£100K Salaries Are Coming (There’s a Tech Talent Crisis, and It’s Getting Worse, Not Better)

For nearly two decades now, tech salaries in the Bay Area within the United States have soared, puffed up by an abundance of Venture Capital as well as competition from established tech juggernauts such as Google, Meta, and Amazon to name a few. 

Within this huge numbers of staff were found to resign from their positions as a result of the Covid-19 pandemic. This is known as the great resignation, and in 2021, businesses in the United Kingdom were hit by a massive staff shortage as an alarmingly high number of employers resigned voluntarily. According to a Bloomberg News Chartered Management Institute report, the voluntary resignations between April and December 2021 were much higher than during the same time in 2019.

One surprising thing was that was that Managers at larger organisations saw more voluntary departments in the workforce as compared to smaller companies. Meanwhile, 60% of managers in general reported difficulty hiring employees for the same job roles they could quickly fill before Covid-19.

Since the pandemic, many organisations have changed their workplace policies to cater towards retaining their workforce. For instance, 89% of companies have now implemented flexible working arrangements, in order to improve employee satisfaction. This is a notable increase from 58% before 2020.

However, companies still face challenges in regards to recruiting employees. For example, 90% of the surveyed managers report having vacancies at their workplace, while 55% said recruiting new staff is much more complicated and difficult now.

While the Great Resignation is in full flow, there have also been more instances of people shifting from full-time work to part-time work. For example, 20% of the managers reported seeing an increase in employees moving to part-time work since the pandemic began.

The number of available job vacancies in the UK surpassed a million for the first time in July 2021. In addition, a Microsoft report released during the same time showed that 41% of employees plan to leave their current employers. Despite the recent tech layoffs and tech financing crunch, it seems likely that back-to-business will involve the same challenges.

The question is why are these employees planning on moving? Well, 46% of these employees plan to move because they are able to work remotely. At Academy we have found that people find remote work more attractive. This is reinforced by the findings that indicate Gen Z, people with a graduate degree, as well as women within tech tend to apply for remote jobs more than those which are on site as Illustrated in Figure 2. 

Figure 1: 41% of employees considering leaving their current employer (Source: Microsoft)

Figure 2: What demographics are likely to seek remote working opportunities (Source: Microsoft)

Continuing Into 2022

While the great resignation may have started as a result of the Covid-19 pandemic, it has continued into 2022 as more people seek further opportunities and training outside of their current roles.

A recent survey commissioned by HRD showed that 29% of employees are actively looking for a new job or are open to new job offers. In addition, the number of people who are passively looking for a new job has also increased in the past year.

According to this survey of 1,000 workers in the UK, the following industries are more likely to be affected by this resignation spree:

  • Legal: 44%
  • IT & Telecoms: 42%
  • Sales, Marketing, & Media: 40%

Companies that offer remote or hybrid working models have been found to be less likely to face resignations as these types of workplaces are more attractive to employees. 28% of the workers admit they stay in their current work as a result of flexible working schedules and policies. Meanwhile, 16% of employees report wanting to leave their current job because their workplace requires them to be in the office for a job that can be done remotely.

Besides the lack of hybrid and remote working opportunities, low salaries are also causing employees to resign. 23% of workers report looking for positions in other companies because their current workplace does not offer an attractive salary, timely pay raises, or bonuses.

Therefore, it seems like employers can retain their staff by offering more flexible work arrangements such as hybrid working as well as increasing salaries. Businesses can avoid their best employees from resigning in the first place, provided the correct policies such as flexible working are in place.

Tech Talent Crisis

Now that we’ve discussed the Great Resignation, let’s look at the elephant in the room, shall we? Unfortunately, the tech talent crisis is real, and it’s only getting worse.

The problem is twofold. Firstly, there are not enough people with the necessary skills to fill the ever-growing number of positions in the tech industry. Secondly, even those with the right skills are often snapped up by the big tech giants, leaving smaller companies struggling to find skilled digitally native talent.

The result is that many businesses are being forced to either lower their standards or do without specific key roles altogether. And it’s not just the businesses that are suffering – the people who can’t find work in the tech industry are missing out on a huge opportunity.

According to Eurostat’s 2020 report as shown in Figure 3, there’s a concerning percentage of the population aged 25 to 64 who have little to no digital skills. In today’s tech-driven world, that’s a severe problem. We recently wrote about how Academy is helping tackle this issue here.

