Tech hiring rate and pay drops by 40% in Europe

New hire rates have declined by 40% by Tech companies and they may not hire in the first six months of 2024, according to Ravio’s compensation report. Why is there a decline? Discover how tech companies are thinking of growth and hiring for 2024.

Victoria Egba on December 27, 2023 Average reading time: 3 min
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Tech hiring rate and pay drops by 40% in Europe

In Europe, tech hiring, and compensation gains are significantly down compared to the previous year. Based on the Ravio compensation report, a substantial trend this year is a considerable drop in the overall rate of new hires. It has fallen from 67% in the last year, to now, 37%.  In other words, tech hiring in the continent would be at least 40% lower in 2024 compared to the previous year.

Ravio surveyed 900 employers, and 55% said they planned to keep the same number of employees in the first half of 2024. The implication is that these companies will replace retiring/quitting employees but not actively seek new ones.

This decline is consistent across all funding stages, with late-stage companies experiencing a particularly sharp decrease, halving their hiring rate compared to the previous year. The main driver behind this decline is the decrease in public market valuations and a nearly closed IPO window, limiting funding options for late-stage companies and consequently impacting their hiring and growth prospects.

The tech sector has witnessed a higher rate of employee layoffs this year than ever before.

TechCrunch reported that 240,000 tech jobs were lost in 2023, both from startups and giant tech companies like Spotify, Amazon, and Google.

Wages may not rise in 2024

As if it isn’t bad enough that tech hiring is reducing, the wages and compensation don’t have a significant increase. Surprisingly, 59% of companies do not plan to increase new hire salaries in the next six months, despite a 4.9% inflation rate across Europe.

Within the subset of companies planning salary increases, the primary reasons include keeping up with inflation and attracting more senior candidates. These tech firms anticipate a 4.8% increase in basic compensation for their staff in 2024. However, the amount indicates a 40% decrease from the wage increase in the previous year.

This decision is not isolated; it reflects a broader trend wherein companies are cautious about their expenditure in the face of economic uncertainties.

Most of the tech company layoffs in 2023 were due to inflation that affected the prices for services, and to cover up, they had to make cuts.

Their decision to increase wages just enough to meet inflation wages still reflects that companies are still trying to make cuts, which were necessary. Consequently, job seekers entering the tech industry may encounter limited upward movement in compensation.

Are there plans for new hires and growth?

A mere 44.8% of companies plan to grow their headcount in the next six months. Among these, there is a relatively even split between those actively accelerating hiring and those maintaining hiring levels. Intriguingly, early-stage companies, particularly those with pre-seed or seed funding, are less inclined to prioritize new hires, with 67% indicating that they are only replacing leavers.

For companies intending to hire, engineering emerges as the most-cited job family (23%), reflecting its significance in the overall job landscape. This may hint at a potential uptick in the hiring rate for engineering roles in the coming months. However, there has been no significant change in median salaries for Software Engineering in the past year. For instance, the current monthly wage for a software engineer in the Netherlands at the medior level is currently €4,040, according to Giant, and there might be no significant change over the next few months.

Notably, there is variance across job families, with commercial roles such as sales and account management also experiencing a demand among companies who intend to hire within the next six months (8%). It is likely a strategic move by companies to focus on core topline growth in a challenging funding environment, sidelining new product initiatives.

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