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The stock market crash, and the punishment meted out to tech companies in particular, is poised to reshape compensation despite high demand for tech talent.
Every day brings a new wave of inventory crashes, hiring freezes and slowdowns, or outright layoffs of companies that a year ago couldn’t hire fast enough. Earlier this week, Spotify CEO Daniel Ek sent an email to employees explaining that the company was slowing hiring by 25%. Crypto exchange Coinbase has announced that it is cutting 18% of its workforce. And in the past month, Stitch Fix has cut 330 positions, representing 15% of its staff, and buy-it-now company Klarna has laid off 10% of its global workforce.
These companies, and many others in the tech space, rapidly expanded their workforces during the pandemic, but are now halting or downsizing their workforces as soaring inflation and economic uncertainty threaten the growth. And while overall demand for tech talent remains strong — in the first quarter, U.S. employers posted 1.1 million tech jobs, a 43% increase from a year earlier, according to the group. CompTIA Information Technology Commerce – The way compensation packages are structured is likely to change.
For start-ups and small businesses, expect to see more equity and less money in job postings as these companies look to save money in tough times, says Thanh Nguyen, founder and CEO of compensation benchmarking startup OpenComp.
He says start-ups – which until recently were willing to pay between 15% and 30% more to get the right candidate – are starting to focus on preserving their own money, especially if a previous funding round dated back more than six months.
“What we’re starting to see now is that early-stage companies are less cash-aggressive and more equity-aggressive for job postings because their cash burn is now paramount.” , he adds.
While a mix of cash and equity has long been the practice for compensation packages in tech, this equation gets a little dicey. Companies that issued stocks in their heyday to entice employees on board now find those stocks worth much less.
“There’s either going to be a huge amount of employees or a huge loss because companies are going to have to cancel and reissue those shares that are underwater, or reallocate them and cause dilution to keep the talent on board,” Nguyen said.
In May, Brex co-founder and co-CEO Henrique Dubugras said the company’s $250 million takeover bid was a way to give employees “cash to weather this storm.” .
Large public companies like Apple, Meta and Google are caught in this same dilemma. Nguyen thinks there will be huge implications for these heavyweights who have had massive hires with equity grants when stock prices have risen. “We’re going to start seeing the implications of this start in the third-quarter earnings reports,” he says.
The “fat gorilla in the bedroom”
The current strength in tech hiring will not go away, but it is expected to taper off. Nicola Morini Bianzino, chief technology officer at EY, said people with skills in AI, data, Web3 and cloud architecture will continue to find opportunities, describing them as the talent that can take “businesses to the next level”. higher level”.
Nguyen adds that people with these skills are “highly valued and may require significant cash and equity.”
The pain will most likely be felt by technology generalists such as those in sales, operations, or marketing. “As people moved on, pay went up 10% to 15% across the board,” he says. During a recession, labor costs will begin to level off and people will be more likely to stay on the job longer, he adds.
“The recession is the big gorilla in the room,” says Nguyen. “It has a big influence on whether people keep their jobs or leave,” Nguyen adds.