Expert Insights on Developer Compensation: Answering Top Questions on Pay, Location, and Diversity
If you’re hiring developers, chances are, you have questions around compensation and salary.
Deciding who should be paid what and why, can be rather complex. Especially since salary budgets rarely reflect the work, success and value of each developer.
We talked to industry experts, to get their take on these three trending questions:
✋ Want answers to more compensation-related questions? We’ve released a free ebook on how to pay developers in 2023. Get it here (no contact information required!).
1. How much should you pay developers?
The age old question. How do you come up with a number?
The easy (ish) answer is to rely on a benchmarking tool that will do the hard work for you. Tools (ERI or iMercer, for example) will give you an average wage to work with.
Note: although several tools promote themselves as international, we recommend looking for a tool that applies to your country. If you’re in France, for example, a french tool like DataRecrutement or https://salaires.dev/ will be more precise than an international tool.
The trickier, but more thorough and holistic way to do things, is to build your own pay structure. A custom-made pay structure is specifically applicable to your company, includes pay grade systems and salary ranges, and takes into account elements such as education, experience, expertise, market rates, etc.
An in-house system gives you the flexibility to adjust your system according to your company culture and compensation philosophy.
Are you sure you want to prioritize formal education, for example? 59% of developers do not have a university degree in Computer Science and close to a third of developers consider themselves to be primarily self-taught. In an increasingly skill-led tech job market, it doesn’t necessarily make sense to compensate according to level of education.
An external tool is a great starting point, but building and improving your own system over time is even better. It’s an ongoing process, to be optimized over time as you gather internal data and as your company culture, values and commitments grow.
“The hardest thing about salary benchmarking or building a salary structure is figuring out what factors you take into consideration.
With the world moving to remote, does geography play a role in salary (higher cost of living city vs. a lower cost of living city)? If you’re a global company, what should you consider about benefits (health insurance especially) and legal norms for specific countries?
The options are endless – so I would come up with 2-3 different models to see what fits your company’s culture and compensation philosophy.”– Sejal Patel, People Operations Lead at CoderPad
🔖 Related read: 19 Developer Salary Tools: Where to Find a Benchmark Salary When Hiring Software Engineers in 2022
2. Is it fair to adjust pay according to place of residence?
Location-based pay isn’t a completely new concept.
Large, multinational companies, with similar roles distributed in different offices around the country and/or around the world, have been dealing with location-based pay for quite some time.
However, instead of it being something only HR teams in larger, distributed corporations had to think about, it’s now something almost everyone has to think about. In a remote and hybrid world, there are more pay discrepancies within the same teams, which can lead to tension and misunderstandings. Communication and transparency around pay have also changed massively in the past years.
All in all, today, location-based pay is a subject of debate. There are a number of arguments both for and against location-based pay, but here’s the very (very) short version:
“Location-based pay is a fair business decision, allowing companies to offer competitive and cost-effective salaries, while leveling the playing field in terms of buying power and take-home pay, accounting for local tax rates and cost of living.”
“Location-based pay is unfair, because it emphasizes a compensation factor decorrelated from value and performance. An employee brings the same value to the company whether they work here or here, and should therefore receive the same pay.”
“I think that higher pay adjustments for living in a city like New York are fully justified, but only if you’re physically in the city, paying rent. The adjustment wouldn’t make sense if you were fully remote, working for a company based in New York, and living elsewhere.
I don’t necessarily know that it’s harder to get a job somewhere else, after having worked in NYC, unless you’re adamant about receiving the same pay.
I can’t say for sure whether I would accept a job with lower pay, but I do think that I would be open to it at a different stage in my life (not right now), if it meant being fully remote.”– Sarah Teng, Global Product Marketing Manager at TikTok (New York City)
🔖 Related read: Company leaders weighed in on location-based salaries. Here are the pros and cons
3. How can your compensation strategy support DEI?
While an increasing number of organizations are sitting up and taking notice of DEI, it’s still very much an ongoing battle.
Software development particularly, still has a long way to go as an industry, with some of the biggest reported gender pay gaps. Indeed, Uniting Cloud’s recent survey revealed a gender pay gap of 4% among junior developers, 27% gap among mid-level developers and 31% among experienced developers.
Incorporating DEI into your compensation strategy is a powerful way to drive change. Some words of advice:
- Build a standardized compensation strategy to avoid bias
- Carry out regular critical analysis (internally or with the help of an external organization) of your pay structure to identify any inequalities and make strategic adjustments
- Look at pay equity as more than just salary, make sure to evaluate access to bonuses, stock options, advancement opportunities, etc.
- Take a stand on salary transparency (whether it’s clearly communicating why employees earn what they earn and how they can earn more, including salary ranges on job posts, or making employee salaries public)
“The first step to understanding how to approach compensation from a DEI perspective is to understand the underlying data. It’s important to have a full picture of current total compensation and to bring into that data any demographical information on the workforce. Once you have the data in a good place you can analyse, paying specific attention to pay equity of similar or same positions in relation to different diverse populations in the organisation.
Pay gap analysis is helpful to understanding, at a macro level, the differences between the hourly rates of populations. Currently in the UK, gender pay gap analysis is mandatory for organisations with more than 250 employees, but smaller organisations can also publish their gap analysis. However, ethnicity pay gap reporting has been touted for some time with an anticipated government announcement on guidance coming soon. For an inclusive employer, it’s important to be ahead of the curve, not waiting for legislation to dictate reporting but to instead be open and transparent about compensation.
In many organisations the pay gaps seen can often be attributed to not having diversity at senior levels. To remedy this, I’d recommend an organisation look at their talent management strategy holistically and nurture diverse talent into senior positions. A compensation strategy should only form part of the greater reward strategy. By focusing on internal development of skills and providing career and pay progression opportunities, organisations can benefit from an enhanced employee value proposition.”– Anonymous, People Analytics and HRMI Manager at large banking corporation
🔖 Related read: Do Your Pay Practices Support Diversity, Equity, and Inclusion?