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Layoff Headwinds Are Blowing—Are Salaries for New Hires Being Affected?

The Betts Team
July 3, 2023

Layoff winds are indeed blowing, but it’s been a year of contradiction. What does this mean for new hires?

Tech workers are worried that the industry may be nearing the end of what has been a very lucrative period. The big tech companies that made headlines with mass layoffs have led many to believe that the end is indeed near, but these companies saw larger than average growth during the pandemic, leading some to think this is more course correction than presaging the end of the lucrative tech era while others wonder if it’s a proactive precaution. Are the big salaries of yesterday now history—or are we just in a period of correction—with some stormy clouds passing through? The story is a nuanced one. How does this climate bode for compensation rates for new hires in tech?   

The tech unemployment rate is holding strong at 2% as of May 2023, but layoffs still loom in the wings, with visions of Alphabet, Meta, Microsoft and more still fresh in the minds of many. While those who have lost their jobs are being re-employed quickly—the Society for Human Resource Management reports that “79% of laid-off tech workers are finding new jobs within three months—and a June 2023 report from TechStartups found that 13% of this group started their own businesses, sparking a new wave of tech startups. 

Tech companies often rely more on outside sources of capital than other industries. The Fed has raised the interest rate ten consecutive times, nosing the borrowing rate north to 5 – 5.25%, making borrowing money more expensive. But there is some possible positive news on this front; in June 2023, Fed policymakers nixed an 11th increase to the interest rate, perhaps indicating that things are starting to stabilize. 

How does this translate to potential salaries? In two ways. Companies can more easily access capital if money doesn’t become more expensive to borrow, allowing them to re-focus on meeting essential business objectives since they’ll have enough to hire the necessary talent. Key benchmarks still need to be met to make it to the next round of VC funding, underscoring the need for tech talent that can deliver. 

Betts predicts that the second half of 2023 will see long-term demand for tech talent remain strong—but with layoff winds still blowing, the short-term reality is likely a bit bumpier.  

Over 200,000 employees from nearly 700 tech companies have been laid off in the last year or so, undoubtedly impacting the newly hired in this current climate. With the ability to attract top-quality talent at a potentially reduced cost and a larger pool of applicants, companies have far more options than before. There are also growing concerns about generative AI, with dozens of tech workers sharing that they have worries about their jobs being replaced by this emerging tech.

According to a survey conducted by Blind of 7,322 tech workers, 56% of those  surveyed would take lower or equal pay, with 45% citing current job market conditions as a rationale for accepting a comparable or slightly lower salary for a new position. Betts has seen salaries for entry level workers with two to five years of experience the most likely to be affected, with compensation changes becoming more minimal with mid-level to senior roles.

While the current job market and concern about possible layoffs are the main reason for tech workers’ willingness to negotiate on salary, there has also been a shift in priorities, with work/life balance issues taking a more central role in their decision-making process. 

Many are now willing to lean into jobs that provide more overall job satisfaction and non-monetary benefits like work-life balance, career growth, and company culture,  fostering a deeper sense of well-being—even if they offer less compensation.  “I’d rather make less money and be happier,” one Meta worker wrote in response to a Blind survey question, with a Salesforce employee sharing: “I would trade toxicity for a lower paycheck.”  

Perhaps opportunity is knocking where least expected. While the tech sector is still experiencing upheaval, a recent Associated Press article shared that laid off workers are being courted by established companies whose names are not generally synonymous with tech—think investment firms, healthcare, retailers, hotel chains, railroad companies, and even the IRS. It’s a chance for these other industries to level the playing field and access top tech talent that was not as accessible before. 

If you need help deciding what salary or benefits to offer to engage new candidates and keep current ones happy, reach out to us at Betts. We can help you craft the perfect compensation plan for the role and your location.