Some Thoughts on Engineering Salaries

Posted in Hiring

Today I saw an article from Hacker News about a Googler’s salary and the subsequent reaction from the community. For some, it’s a shock how fast engineering salaries have jumped in the past ~2 years; others, a bit of outrage and incredulity that fellow developers are getting job offers so beyond what small companies and startups can afford to pay.

I can confirm that Google is indeed paying high ($150k – $250k+) salaries to its mid-level engineers, but the raw numbers are whispered breathlessly and repeated carelessly. As salary is a culturally sensitive topic – at least in the US – going into the details may help clarify some misconceptions and add some context.

Your compensation is the entire package

The first and biggest factor separating what some quote as compensation and that dizzying number above is everything beyond the base salary: items like options/stock grants, bonuses (both an expected annual as well as spot and team bonuses), retirement account matching, and other benefits consolidate into the total comp. This is the actual measure of an offer for recruiters and executives, used to determine the true cost of a hire.

One article I’ve read pegs all “the other costs” of hiring an engineer at anywhere from 50% to 100% on top of the base salary[1]. Since that Google’s bonuses are higher than the industry average and has perks above and beyond most other companies, using just the base as a basis for comparison doesn’t make sense.

Negotiations make a difference

Two engineers with the same job and same abilities can take home substantially different paychecks. The initial salary is the basis for which raises and bonuses are paid out, so savvier workers will spend the effort to get that number as high as possible, making their paychecks down the years look great as well.

Google is hardly the first company to come back with better offers after negotiations and discussions, particularly when they know another company (ahem, the one in Palo Alto) is bidding for the same talent. Generally, new grads and those who join after spending years at their previous firms aren’t as calibrated to the job market, and I suspect they account for the large spread in reported salaries. Having another offer in the pocket can literally make a five-figure difference.

Age shouldn’t matter

From the initial article and some HN commentary, there is a fixation that the number of years in the industry is a big factor in comp. That “someone under 30” makes $250k+ or that a guy 4-years-out-of-school is looking at a $200k offer becomes a big deal because of the youth and the implication that guys with even more experience will be showered with money.

Okay, I’d be lying if I said that age and experience plays no role in comp, but for the places that the HN crowd cares about (e.g., the Google, Facebooks, and Apples of the world), merit is emphasized strongly in salary structure as it should be. If the tech industry is supposed to be a meritocracy, why not focus on what the 21-year-old is doing to warrant his salary instead of getting hung up the idea that he can barely get into a bar?

If an engineer’s salary is quantified with an age, chances are it’s outside of the average anyway. Its mention sets up a convenient but highly inaccurate shorthand, distracting from the individual’s accomplishments and meant to impress. Nobody talks about John Resig‘s age, because he isn’t running around using it contextualize his earnings or his achievements.

Money isn’t the end of it

Some commenters have said that engineering shouldn’t be about the money. From someone who was at Google and decided to leave only after a year to a startup, my addendum is that money doesn’t matter, beyond a threshold of comfortable living.

If you enjoy software development and dream of making a difference in the world, a six-figure salary ought to be enough for a comfortable lifestyle – regardless of where you live in the US. After a certain amount of base income ($75,000 based on research), the rest of the pay is a nice extra but not enough to be life-altering. Depending on whether you start from $75k or $150k, an additional $50k takes on a different significance.

The goal of Google’s pay is to provide enough so we were not worrying about our salaries.

Competing against that kind of cash is tough, but one positive is that money is shown to not to be a great retention nor long-term motivational tool. It’s a short-gap measure to get and hold onto talent, but “golden handcuffs” are orders of magnitude more expensive (why retention-driven counter-offers are so ridiculous). In fact, I’d say that engineers who forgo money for project and passion are the ones to hire.

Footnotes    (↑ returns to text)

  1. Admittedly, this is also inflated via payroll taxes, and some throw in recruiting costs too.