Percentage of Population 25-64 year olds with low or no Digital Skills.

Figure 3: Percentage of people who have low to no digital skills within Europe: Source

Moreover, a McKinsey report reinforces the findings from Eurostat by showcasing that 8.6 million people lack the necessary skills in three categories across the EU-28 public sector. Of those, 1.7 million people lack tech skills.

 

Figure 4: The Skill Shortage: Source

While most positions in the UK suffer from a shortage of digital skills, some jobs are more affected than others. For instance, managerial positions require the ability to navigate a more complex digital landscapes requiring native digital literacy than intermediate workers and junior managers.

Therefore, a shortage of digital skills is more problematic in the top tiers, where organisations require a strategic and comprehensive understanding of how technology can be integrated into the business.

Figure 5: Positions in the UK, where digital skills shortages are most apparent: Source

Likewise, a McKinsey Global Survey report shows that nearly 87% of the organisations in the world are currently experiencing a skills gap. Meanwhile, the rest expect to see a skills gap in the future.

43%

Figure 6: Respondents expected to see skill gaps within the market and technology trends: Source

This ultimately has wide-reaching implications because it limits the ability of businesses to digitalise and, therefore, hinders them towards becoming more productive and efficient. As a result, UK businesses are losing out on billions of pounds every year as a result of this skills gap.

What Concerns Employers

Organisations are concerned about the widening skills gap because of the negative impact on productivity, growth, and profitability. A skills shortage can lead to organisations struggling to find the right people with the right skills to fill critical roles, which can, in turn, lead to reduced output and slower growth. In a globalised economy, where competition is fierce, this can be devastating for businesses.

The growing skills gap is also a significant concern for employers because it can lead to higher wage costs as employers compete for a limited pool of skilled workers. As a result, it can put businesses at a competitive disadvantage and make it difficult to attract and retain the best talent moving forward.

CompTIA research study in Figure 7 below shows that the most concerning impact of the skills gap on businesses is lower staff productivity. It is followed by lower levels of customer engagement, lower profitability, and an inability to keep up with the competition.

Ways Skill Gaps Negatively Impact Business

Figure 7: How does the skills gap negatively impact business performance: Source

Another reason companies are concerned about the ever-increasing skills gap is because it is most prevalent in areas that are critical to their business. For example, the skills gap in IT mainly concerns businesses because of the reliance on technology in today’s world.

The CompTIA study further shows that the skills gap is the highest in automation, AI, and IoT adoption. Meanwhile, cloud infrastructure, digital business transformation, cybersecurity, and app development are right behind as shown in Figure 8.

Figure 8:  Top IT Skill Gap Areas: Source

Since these aspects are integral to businesses, the skills gap in these areas can significantly impact businesses. It can make it difficult for them to stay ahead of the competition and meet the demands of their customers.

On top of that, the skills demand has also changed significantly since 2018. The Future of Jobs Survey 2018 by the World Economic Forum revealed the differences between in-demand skills in 2018 and 2022. As evident, technology design and programming is a critical skill set required for jobs in the future.

Figure 9: The future of job skills findings: Source

Tackling the Talent Crisis?

So what can be done about this talent crisis? Well, firstly, we need to address the skills gap. Companies need to ensure that more people are being trained in the necessary skills, and they need to do it quickly. Academy makes it easy to find junior skilled talent within the tech sector, but considering the current employment landscape and increasing difficulty of hiring, companies are looking for even more ways to get more people trained in the specific skills they need.

Reskilling the Workforce

Reskilling means training employees in new or different skills. It can be done through several methods, such as:

  • On-the-job Training: Employees receive training from their employers while they are working. It can take the form of shadowing, mentorship programs, and attending workshops and conferences related to the desired skill set.
  • Online Courses and MOOCs: Employees can take advantage of the vast array of online courses and Massive Open Online Courses (MOOCs) available today. These are often very affordable or even free, and they provide employees with a flexible way to learn new skills on their own time.
  • Bootcamps: Bootcamps are intensive, short-term training programs that teach participants the skills they need for a specific job. They usually last between 4 and 12 weeks, and some programs even guarantee job placement after graduation.
  • Formal Education: Some employees may need to return to school to get the necessary education for the desired skill set. It could mean going back to get a degree or certification or taking a few courses at a local community college.

