While demand for talent in the tech sector remains strong, the stock market slump, which hit tech companies in particular, is prompting a recalibration of the industry's talent compensation package.
Every day, new company stock prices plummet, hiring freezes and slows, or companies that were previously unable to hire talent quickly announce layoffs. Not long ago, Daniel Ek, the CEO of streaming music giant Spotify, explained to employees via email that the company was laying off 25% of its workforce. Cryptocurrency exchange Coinbase announced 18% layoffs.
In the past month, U.S. fashion e-commerce company Stitch Fix has laid off 330 employees, or 15% of its workforce, and "buy now, pay later" company Klarna has cut 10% of its workforce.
These and many other tech firms, which rapidly increased their workforces during the Covid-19 pandemic, are now halting hiring or laying off workers as soaring inflation and economic uncertainty threaten growth.
but,Overall demand for talent in the tech industry remains strongAccording to CompTIA, an information technology industry group, U.S. employers posted 1.1 million tech jobs in the first quarter of this year, up 43 percent from a year earlier. But the structure of the compensation package may change.
For start-ups and smaller companies, equity awards are expected to boost employee compensation as they look to save money during difficult times, while the proportion of cash accounts will decline, said Thanh Nguyen, founder and CEO of compensation benchmarking startup OpenComp.
Until recently, startups were willing to pay 15% to 30% more to attract talent, but they are now focused on preserving cash, especially six months after their last funding round, Thanh Nguyen said.
He added: “We are now starting to see early-stage companies being less aggressive in hiring cash, but more willing to offer equity awards because it’s important to slow the current rate of cash burn.”
Combining cash and equity awards has long been the most common practice for tech companies to create compensation packages for employees, but that structure is changing. Companies that issued stock at peak times to attract employees are now finding that stock is worth much less.
“Companies will face massive layoffs or huge losses as companies will have to cancel and reissue those insolvent shares or re-granted those shares and cause dilution to retain talent,” Thanh Nguyen said.
In May, Henrique Dubugras, co-founder and co-CEO of fintech Brex, said the company's proposed $250 million share repurchase program was a strategy to provide employees with more liquidity to help them get through the crisis. storm.
Large public companies such as Apple, Facebook's parent company Meta and Google are in the same predicament. Thanh Nguyen believes this will have a huge impact on these heavyweights, who are hiring heavily through equity awards when their share prices are soaring. "We'll start to see that impact in the third-quarter earnings report," he said.
Continued strength in tech hiring isn't going away,But the scale may shrink. Those with artificial intelligence (AI), data, Web3 and cloud architecture skills will continue to look for opportunities, and will be described as people who can take "the company to the next level".
Thanh Nguyen added that people with these skills are "very valuable and will be able to ask for more cash and equity awards in the compensation package."
Technical generalists are more likely to feel the pain, such as generalists in sales, operations or marketing. Thanh Nguyen said: “Wages have increased across the board by 10 to 15 percent as talent moves. In a recession, labor costs will start to level off and people are more likely to stay in their current jobs longer. The recession has become a key factor and it will have a huge impact on where people travel and stay."
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