Unicorns face a reckoning after doling out generous salaries in boom time

As a recruiter, David Bolton has a ringside seat to the inflated salaries that tech firms often offer their employees.

“We had a case last year where a guy with a couple of years of experience was currently on four grand a month with the company,” Bolton, an associate director at recruitment agency Space Executive’s technology and transformation practice, tells Tech in Asia. After being interviewed and doing “really well” on the tech test, the company doubled the candidate’s salary, he shares.

The firm in question was a Southeast Asian tech unicorn, says Bolton, who focuses on hiring executive and C-level staff. Competing startups, meanwhile, were offering the candidate about a 15% to 20% salary increase. This disparity, he says, applies from junior roles, senior hires, to tech leads.

When it comes to hiring the best talent, businesses in Southeast Asia – startups and tech giants alike – have been pulling out all the stops. But this may now be screeching to a halt as firms reassess labor costs amid a pandemic-induced recession that has already forced industry-wide layoffs in sectors like travel and hospitality.

Funding for startups in the region ended on a high note at the close of 2019, creating a new wave of tech unicorns. As they grew, many of these companies had to compete for the same talent as tech titans like Facebook, Google, and Alibaba, who have led the way in offering glitzy salary packages.

For smaller startups that are less flushed with cash, forking out outsized wages upfront – even for a highly skilled candidate – can be out of the question, leading to a brain drain in favor of bigger enterprises. During a recession, these firms are further disadvantaged, as they’re forced to make cutbacks even as tech giants continue on their hunt for talent.

One reason that bigger firms offer huge increases in pay is the short supply for certain technical workers. For instance, proficiency in modern programming languages such as Golang and Node.js has been sought after, says Bolton. Companies have been seeking such talent from abroad in recent years, he adds.

Even before the pandemic, candidates with “very niche skills” could already command up to a 60% increase in salary, Shinjika Shukla, an associate director at recruitment firm Michael Page, tells Tech in Asia.

Collecting talent

To acquire top employees, rich tech multinationals will make every effort – sometimes to an extreme. Unprofitable tech unicorns have had to match them or risk losing out on the cream of the crop.

A founder from a mid-sized startup tells Tech in Asia about how the firm lost “two of its best people” to a big tech company even though there was no real need for them there.

“[The employees] went there, but there was nothing to do. All [the tech company] wanted was to make sure [a competitor] didn’t get them,” says the founder, who did not want to be named. Unicorns have followed suit, hiring with the idea that money will be free-flowing, the CEO adds.

Photo credit: 123rf

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