Are startup salaries decreasing?

The tech industry has always been a hub of innovation, attracting top talent worldwide. While historically landing a dream front-end gig required relocating to a key start-up ecosystem, the COVID-19 pandemic highlighted what’s possible to accomplish from your kitchen counter. 

With the emergence of remote work, companies gained access to a larger pool of candidates - exciting for smaller tech environments like ours, who stand to gain knowledge share from Google’s newest hires. Salary expectations remained strong, as many companies were forced to reevaluate operations and product-market fit within a new normal. Product-led growth strategies helped many SaaS companies keep afloat during the turbulent economic climate, and only further emphasized how essential key technical staff were to limit customer churn.

Start-ups reacted by increasing salaries - particularly tech wages. But was it sustainable?

It appears that might not be the case.

Perhaps less relevant in the deep pockets of larger companies, but for startups, tapping into a global talent market provides access to a larger pool of qualified candidates who are willing to accept lower wages. Massive layoffs across tech have additionally driven movement within the industry and only add to the availability of qualified talent seeking their next role.

This is exactly what we’re seeing across the companies we work with. 

Increased competition is also contributing to the trend of decreasing salaries. The tech industry has exploded in recent years, with more and more companies vying for the same pool of talent. B2B SaaS founders are facing 15.6x more competitors than in the past. Companies are competing with each other to offer the lowest salaries possible, which despite initially filling desks, has ultimately led to a 34% decrease in employee tenure.

What does this mean for start-ups in Atlantic Canada? Take a look at your financial projections. What key hires have you projected to add over the next 3 years? Did you budget aggressively for these new positions? Have you considered the global talent pool? If you were able to attract the best hire under budget, where is the first place you would reallocate cash?

Ideally, you’ve answered this question with an activity that directly generates revenue (or moves you closer to revenue generation as a pre-revenue company). If you’re unsure or haven’t looked at your projections since your last financing round, now might be a good time to blow off the digital dust mites. 

Stuck on where to start? Send us an email at info@profitual.io and let us help you out! We’ll benchmark your salaries against industry averages, and see what cash you can reallocate toward growth. 

The trend of decreasing salaries in start-ups might just help your company land its next key hire - but you can’t ignore retention. Additional staff incentive plans, leveraging an ESOP, and providing tiered mix-and-match compensation offers are strategies companies today are using to not only attract top talent but keep the hires motivated to contribute to the company’s growth.  At the end of the day, the tech industry needs to strike a balance between cost-cutting and ensuring that its employees are fairly compensated for their hard work and contributions.