Compensation Trends in IT: It's a Candidates' Market

By Brian Margarita,
TalentFuse

IT has become the most critical component to every business sector in the 21st century. Whether you sell retail merchandise or insurance, or own a construction company, the formula for success lies greatly on the efficiencies of this department.

Although overall job growth in America has wavered since the late 1990s' infamous "dot com" bust and a downturn in the economy, the IT sector has seen consistent growth since 2004, with no signs of slowing. Recently, Economy.com, a leading independent provider of economic research, reported that an estimated 214,000 IT jobs have been added in 2005 (the largest increase since 2000), with projections forecasted even higher for 2006.

While IT hiring has picked up the pace, the overall terrain has changed. A major misconception HR managers must overcome is that good technical candidates are easy to come by and desperate to take any job offers that come their way. On the contrary, it's the talent who holds the cards. With complicated technology solutions becoming more necessary in day-to-day operations, coupled with an increased demand for knowledgeable personnel to maintain the systems, IT placement has shifted to a candidates' market. Leading prospects are looking for bigger base salaries, increased vacation time, and the flexibility to juggle between their job and personal life.

The Changing Climate

Taking a page from the European "life-work balance" philosophy, Americans are valuing their time more than ever. Having the option to cart the kids to practice, visit the beach during the afternoon, or cut out early to avoid traffic congestion is becoming more important than working an 80-hour week for a larger paycheck. In fact, many IT professionals won't consider a better opportunity if it's farther than 20 miles from their home-especially in high-density urban areas.

Compensation packages have also evolved. As a result of lost confidence in the stock market, very few candidates are accepting stock options as a source of nearterm wealth. In the recent past, candidates would say "yes" to 1 million shares in company stock as a signing bonus without even questioning how many shares are outstanding. Everyone knows at least one person who was burned by these dangling carrot tactics. Today, offerings must be tangible, and hard cash is still the most coveted asset a company can propose.

This is not to say the HR department is at the mercy of hotshot techies. Companies are willing to offer attractive benefit packages and bonus options, but only to those who have a proven track record and share the company's vision for success. Twentysomething college graduates whose résumés entail making the perfect double espresso need not apply.

Evolution in the Hiring Process

Equivalently, this new climate has affected the overall hiring process. Because of the increase in demand, it now takes HR managers an average of 2 to 3 weeks to fill an IT position. Candidates are learning to line up as many job offers as possible, then match opportunities with their own long-term goals and objectives. HR should be aware that most high-level candidates have at least two counter offers, giving them the leverage to negotiate additional benefits. For example, a recent trend has been to immediately ask for additional vacation time, no matter how good the initial offer looks on paper.

Telecommuting is one key benefit HR managers are using to sweeten the deal by allowing flexible work arrangements. Because much of today's technical upkeep can be managed by remote access via broadband connection, in-person work schedules are not as necessary, limiting the need for extensive road travel. Even offering 3 days in, 2 days home, is extremely attractive considering the current outrageous gas prices. It's not only the worker who stands to benefit from working at home; several studies have shown that telecommuting (if managed correctly) can increase the overall production of the individual.

Conclusion

Many in the HR community are lulled into comparing today's current situation with the tech bubble burst just a few years back-when elite programmers were taking anything just to pay the mortgage. Often overlooked is the fact that today's tech job market is twice as productive in terms of growth as it was before the dot com boom. As global dependence on technology rises, increased pressure will be put on the HR department to manage IT's benefit and compensation requests. By recognizing and adjusting to the current playing field, companies will be in a better position to attract and retain the most qualified talent while keeping their own economic constraints in mind.