Downward pay pressure

Turbulence in the IT industry during the past year is mirrored in a new survey of pay levels and trends at technology companies.

According to the 2001 Information Technology Association of America (ITAA) compensation survey, conducted by human resource consultant William M. Mercer, compensation for IT executives is on the decline, and midlevel IT professionals are seeing slight pay raises. Data from technology companies was gathered during the spring of 2001.

Recruiters across the country say their day-to-day experience shows that IT salaries across the board are increasing only slightly, and in some areas are drastically decreasing.

“We’re seeing moderate increases for midlevel managers and line individuals….We’re also seeing 4 per cent annual salary increases, and seeing [people] in existing jobs at management levels taking salary hits – up to 10 per cent reductions,” says James Duran, founder of recruitment company ProQwest Inc. in Sunnyvale, Calif.

The downward pressure and slowing pay raises affects both companies and candidates, says Joel Abraham, ProQwest’s director of Midwest operations in Wauwatosa, Wis.

“Companies are getting market value for skills for the last four or five months, and certainly since Sept. 11 many IT projects have been frozen. I have a midlevel, hard-core technical professional with the latest networking background. Last year I could have placed him at over six figures; now maybe US$75,000 and up,” Abraham says.

Says the recruiter, “Companies still have to be competitive to find good talent, but they are using this time to get rid of dead weight and making strategic hires.”

Down at the Top

The ITAA compensation survey results show that median total cash compensation – base salary plus annual incentives – for executives in IT companies declined from 2000 to 2001. The results showed that the decline largely resulted from smaller annual incentives rather than decreases in base pay.

ProQwest’s Duran says that survey findings are borne out in the area where he works, Silicon Valley. “In terms of base pay for IT executives, that has not increased this year. We’re seeing less incentives [for executives] to move, but they’re not gone. If you’re trying to hire a director of IT or a CIO, you still need to pay a sign-on bonus. People are skittish and not moving easily,” he says.

According to the survey, the median base salary of CEOs in technology companies decreased from US$280,100 in 2000 to US$277,500 in 2001 as total cash compensation for that same period decreased from US$409,600 to US$350,000.

The median base salary of CIOs in technology companies declined from US$159,800 in 2000 to US$171,300 in 2001 and total cash compensation decreased from US$203,500 to US$192,100.

Stacy Hayes, executive recruiter for The McCormick Group, an executive search firm in Arlington, Va., says that this compensation trend is present in the Washington D.C. metropolitan area. “For IT executives, from a compensation standpoint, nobody is getting a raise. People right now are happy to have a job,” Hayes says.

Hayes attributes this not only to the high number of failed companies, but also to merger and acquisition activity. “With M&As – at the executive level – there is duplicity….There’s a certain degree of Darwinism in a down economy. Companies fire the poorer executives. The ones that are being sought after are still more than likely gainfully employed in the competitive arena.”

Slightly Above Middle

Some nonexecutive employees saw moderate to strong increases in both base pay and total cash compensation through Spring 2001, according to the survey. The data interpreters suggest that shortages in specific talent categories continues to drive pay upward for many positions.

According to the survey, the nationwide median total cash compensation for application-systems professionals in technology companies increased in early 2001 to US$105,100 from US$91,800. Nationwide median total cash compensation for LAN administrators in technology companies increased to US$54,200 from US$51,300.

Not all mid-and junior-level IT professionals saw an increase in pay from 2000 to spring 2001. Senior project managers’ median total cash compensation was US$91,500 in 2000 vs. US$90,000 this year, and for senior software-systems engineers, US$70,000 in 2000 vs. US$69,100 in 2001.

“Tremendous premiums were being paid in the tech boom,” Hayes says. “Web programming, Microsoft tools, ERP skill sets, development in an Oracle or PeopleSoft or SAP environment – these premiums have come down. The demand has gone down. We’ve stepped back and returned to a level of normalcy.”

The ITAA compensation survey reflects pay data from 69 IT companies representing a total of 225 geographic locations and more than 56,000 IT employees.