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How Much Should You Pay Your Engineers? (Infographic)

March 10, 2015 by Compass

by Cheyenne Richards

With the world’s ever-expanding appetite for great engineering talent, hiring is becoming a larger and larger challenge for tech companies. Never has it been more critical to know just how much you should pay that promising candidate. 

If you’re a startup — How do your salaries compete with more traditional IT firms? Where in the world is the cheapest place to source talent? And if you’re bootstrapping development, which are the least expensive programming languages to work with? 

If you’re an IT firm — Are freelance or in-house resources more cost effective? What is a benchmark career path for an engineer? 

Whatever your situation, the following insights from the Compass.co Research October 2014 survey of engineers around the globe, may prove helpful. In addition to data from our own members, for this report we reached across the web for comparison data from oDeskElanceToptalGlassdoorAngelList and Payscale. In the process, we owe a special shout-out to the folks at Elance-oDesk and Toptal, who helped us access and interpret their data. 

The data have been visualized in the Infographic below by Anna and Mark Vital from Funders and Founders.

Here are the critical findings.

1. How geography matters

In the US, startups pay 13 percent more than traditional IT firms (defined as companies with 500 or more employees with established business models who develop IT systems and services, i.e.: IBM, JP Morgan Chase, Verizon). However, in Europe (except for the UK), startups and traditional IT firms pay the same. 
If remote work is an option, you may find more willing candidates in Brazil, Mexico, Belarus and Ukraine, where remote work for foreign businesses pays more than local businesses. If you’re a local business in one of those countries, you may have to work that much harder to keep talent on staff. 
As for engineers on the move, a recent Silicon Valley Competitiveness and Innovation Project report helped quantify the extent of the massive global migration, showing a stunning 70% of software developers in the area are foreign born. 
2. How product and lifecycle matter
Across the board, consumer-oriented companies pay an average of 20% less than enterprise-oriented companies. And for startups, post series B engineering salaries increase by almost 100%, the largest salary jump in the lifecycle of a startup.
3. How skills matter
Back-end engineers cost 35% more than front-end, and those who can code in C, Hadoop and Objective-C command the highest salaries of skill types. As far as roles, data scientists and software architects are the highest paid in the market. At the same time, high demand is giving a special boost to salaries of mobile developers and front-end engineers.
4. How experience matters
Engineers with a CS degree command about 15% more and those with real-world experience see about a 20% salary increase after three years, then large increases at around the seven and 20 year marks. 
5. How equity matters
CTOs at startups receive 30% less in pay than a VP of Engineering but receives 6.5 times more equity. As for the vesting schedule, 63% of the startups we surveyed assert the typical vesting period of 48 months, while 12% fully vest in 36 months and 8% in just 24 months.
As the best hiring scenarios are always win-win for the employer and employee, the following infographic shows you these and many more details from the perspective of your target: the ambitious engineer. 
Methodology:
For the Compass.co Research Salary data, we conducted a survey of 421 startup executives and engineers who work within startups, including salaries and benefits. To compare these responses with other markets, we partnered with Elance-oDesk and Toptal to include comparisons to freelancer earnings. We then used public data from Glassdoor, Angellist and Payscale to complement our data and compare startup jobs to those in IT firms. All Data were collected in the last 3-12 months. The data in this post are averages. We did not highlight individual outliers e.g. 500k annual salary at large tech company for an HBase expert.
For a more accurate comparison, roles, skills and positions data is from engineers working at US companies only.
Correction:
After the infographic had been complete we found out that Toptal and Elance-Odesk had calculated their yearly salaries differently and are therefor not directly comparable. Toptal had calculated their yearly salary by multiplying the average hourly salary for freelancers with long-term projects (3 Months or more) with 1400 hours. They found that 1400 was the typical amount of time worked by freelancers on their platform. Elance-Odesk had calculated their yearly salary by multiplying the hourly salary of freelancers that worked an average of 40h/week with 2000 hours. 
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