate to potential equity bonus packages that a typical engineer might get? Are the talented engineers going for equity or pay? What’s good to offer in order to attract talent?

    Thanks!

  • Rishi Khan

    What would be really awesome is if there were a way that you could share the anonymized data with us in a database so we could slice and dice it ourselves.

  • gadi

    A great article, but the correction is very confusing.
    Which numbers should I add/decrease? I don’t see data for Elance / Toptal but only the summarised data of all the survey..

  • Alexander

    Excellent report!!
    By the way, you have report about high education salary insights.
    Thank you

  • Alexander

    Excellent report!!
    By the way, you have report about high education salary insights.
    Thank you

  • Tony BenBrahim

    I love these studies. Not!. Anyone who pays median or mean wages will get the results they deserve, just plain average.

  • katie

    Why do CTOs get paid less than VPs? This does not make sense to me that a c-suite title gets paid less than a VP.

  • Rishi Khan

    @katie. Because they are highly compensated through equity.

  • Freddie

    The hypothetical worst case should be 23.000 dollar, right? Not 53.000…

  • Alpha

    The href for PayScale.com is wrong in the article. It should link to http://www.payscale.com and not Glassdoor.

  • Alpha

    The link for PayScale now goes to “http://blog.startupcompass.co/www.payscale.com”. Please fix it to point to http://www.payscale.com.

  • Ithil

    Nice!

    It would be interesting to see a more detailed split on the E.U., as I’m positive that there are significant differences among member states.

  • I’m curious why full-stack engineers have been left out of this research.

  • Emmanuel

    It’s really useful information.

    Just one doubt: It’s about the industries. It would be good to have data on the industries each programming language is used and how well that industry pays. I mean, how good is the payment for a C++ developer in banking and how good it is in Retail? And, which could be the industries a developer can move to? and programming in the same technology. Which technologies should I learn to make good money and working in the industry I like?

    Thanks!

  • The last hypothetical cases are nonsense. – just on the map above you have AVERAGE money for remote worker in india $22,111, but in your hypothetical WORST CASE you got $53,440. If your calculation would be right, the worst case would have to be lower than that average. And for unexperienced indian css frontend remote worker it would have to be MANY times LESS then just about 60 % of experienced CTO working in USA. Like about 10 times less. If there is any anyone who is looking for CSS frontend remote developer working for 53 K USD, than just send me email, i will give you plenty of them (and with higher experience). That’s actually higher then my income (currently VP of digital marketing of central european region in huge multinational company, with about 18 previous years of development experience)

  • Cymen Vig

    My experience is this information is way way off. So don’t rely on it. Like Glassdoor, it skews towards the low end.

  • Tony BenBenBrahim

    The last infographic made me laugh out loud, until I saw the self serving source. $95K for a C++ developer with 20 years experience with a VP/CTO title, in the Valley? Really? I would be lucky to find someone with 5 years experience at that rate in Houston, that was worth hiring… $150K and up base would be a decent starting point for someone with that experience, without considering bonus or equity….