The best way to close the skills gap is through a combination of these methods. Different employees will learn in different ways, so it’s important to offer various options.

A McKinsey report found that 30.5 million UK workers forming 94% of the workforce need to be reskilled to perform their jobs in 2030. Moreover, McKinsey found that 80% of hiring managers in the UK expect to hire employees in automation and tech roles, such as cloud computing, cyber security, AI, robotics, and digital customer experience.

In fact, 75% of employers can benefit from reskilling their workforce.

Figure 10: Upskill, Retain or both? :Source

If employers don’t step in with reskilling initiatives, two-thirds of the UK’s workforce will be underskilled by 2030. This will ultimately have a negative impact on the British economy, if swift action isn’t acted on by employers and the government.  Of these as shown in Figure 11, 21.2 million employees will lack basic digital skills to perform their jobs by 2030.

Figure 11: Where are UK workers under-skilled: Source

An example of a company that is taking initiative towards reskilling comes from the tech giant, Google. The Career Forward program at Google is aimed at helping veterans get a Google Career Certificate for user experience design, project management, data analytics, and IT support. Many companies can learn from this initiative towards teaching basic digital skills within their own workforce.

Why £100K Salaries are inevitably on their way

The Great Resignation has been rampant across the UK, affecting all industries from retail to banking. The reason for all of this is simple: people are finding out that their salaries are worth a lot less than they thought.

More importantly, the pandemic has led to an awakening of sorts, where people are realising that their time is worth more than their salary. With this in mind, it’s no surprise that many are quitting their jobs to search for greener pastures.

So, what does this all mean for the future of work? Well, it’s safe to say that salaries will have to increase to keep up with the demand. This is especially true for industries that are struggling to retain employees.

To understand how much tech talent can expect salaries to increase, it’s essential to compare current data with expected raises. According to Hired, the average salaries for software engineers in the UK are shown in Figure 12. As developers advance through their careers, they can expect to earn more.

Apart from experience, the salary increment also depends on the skills, company, and location.

For instance, the most in-demand skills amongst software engineers are Java, Python, and JavaScript. These skills can help developers earn more than their counterparts who do not have these skills.

The company size is another crucial factor that determines the salary of a software engineer. Generally, big tech companies offer higher salaries than small and medium-sized companies.

Location is also an important consideration when it comes to determining the salary of a software engineer. For example, engineers in London can expect to earn more than those based in other parts of the UK.

Figure 12: Years of experience to salary ratio: Source

The same Hired report also showed that some jobs are more likely to see a salary increase than others. These include data scientists, security engineers, and Python engineers among others as shown in Figure 13 below.

Figure 13: Job Role’s expected to see a salary increase: Source

By companies offering high salaries, companies are more likely to attract top talent. It will also help them retain existing employees who may be considering leaving for higher compensations elsewhere.

recent Sifted survey showed that many startups have started to offer higher salaries in the past year to keep up with their competitors. Compared to other professionals, data scientists have seen the highest salary hike of £53.5k to £62k per annum.

Figure 14: Sifted survey showcasing the biggest wage hike: Source

Meanwhile, senior data scientists with additional skills can earn up to £80.5k per year shown in Figure 14 of having an 11% salary increase over the last 12 months. Salaries for such roles are higher because of the increased demand for data analysts and scientists who can identify business opportunities and drive growth.

Although the salaries for data scientists increased the most, the hardest-to-fill vacancy, as per the survey, is engineering roles. So to attract talent, companies increased the salaries of senior engineers up to £90k.

As businesses change and adapt, companies need to be proactive to stay ahead of the curve. It means reskilling existing employees and offering high salaries to attract new talent.

Hard to Fill Job Vacancies

Employers struggle immensely when it comes to filling job vacancies. Unfortunately, the pandemic has only made things worse, with many employers struggling to find staff willing to work remotely. In fact, many employers say that they have struggled to fill vacancies because candidates are unwilling to work on-site and prefer remote positions.

The CIPD Labour Market Survey showed that nearly 46% of employers have hard-to-fill vacancies. In addition, 45% of employers in the private sector, 41% in the voluntary sector, and 53% in the public sector struggle to fill specific vacancies in their workplace.

Figure 15: Employers with hard to fill vacancies in %: Source

Moreover, the survey also found that hard-to-fill vacancies are more prevalent in healthcare, public administration, construction, information and communication, support service activities, and business services.

