Hiring in Tech: From Employer’s Market to the Candidate’s Market
Spiceworks speaks with experts on how companies can reduce hiring costs in the technology sector.
The technology sector has famously attracted talent with generous packages that include hefty salaries, ample perks and hard-to-turn-down benefits. Tech companies kicked this up a notch in the previous few pandemic years as the need for tech-intensive innovation and demand for the talent that can drive it skyrocketed. What changed?
Has Employee Hiring and Retention in Tech Become Expensive? Why?
“It has become more expensive,” Julia Granger, VP of global expansion at KnowBe4, told Spiceworks. “Demand for candidates with tech skills is still extremely high despite the recent layoffs in the tech space. Recruiters are actively hunting and reaching out to those workers who have experienced recent layoffs, meaning the candidate still has multiple options at the end of the day, allowing them to be more selective.”
According to the Dice Tech Job Report, U.S. tech job postings were up 25% in 2022 in spite of greater fluctuations and despite 159,684 getting the boot. The report also found that 375,000 tech jobs still needed to be filled in 2022. Clearly, the demand for tech jobs remains strong.
Year-over-Year Growth in Top 15 Tech Occupations by Job Posting | Source: Dice
“Most people are looking for 100% remote work, which means in-office perks like free snacks, workout classes and services provided by the employer are less attractive. Instead, competitive compensation and opportunity for advancement are appealing.”
Tech freelance marketplace Torc’s VP of operations, Mike Cardillo, believes there is more to hiring and retention costs than the money spent catching the attention of those in the tech sector.
“Costs will rise and fall as the markets shift and companies that undervalue the importance of employee culture, employee development and work life balance will continue to experience adverse impact,” Cardillo told Spiceworks. “If these are not intact, there’s no amount of money that can be thrown at bringing an idea to market because you’ll have no one capable enough to execute the vision.”
See More: Tech Outlook for 2023: Strong Investments but Shifting Priorities
Tech Sub Sectors With High and Low Hiring Costs
While hiring and attrition in any area are bound to cost the organization in terms of effort, money and time, some domains can incur higher costs when a new employee is recruited and trained. For instance, Granger explains how research and development can be more expensive than others.
“When it comes to R&D, if you are constantly having to replace and retain employees, not only is it costing you money, but also affecting the product development which can bleed into customer satisfaction and the ability to create new features or product enhancements,” Granger said. “Engineering and development are extremely competitive and have higher retention costs due to the immediate impact on products and the difficulty in finding qualified candidates.”
Cardillo highlighted greater hiring and retention costs to legacy FinTech, healthcare companies and “any organization weighed down with outdated technology and complex regulations that stifle innovation.”
“Companies that tightly align with larger ecosystems should see lower hiring and retention costs. For example, the development of public cloud technologies, like AWS and Salesforce.com along with their ecosystem companies like Okta or MongoDB, help to drive market progression.”
What Changed in Hiring and Retention in the Previous Years?
According to Granger, the high demand for tech positions turned hiring into a candidate market in the past few years. In 2022, the average cost of recruiting employees was $4,700, according to SHRM, up 13.82% from $4,129 in 2021. Glassdoor data indicates the cost of hiring employees was $4000 in 2019.
Granger told Spiceworks, “Over the past ten years, hiring has fluctuated between being either a candidate or an employer market. The last three years has been a candidate market resulting in employers ‘fighting’ over talent/candidates. This has led to higher turnover, increased compensation packages and a need to increase internal retention efforts.”
“With a recession looming, it is anticipated this will swing the pendulum back toward an employer’s market.” Translation: Expect a decline in costs.
Cardillo also expressed something similar, i.e., a decline in hiring and retention costs, albeit he believes that the road to reduced costs is influenced by technology. As opposed to 20 years ago when a resume was enough to get a candidate a job, “the past ten years have resulted in a better understanding of how a positive corporate culture is derived from mission-vision-value foundations and fuels global purpose on all sides of the employment equation,” Cardillo said.
