Exceptional off-cycle compensation adjustments for software engineers in 2021 | Hacker News Reader

Exceptional off-cycle compensation adjustments for software engineers in 2021

blog.pragmaticengineer.com

65 pointsgregdoesit20 comments

My company offered an (off-cycle) 5% raise in July. In August I signed an offer for a ~30% jump. Not FAANG, also not some thought-leading 10x engineer. If your company isn't offering you a 20-30% raise, someone else probably will.

Haven't gotten a raise in almost 4 years at lufthansa as a consultant. €60k/y sucks.. I should quit, but want to start my own company. However I don't know how I can start a blockchain business in germany, stuff like incorperation and taxation are out of my knowledge. And tax consultants want a lot of money that I don't have. Rent in Frankfurt is very expensive, living in a shared-flat.

I wonder whether this will drive smaller companies out of business, given how important software is in modern businesses, when hiring/retaining engineers becomes so expensive that business models fail or only juniors can be hired, which may lead to other forms of intolerable expense.

Yes. Companies that are not able to produce as much value per engineer will likely be driven out of business. This will not happen overnight, as there are likely more in-experienced engineers available (at least for a short amount of time). The too inexperienced team will in some cases lead to the company not being able to compete with their product and slowly dying.

Small companies with a hiring process that isn't FAANG-like will continue to do well.

I know tonnes of people in London jumping ship for 50%+ bumps.

None of these matter until FAANG does a 30% preemptive raise. All these other companies are still far below market. (As is FAANG.)

If all of these companies, as well as faang are below market, who pays market rate? Who pays above market?

People often react with incredulity about FAANG comp, while forgetting that the company makes several times as much per employee as mean comp package (2/3rds of which isn't even cash). All of that value is generated by employees. Is this a fair split? I suppose we'll find out soon. Someone has to blink, and then everyone will blink. Google did blink circa 2011, and raised its (until then) fairly modest comp something like 30%.

I think a cool and "googly" thing for Google to try would be to do what one of the companies in the article did: reduce the work week to 4 days while keeping the same pay. All tech companies should do that. Working the same hours as factory workers did 100 years ago is absurd given the productivity improvements in the interim.

It would be nice if things were fair but that isn't how the market works.

That's exactly how the market works, in the absence of collusion. Which has been demonstrated several times among big tech behemoths [1]. That is also how it'll work this time, assuming there is no collusion, which there may still be.

https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...

No it isn't. Without collusion the market rate is determined by the supply and demand of and for employees. This has nothing to do with the value created.

I agree with your second sentence, but disagree with your third. The demand for SWE (or any other kind of labor) is itself some (often complex) function of value created.

If you employ N software engineers and an infallible oracle told you that you’d create more value if you hired 2 more, you’d try to hire 2 more. If the oracle told you you’d create more value with 2 fewer, you’d try to get to N-2, making your demand for SWE labor a function of value created.

That may well be the case but you still have to deal with the realities of the market which doesn't give a hoot about your profitability.

Of course if you aren't making enough then you won't be able to afford to hire somebody but that has nothing to do with the market rates.

The market is nothing but the sum of all the actors in the market. If the value created by SWEs doubled (even if only for 10% of participants), the market equilibrium would be higher because of the increased demand for SWEs. If it was instead cut in half (even for only 10% of participants), the market equilibrium would be lower due to decreased demand.

I can’t see any reasonable way that the market for SWEs “has nothing to do” with the value created by them.

Sounds like supply/demand is in their favor at the moment. Some readjustment is due.

It seems literally impossible for an entire market to be paying under market. This market equilibrium is definitely rising over time, but it’s still a market.

The economic theory would be something like given lack of (senior) engineers, salaries should rise to expected marginal revenue.

Conflating actual outcomes in real markets with economic theory is typically unhelpful.

Microeconomic theory would cap total marginal costs (including COGS) at marginal revenue, not just salaries.

most of the increases in Europe, where salaries are low compared to US. Remote causing Euro devs to work for US companies? Could actually depress US salaries.

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