The War for Software Talent in Silicon Valley Drives Salaries to Record Highs!

By: Scott Purcell, Division Manager of Jobspring Silicon Valley

Anyone who has lived in Silicon Valley for a while and works in the high tech world, particularly in software, can attest to a market where the competition for solid talent has continued to grow more competitive by the year.  As a high tech recruiter managing an office focused on placing software engineers I have seen both the competition for talent grow as well as that very same competition drive salaries into a realm that we have never seen before.

To be fair, salaries for software engineers in Silicon Valley have always been, on average, probably the highest in the United States. I personally came up from LA in March of 2007 and noticed right away the differences in salary ranges in Silicon Valley. For example, very top tier software engineers or architects in Los Angeles would on average be making somewhere in the 110k-125k range give or take. Entry-level grads with a BS in CS from top Universities like UCLA would start out making 50k-70k. These numbers all sounded pretty reasonable to me when you take into account averages for other professions and cost of living. Coming to Silicon Valley definitely was eye opening. Recent grads were getting 70k-80k. Senior Engineers were on average getting anywhere from 120k-140k. These average numbers really blew me away.

Fast forward to 2010. We’ve just come out of a pretty nasty recession and the rest of the country is still hurting economically. Silicon Valley however is on the rebound. After a few years of radio silence in the venture capital world the money is flowing again. Software engineers that have put in a solid 3-5 years with their current companies and have waited out the recession are beginning to sense that there’s a new boom on the rise. Companies begin to use those funds to hire top talent. At first, salaries seem to stay the same on average. But as 2011 begins trends start to emerge. Facebook and Google begin competing fiercely for the very best young software talent and willing to pay 100k+ for entry-level software engineers. Other companies like Yahoo follow suite forcing venture-funded start-ups to also raise their salaries. Those engineers that had been making 125k-140k are looking for new jobs and, with the demand for their skills, are not willing to consider lateral moves. This drives the salaries up and now 150k base salaries for Senior Software Engineers has become the average. New trends in the market like Big Data and HTML5 drive the salaries up even more.

For the first time since I’ve been recruiting I’m placing Senior Engineers at base salaries of 165k. You would think that these would be big, profitable companies, but the companies paying those salaries range from Series A funded startups to 300 person profitable startups. Gone are the days of paying someone a lower salary with the promise of equity unless that equity is something extremely unique; as in 1% of the company and you can still expect a relatively competitive base salary.

Today, in 2013, the salaries in Silicon Valley are drastically different then even six years ago when I moved to Silicon Valley. This year alone I’ve placed entry-level grads starting at 80k and generated an offer for a Java Hadoop candidate with only three years of experience at 175k. Salaries for Senior Java Engineers that my team is placing range from 140k on the very low end to 165k. Candidates with 3-5 years of experience are easily being offered 110k-130k base salaries with significant equity and / or bonuses. This presents challenges to many companies from both a budgeting and internal equity standpoint but that’s Silicon Valley!

So what will future salaries look like in 2013?

This is an intriguing question. We’ve come to a really interesting place regarding compensation in Silicon Valley. Right now top engineering talent is getting 165k and above. With some C-Level executives and lower-management in the same range it can make things challenging from an internal-equity standpoint. Do companies stick to their guns and lose out on candidates or do they look to adjust their entire structure?

Predictions:

My personal opinion is that there are going to be some serious growing pains in 2013 and it will take until Q3 or Q4 until some companies begin to catch up to the market. Many companies will think that salaries are inflated and not want to pay the top salaries when those candidates may not be as skilled as the engineers already at the company. They also won’t want to up the salaries of the current employees. However, as word gets about what the market is paying and there are more companies paying those salary ranges we will start see more candidates making moves based partly on salary. Some companies will successfully counteroffer those candidates and others may lose talent.

By the end of the year most companies will be paying that market rate for top talent and will have to adjust their internal salary structure. This all hinges on the continued economic growth that we have seen the past couple years. Fingers crossed!

If my predictions are right, the good news is there will be some exciting growth in the tech world and more than enough money to go around for both talent and budding companies to continue the explosive innovation that makes Silicon Valley the high tech mecca of the world! As the war for talent continues I’m excited and interested to see how this will continue to evolve the high tech market in Silicon Valley and the impact it has on other tech meccas across the nation.