Nearing the boiling point

After working at a large Midwestern manufacturing company for 22 years, a senior IT design analyst understood that times were tough for her firm, so she didn’t complain about the two per cent raise she got in 2003. But this year her empathy turned to irritation when her performance improved but her salary didn’t.

“When you consider that I get an above-average review and get just a three per cent raise (this year) — it doesn’t make up for the crappy year before that,” she says. “They are assuming that I’m going to keep working hard anyway. But there’s no carrot. The carrot’s gone.”

She’s not alone. For the third year in a row, IT workers across the board received only modest raises — their pay increased by an average of just three per cent in 2004, according to Computerworld‘s 18th Annual Salary Survey, which studied the compensation and bonuses of 9,854 IT workers.

Although the average IT pay raise is slightly higher than last year’s figure of 2.8 per cent, it’s still lower than the national average of four per cent that the U.S. Bureau of Labor Statistics reports for all U.S. workers. While the majority of respondents (65 per cent) said their 2004 base salary increased from one year ago, 35 per cent experienced either no change in salary or had their pay cut.

Meanwhile bonuses are back — but up only one per cent on average. Most IT workers (70 per cent) said they expect no change in their 2004 bonus compensation from one year ago.

What’s more, on-the-job stress is at an all-time high, according to the survey. Some 88 per cent of respondents reported feeling stress because of budget cuts and increased workloads, up from 82 per cent last year. One quarter of IT workers surveyed said they’re dissatisfied with their pay when considering all their job responsibilities, while another 24 per cent reported that they’re neither satisfied nor dissatisfied with their pay.

Have IT employees reached the boiling point when it comes to pay? Not yet, survey takers said, but they’re getting close.

An IT security strategist, who spoke on the condition of anonymity, has survived outsourcing, reorganization and a tough economy in his 15 years at a financial services company. For him, a meager raise beats the alternatives. “I feel lucky to have survived that rapid loss of business and that slow recovery of it. I’m happy to still be working,” he says.

“I think that people are happy to have a job because the economic situation still supports such behavioural thinking,” says Linda Pittenger, an analyst at Gartner Inc. “I also believe that over time, IT professionals … are going to get to that boiling point, but they’re not there yet.”

Some unhappy IT professionals are considering moving to new jobs, Pittenger adds. But they’re learning that the grass isn’t always greener somewhere else.

“We all know someone personally who left (the company), but the project they got hired to do got canceled and they are jobless,” says the senior IT analyst who asked not to be identified. So for now, she — and many IT professionals like her — will stay put.

Where to put the blame

More than 27 per cent of survey respondents reported increased use of offshore outsourcing at their companies in the past year. David Foote, president of Foote Partners LLC in New Canaan, Conn., says offshore outsourcing had a major influence on pay this year.

Specifically, pay for both non-certified application programming skills and enterprise application development skills has declined 19 to 21 per cent over the past two years, according to Foote Partners research. “As more applications development work is transferred offshore or at least directed away from IT full timers, premium pay becomes unnecessary,” Foote says.

Poor corporate performance has also prompted executives to cut pay across the board. Kohl’s Department Stores Inc. in Menomonee Falls, Wis., lowered pay raises for all employees, not just those in IT, says Paul Lewandowski, an e-commerce testing coordinator.

“We didn’t have as good a year as the company expected,” says Lewandowski, whose pay raise dropped from five per cent in 2003 to four per cent in 2004. But the “double whammy” came when the IT staff lost a week of vacation, he says. Now, employees must keep track of overtime until they earn the extra week — and they can use the earned time off only when project schedules allow. “It’s a kick in the teeth,” he says.

Regional inequalities

IT workers living in the South Atlantic region fared better than most others in pay raises this year, while those in the Northeast and on the West Coast experienced flat salaries. IT workers in the North Central region saw increases slightly below average.

McLean, Va.-based Stan Kiyota says his salary jumped six per cent this year and was topped off with a 27 per cent bonus. “I wish I could say it was all me,” says the senior information security manager at Booz Allen Hamilton Inc., “but part of this is the location. This market is so hot here, it’s virtually zero per cent high-tech unemployment right now.”

CIO Jason Blevins hasn’t had a raise in two years at Manchester Tool and Die Inc. in North Manchester, Ind. Though he understands that times are tough for the company, he says the lack of raises hurts morale. “If we go another round here without increases, then I know there’s going to be some screaming,” he says.

IT manager David Levine saw his salary jump 4.5 per cent at Sony Electronics Inc. in Park Ridge, N.J. “I’m making enough money that even 4.5 per cent is a decent raise,” he says. In fact, 51 per cent of survey respondents said they’re satisfied with their pay despite low or no raises, and 80 per cent are still satisfied with their career choice.

The good news for IT workers is that bonuses are on the upswing after dropping an average of 1.8 per cent last year. The bad news: They rose an average of just one per cent.

“The last really good bonus was in 2000. They’ve been about half that (amount) since,” says the IT security strategist. “It’s not the best, but it’s better than a kick” out the door, he adds.

Terry Broadbent, a database administrator at L-3 Communications Corp. in Salt Lake City, hasn’t seen a cash bonus in 10 years because L-3 is offering other types of incentives.

“I’ve been involved in teams over the years, and we’ve received … a jacket or a portable TV,” says Broadbent, a 26-year veteran of the defense contractor. “That sits on the shelf and gathers dust. I’d much prefer that came as a cash bonus.”

Pittenger says companies are moving away from the “peanut butter method” of spreading bonuses evenly and instead use precious funds to reward a small slice of superior performers.

“Companies are finally saying, ‘Who are the 10 people who made things happen last year? Let’s take care of them,'” Pittenger says. “It doesn’t motivate the top performers if they get four per cent bonuses and the low performers get three per cent. If the top get 10 per cent bonuses and the low performers get one per cent, (companies) send a message that ‘we pay for superior performance.'”

After three years of lackluster average pay raises and meager bonuses, can IT professionals expect a return to the boom days of compensation any time soon?

“I don’t think there’s a norm anymore,” says Pittenger. “But I don’t think we’re going to see the same peaks and valleys that we’ve seen.”

Pittenger does expect a small resurgence of IT jobs and pay beginning in 2008, when a record number of IT professionals will retire and fewer new MIS and computer science graduates will enter the market. “We’re going to go into that demand role again where companies can’t find people.”

Collett is a freelance writer in Chicago. Contact her at [email protected].


Computerworld’s 18th Annual Salary Survey was administered via the Internet. Both Computerworld print subscribers and visitors to were included in the survey.

The collection of survey data began May 3 and concluded July 23. A total of 10,745 people responded to the survey. Of those respondents, 9,854 were employed full or part time and were eligible to complete the entire survey. At the 95 per cent confidence level, the margin of error for this sample size is less than +/-1 percentage point.

Respondents were asked to report the percentage change in their compensation for 2003 to 2004. Compensation figures for 2003 were calculated based on the percentage change reported by the respondents.

Who they are:

Eighty per cent of the respondents were men, 91 per cent were employed full time, and 45 per cent had a bachelor’s degree or higher. The respondents had an average of 14 years in IT, and their average age was 41. Fifty-four per cent indicated that they had some level of certification.

Forty-two per cent of our respondents indicated that they were in management, whereas 58 per cent said they held staff or technical positions. Five per cent said they were employed as contractors or consultants. The most well-represented industry was computer-related services/consulting, with 18 per cent saying they worked in that field.

Eighty-three per cent reported that they held the same job last year. More than 29 per cent of the respondents said they reside in the North Central U.S., making it the most well-represented geographic region, followed by the South Atlantic (20 per cent).

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