Since healthcare tops the chart, it’s understandable why many companies are offering ‘’welcome bonuses’’ to employees. For instance, HC One, a care home operator, offers £10,000 as a welcome bonus to night nurses.

Meanwhile, Elysium Healthcare offers £5,000 to registered nurses while Priory Group gives the same amount as a welcome bonus to mental health nurses.

However, the trend isn’t limited to healthcare only. While Arla, the dairy group, started offering a bonus of £2,000 to employees, Tesco followed suit, offering a signing-on fee of £1,000 for HGV drivers.

Figure 16: Employers with hard to fill vacancies by industry (%): Source

However, this isn’t just a momentary problem. 64% of employers anticipate they’ll struggle to fill vacancies in the next six months, while 33% expect recruiting to be a significant problem moving forward.

Figure 17: Over the next six months, does your organisation anticipate problems filling vacancies (%): Source

An Expected Wage Raise

It is clear employers are experiencing difficulties in hiring, and continue to offer more remuneration in order to attract and retain the key skilled workers they require. This is already happening in some industries as employers are starting to offer £100,000 salaries for certain positions.

For example, it’s not uncommon for senior executives to earn six-figure salaries in the banking sector. In fact, many banks have been offering £100,000 salaries to lure in workers from other organisations.

These figures don’t even include bonuses, which can often double or triple the salary amount.

As the demand for specific skill sets increases, it’s only natural that the salaries will follow suit. This is especially true in industries where there is a lot of competition for workers.

The same survey mentioned earlier showed that raising wages is the employers’ first action plan against recruitment difficulties.

Figure 18: Employer actions to alleviate hard to fill vacancies, past response and future plans (%): Source

48% of employers have already raised wages for specific vacancies, while 37% plan to do so in the future. Besides raising wages, employers also plan to do the following to attract and retain employees:

Figure 19: Employer responses to retention difficulties, past response and future plans (%): Source

  • Flexible Working Policies: Employers are offering more flexible working policies to employees to attract and retain them. Most employers already offer flexible working policies, such as working from home and part-time hours.
  • Upskilling Existing Staff: Since hiring new talent can be difficult, many employers instead focus on upskilling their existing staff. This way, they can retain their employees and have a pool of qualified talent for the vacancies they need to fill.
  • Increased Training: Besides upskilling existing staff, employers also offer more training opportunities to employees. It is especially true for certain industries, such as healthcare and construction, where there is a need for more qualified workers.
  • Improved Benefits Packages: Employers also offer improved benefits packages to their employees. They include things like health insurance, childcare vouchers, and pension plans.

Better Employee Benefits

Along with offering higher wages, companies also provide better employee benefits to improve retention rates. These benefits can include anything from health insurance and paid time off to on-site child care and free lunches.

Employee retention is a crucial concern for businesses. The cost of losing and replacing an employee can be very high, and it can have a negative impact on morale and productivity.

Employers that offer such benefits don’t only see high retention rates but also notice better productivity and engagement from their employees. Moreover, it improves the employees’ physical and mental health, which is imperative for any business.

The Gartner 2020 ReimagineHR Employee Survey showed that employers that improve their employees’ life experience see a 20% betterment in the employees’ physical and mental health. Plus, such organisations have 21% more high performers than their counterparts that don’t offer the same support to the workforce.

Figure 20: Employers that support employees with their life experiences: Source 

Bridge the Skills Gap with Academy

Founded by The Hut Group alumni Ash Ramrachia, Academy brings the experience of top hiring execs and teaching experts from across the world to offer a truly unique learning experience for candidates, with employment skills front and centre.

Unlike bootcamps, our Scholars are hand-picked to ensure both raw aptitude and emotional intelligence.

We have strict criteria for our scholars and do the heavy-lifting of selection for you, as well as offering companies the opportunity to continue that mentorship and training through a 24-month Accelerate programme.

It ensures that not only are our Scholars able to hit the ground running, but the experience is as hands-off as possible for your software engineering team. We do this through an intensive four month tech training programme, supporting our Scholars financially throughout to ensure that we really are putting our money where our mouth is.

“The best talent we could have had in the role… I didn’t think we could get this from a junior employee.” – Millie Group CEO and Co-Founder, Jenna J. Ahn

Get in touch today to find out how we can help you locate the best junior tech talent for your workforce at: https://academy.alchemy.construction/contact-us/

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