Our Head of People Operations Sirli Spelman recently had the opportunity to moderate the conference Pay Day 2019. The conference discussed trends in salaries, recruitment practices, employer branding and much more. In this blog post, she shares some of the thoughts that stayed with her from the event as well as observations from her career in HR management in the tech sector.
So, you probably started this read to find out how Icefire compares to the tech market average in terms of salaries? Or, maybe you want to know, how much you as an industry professional would earn here? Well, to put it briefly — you get what you give.
Salary has become such a hot topic nowadays that everyone wants to talk about it! Especially in the tech industry. It’s no secret that salaries in the tech sector went through the roof already a while ago. We haven’t managed to ignore this trend at Icefire either. It should be a common practice that the effort you put into your work will be reflected in your salary. And that effort depends on your previous experience, skillset, knowledge base, etc. However, the current situation in the overall job market is quite the opposite: people’s expectations towards their salaries are increasing on a yearly basis, but expectations towards themselves as professionals quite often remain the same. For example, people aged 16–24 wish to be paid on average around 2000 EUR gross*; that is a 7,1% increase compared to 2018.
One size does not fit all
Salary is a psychological symbol, and the meaning of money is subjective.
Arnold Schwarzenegger once said: “Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.”
Joking aside, there are individual differences in thinking (or worrying) about money, and different people value money for different reasons (security, power, etc.). Research shows that different values are differentially linked to engagement. For us here in Icefire, it’s important to keep the engagement level as high as possible, thus, we have to understand what our employees really value — and the answer is different for each of them.
Hence, when talking about salary, it is never about “just a number”- it’s a total reward system, that includes subsystems like compensation, benefits, professional development, recognition, and work-life balance. And from people, we expect the same variety of “subsystems”: skillset, prior work experience (if applicable), relevant knowledge base, growth-oriented mindset, and mutual values. Based on the match we get, we’ll find a solution that satisfies both parties.
Salary as a performance driver
Let me ask you a question. If you are putting in more work, taking more responsibility and meeting agreed expectations — even more, you outperform! — it’s probable you will receive a salary increase. Right? Now, picture this — a person is not doing any of those things just described, furthermore they might even underperform. In these circumstances it’s rather unusual to have a pay raise, right? However, based on an extensive yearly salary survey by Fontes, people who do not meet agreed expectations or underperform, still get an average of 8% increase in their yearly salary**.
People often debate whether a salary can be used in motivating higher performance. A well-known American psychologist Frederick Herzberg developed a two-factor theory (also known as motivation-hygiene theory) to explain the link between employees’ motivation and job performance. The theory, developed from data collected from interviews with 200+ participants, says that basic salary is important as a survival need as it protects against employee dissatisfaction. However, it’s not a strong or long-lasting motivator. Herzberg states that appreciation, career opportunities, and self-confidence are key factors when aiming to increase employee motivation.
Based on our own experience and employee surveys, internal motivation is a stronger predictor of job performance than external — it is likely that higher monetary rewards will hinder not only internal motivation but also job performance. The more people focus on their salaries, the less they focus on satisfying their intellectual curiosity, obtaining new skills, having fun; and those are the very things that make people perform best. This observation is the result of long-term experience working with industry professionals.
What the perk?!
When talking about salaries and compensation, we cannot overlook the subject of perks. Offering perks as a way to attract and retain talent is a popular strategy. However, recently, they have gone to a whole new level, especially in the tech sector. We’re not saying perks are bad, no, we offer our employees extra benefits also and they are an understandable part of our motivation package. But it seems that we’ve reached the point where we have forgotten the real reason why we should be happy coming to work every day — fulfilling work that lets us grow and learn, inspiring company culture, great teammates. Not a pile of pizzas waiting for us during lunch break.
So what’s the solution? In Icefire, before introducing a new perk, we try to look at how the perk contributes to the overall employee experience in the long run, rather than just short-term effect. Another thing that we try to keep in mind is — how does the new employee benefit carry our company values? For example, if one of our core values in the company is constant learning, then it is logical that we also support our employees in their studies.
With that in mind — we also try to limit ourselves in the number of goodies we distribute at various industry events. Somehow, showering potential employees with stuff, already before hiring, has become the norm. And what is more, it seems like tech companies are trying to outdo each other by handing out more and more expensive widgets.
This is saddening as it takes the focus off from the burning topic that the tech industry is actually struggling with — how to find motivated employees, whose professional profile and salary expectations are in balance. Not to mention — when talking about different studies on factors that increase employees’ job satisfaction, it is never about the perks or the stuff.
In our experience (backed by employee surveys and market research) the greatest driver of productivity is professional satisfaction. So in the long run, it’s wiser to invest in building a company culture that motivates your team. And we live by that in Icefire.
*Job market study 2019 by Palgainfo Agentuur and CVKeskus.ee (9000+ participants)
**Estonian Salary Survey 2019 by Fontes (379 participants)
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Written by: Sirli Spelman