The ongoing shortage of qualified IT pros, an improving economic picture, and inflation pressures could push salaries up by 8% for some tech workers this year, according to a new report from business consultancy Janco Associates.
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After failing miserably to keep up with inflation over the past two years, it appears salaries for IT pros are beginning to catch up, according to a new study from Janco Associates.
In 2021, the mean compensation for all IT pros rose just 2.05%, according to a mid-year salary survey from the business consultancy. In 2021, the median salary for IT pros at large enterprises was $100,022, and $95,681 for those at mid-sized firms.
In the year ahead, salaries could rise by another 8%, according to Janco Associates CEO Victor Janulaitis. “We project that salaries for IT pros in SMBs will exceed inflation. In large companies, we think it may lag since the salaries are greater,” he said.
Recent salary increases were mostly due to a shortage of qualified IT pros at a time when organizations were embarking on digitization projects, the Great Resignation, and inflation pressures, according to industry analysts.
The Janco data focused largely on companies in the US and Canada.
In 2022, the overall US inflation rate was 7.68%, according to the US Bureau of Labor Statistics (BLS). During last year, the US inflation rate climbed to a high of 9.1% in June, dropping back to 7.1% by December. (That means prices for goods and services were 7.1% higher in December 2022 than a year earlier, according to the Consumer Price Index.)
Even as inflation soared in 2022, the pool of IT talent shrank as employees quit to re-evaluate their career and personal lives. Employers were also rolling out more technology projects in response to the global pandemic’s effect on remote work, sales and services.
Over the past year, more companies have been investing in IT with an emphasis in e-commerce and mobile computing.
"At the same time, with the ever-increasing cyberattacks and data breaches, CIOs are looking to harden their sites and lock down data access so that they can protect all of their electronic assets," the Janco report said. "Added to that is an ever-increasing array of mandated requirements from the EU with GPDR and US federal and state requirements to protect individual users' privacy. All of these factors increase demand for experienced IT pros and salaries they are paid."
In addition, retirements among IT workers increased as more Baby Boomers opted out of returning to work, Janco noted.
Tony Guadagni, senior principal analyst in the HR practice at Gartner Research, said the 5.61% salary increase cited by Janco Associates over the past year “passes the sniff test.”
“It’s pretty well aligned with what we’ve seen,” Guadagni said, adding that salaries in all professions — not just IT — are expected to increase on average about 3.5% as of the start of 2023. That would represent a significant jump compared to the 2% to 2.5% merit increase Gartner typically sees throughout industries.
Gartner’s data is based on a November survey of 150 organizations worldwide; the merit increase figures are based on “core contributor” employees — or the 80% of employees who are neither underperforming nor overperforming, Guadagni said.
He took exception, however, to the 8% increase Janco Associates projects for IT professionals in 2023.
“That’s one that I think is a little tougher to rationalize at the moment,” Guadagni said. “Most organizations we’ve talked to have already planned for what they expect for merit increases…in the first quarter of 2023. I’ve not talked to a lot of organizations who say with any certainty how they expect compensation to grow over the next calendar year.”
The balance of power, which had been in favor of IT workers, has shifted somewhat in favor of employers, according to Guadagni, due in part to a “tumultuous business environment” — especially over the past eight months or so.
“I think organizations have a lot more leverage in compensation discussions than they did even four months ago. I think a lot of that is based on some of the high-profile layoffs…we’ve seen from major tech platforms,” Guadagni said. “Even today, we saw Salesforce announce they are parting ways with 10% of their workforce.”
Other high profile layoffs over the past few months included Meta (Facebook’s parent company) and Amazon.
Even in light of well-publicized layoffs, however, there remains a dearth of tech talent.
Janco’s 2022 Salary Survey findings indicate organizations added 190,000 IT positions during the past four quarters, but there remains a wide gap between positions available and workers available to fill them.
Salary compression is also occurring as “new hires” are offered salaries at the top end of the pay ranges for existing positions — often getting more than current employees in the same positions, according to Janco.
“Staffing and retention are now a primary priority of C-Level management,” Janco argued.
The report also noted:
While projections for future tech hiring fell back in November (the latest month for which figures are available), those future postings still totaled nearly 270,000, according to CompTIA, a nonprofit association for the IT industry and workforce. Openings for software developers and engineers accounted for about 28% of all tech jobs postings last year. Demand for IT support specialists, systems engineers, IT project managers, and network engineers also remained solid, CompTIA’s data showed.