Will hiring and retention costs increase (or decrease) in the foreseeable future? Well, technology has helped bridge the gap between sourcing and hiring, benefiting employers in terms of costs and candidates in terms of opportunities.
“The past three years have delivered on the promise of online-first work environments where you no longer need to be seated in a specific office/geolocation to be successful. Finding the right staff mix is critical and today’s technology removes barriers to bringing them in and enabling them to grow within an organization,” Cardillo added.
As such, “tech hiring and retention expenses should decrease as technology continues to disrupt industries. The shift is already happening with talent platforms changing the dynamic of finding, attracting, hiring and keeping software developers worldwide.”
See More: 2023 HR Predictions: Tech, People Will be Key to Great Talent
Impact of a Higher Rate of Hiring in Tech
It depends on how productive and engaged existing employees really are. An organization may feel the need to recruit additional resources for various reasons, including:
- Lower employee engagement
- Lower productivity
- Ineffective staffing model
- A genuine need for resources
“Companies need to avoid hiring just for hiring’s sake. Each team addition should be based on actual need. Organizations are responsible for making sure a resource is the right fit and placed in the most effective staffing model (hybrid, contract, PT/FT, etc.) possible to ensure success all around,” Cardillo explained.
For instance, several tech companies onboarded more than what was needed in 2020 and 2021, leading to a tech hiring freeze and large-scale layoffs in 2022 that is still continuing. Amazon alone doubled its workforce from 798,000 in Q4 2019 to 1.544 million in Q3 2022 before it announced layoffs. Thankfully, not all tech players have scaled their employees so rapidly.
Except for the pandemic years, Cardillo added, Human Resources (HR) has helped organizations steer clear of hitting dangerous rocks in perilous shallows. “Part of HR’s success has been due to embracing how multiple talent models that tap FT, PT, contract, remote, hybrid, etc. staff drive employee engagement, productivity, performance, health and wealth,” Cardillo said.
“HR and IT’s collaboration on talent management is greater than ever, and companies are seeing better teams, products and returns as a result.”
How Can Tech Companies Reduce Hiring Costs?
Employee retention itself is one of the most effective ways to minimize recruiting costs, not to mention expenses incurred in onboarding and training. Decreased productivity can deplete company coffers, and to rebuild knowledge.
According to a study, it takes six to nine months of an employee’s salary to find and recruit their replacement. In 2021, the average tech salary was $104,566, placing the attrition and replacement cost to the company anywhere between $52,283 to $78,424.
“Organizations will successfully reduce hiring and retention costs by maturing workforce structures to be streamlined and nimble, and yet scalable with on-demand high quality talent. In addition, committing to pay for performance at all enterprise levels to drive workforce and team achievements will demonstrate value throughout the talent supply chain,” Cardillo opined.
“Companies need to be wary of anything that sacrifices culture and employee engagement, puts more demands on an individual without setting proper expectations, and uses layoffs for some and salary increases for others as a bandaid to solve recruitment and retention issues.”
Cardillo advises that organizations should focus on gauging employee productivity and upskilling them where relevant, regardless of whether they are contract workers, part-time or full-time positions and whether the location is on-site or remote.
“It’ll then become clear for organizations to better align productivity and output and match it to earned compensation, which will yield a feeling of being truly valued. That combination is what will attract, recruit and retain employees in any economic climate,” he said.
Granger echoed similar opinions, i.e., ensuring continuous professional development in a well-maintained organizational culture. “Investing in employee development and opportunity for growth such as more competitive compensation, professional growth, education, etc. Making sure employees are happy with the job they are doing and engaged is key,” Granger said.
“By offering a challenging and rewarding work environment with a great culture and professional development you’ll have employees who want to stay and hopefully refer more people to your organization.”
Is hiring and retention in tech becoming expensive? Comment below or let us know on LinkedIn, Twitter, or Facebook. We would love to hear from you!
Image source: Shutterstock
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