High-tech Salaries Climb as Firms Scramble for Too-few Workers

Pay rose an average of 5.4% in 2014 and many companies now offer non-monetary perks to lure workers

Courtesy of Intel Israel

There was no billon-dollar Waze deal last year to capture the imagination of Israel high-tech industry, but 2014 was an excellent year for entrepreneurs and investors with a record of close to $15 billon in initial public offerings and mergers — and the engineers and code writers as well.

Salaries rose an average of 5.4% last year, marking the fifth straight year of increases and the biggest one-year improvement in recent memory, according to the high-tech hiring firm Ethosia. Indeed the money in high tech is so good and so easily available, many employers are luring staff with non-monetary fringe benefits.

The reason was the strong pace of job growth, with the number of jobs increasing 3.2%, more than double the 1.5% rate of 2013, according to Ethosia, which bases its figures on a survey of 185 big, medium and large startup companies with a combined payroll of 110,000.

Although the news was dominated by layoffs at companies like Cisco in Israel, Cerragon and Retalix, which is now a unit of America’s NCR, companies operating in sectors now out of favor, like hardware and communications technology, are still raising salaries.

Last year 13% of all new hires were for newly created jobs rather than replacements, Ethosia estimates. Demand in high tech so far outstrips supply that it is pushing salaries higher and causing employees to jump from job to job in anticipation of getting better offers.

“We’ve seen an increase in the pace of people changing jobs and a jump in the number leaving their jobs voluntarily as well as a surprising willingness to risk moving from big, established companies to one just starting out in life,” says Eyal Solomon, Ethosia’s CEO.

Ethosia said in 2014 that 9.8% of all high tech job seekers had or were planning to leave their jobs voluntarily for something new, compared with just 2.5% in 2008-09, when the global recession saw salaries and hiring fall.

Indeed, competition for staff has grown so strong that in many cases generous salaries are no longer enough, said Daphna Michaeli, senior vice president for recruiting and human resources at Outbrain Israel, which provides content discovery services for online publishers.

“Developers today are looking for technological challenges so we need to act more creatively to reach them and give them what they want,” she said. “The assumption is that the pay at each company is about the same.”

At Outbrain, the company organizes meetings and lectures on high-tech issues in its offices and at other locations. “We organize a lot of open-code projects because developers like it. It makes Outbrain more attractive to developers and that makes it easier to attract them,” said Michaeli.

The most intense demand was in mobile and Internet, where the number of job openings soared 22% and 20%, respectively, according to Ethosia. Salaries for developers jumped an average of 7% in the two sectors and now range from 12,000 to 16,000 shekels ($3,080-$4,110) a month for starting developers to 28,000 and 32,000 for team leaders.

A developers with two or three years’ experience with the popular programing language Ruby can expect a salary of 16,000 to 21,000 shekels a month, Ethosia says.

Solomon says the industry remains optimistic about 2015 even though Israel’s economy is being clouded by a general election and chronic regional security instability.

But the shekel depreciation against the dollar that began over the summer and has seen currency lose as much as 18% of its value is a big boost for Israel’s tech sector, which exports almost all products and services priced in the U.S. currency. Likewise, the big research and development centers operated by multinationals in Israel work with budgets set by their headquarters in dollars.

All in all, the weaker shekel has taken some of the cost edge off ballooning salaries, say industry executives.

“Many executives are expressing confidence and optimism that the positive trends will continue into 2015 despite the political and regional uncertainty,” said Solomon. “Most executives think foreign capital will continue coming in the tech sector in 2015 at about the same rate as in the past year.”