Tech employees became some of the most sought-after workers earlier in the pandemic. Now they're losing their leverage.
Recruiters from Facebook, Google, Microsoft, Amazon, and Twitter struggled to hire enough workers in the past two years to keep up with demand for online products as the pandemic kept people home. Web3 products like cryptocurrency and nonfungible tokens were exploding. Even entry-level tech workers could basically set the terms of their employment, including high pay, flexible work schedules, and the freedom to work from home, or anywhere, for that matter.
That has abruptly come to an end. In the past three months, tech companies from Google to Twitter have dramatically slowed hiring or frozen it altogether. Dozens have conducted layoffs, with as many as 30,000 tech workers losing their jobs this year at companies like TikTok and Oracle, according to a running tally by Insider. An outside tracker, Layoffs.FYI, puts industry tech layoffs this year at more than 60,000.
For the average tech worker, that means the good times of multiple offers, big grants of restricted stock units, generous merit raises, and retention bonuses are likely over. More than half of the common skills in the industry have seen a compensation drop in the last three months, according to a new report from Foote Partners, a tech industry consulting firm.
Even Facebook, which now goes by Meta, is widely expected to start cutting workers based on new work expectations after aggressively hiring throughout the pandemic and offering generous pay packages.
"The pendulum has certainly swung back the other way," Aalap Shah, a managing director at Pearl Meyer who advises tech companies on compensation strategy, said of the recent market for tech workers. He added that last year, companies had a higher need for workers and even hired people who were less experienced or knowledgeable than what the role required, with hopes those employees would grow into their roles.
"Now there are austerity measures all around, and companies are looking to focus in on talent of the highest caliber," Shah said.
Pay cuts could be coming
In employment agreements for tech workers, there may now be no promise of equity grants in some cases. And boardrooms are starting to cool on the idea of big offers and bonuses to keep even high-level talent. For workers on the job hunt, they should not expect pay packages the size they have been for the past two years, Shah said.
"So many companies are looking hard at their salary structure and equity structure and seeing how they can be recalibrated," Shah said.
Meanwhile, workers who kept their jobs have seen their total compensation drop as their stock options and restricted stock units lose worth from the sudden pullback in tech stocks.
Some even speculate that salary cuts could be coming. Jason Calacanis, a media entrepreneur and tech investor well known for early bets on Uber and Robinhood, recently said on the "Odd Lots" podcast that he "100%" expected salary cuts to come next, given the clear pattern of companies slowing or freezing hiring, rescinding offers, and laying off staff. Even Meta, Amazon, Apple, Netflix, and Alphabet, aka the FAANGs, and other seemingly untouchable tech companies could be affected, he said.
To avoid traditional layoffs, such companies will do something like put an end to remote work and demand that employees return to the office. When employees put up a fight, the company may say, "OK, so you don't want to work here anymore," Calacanis said.
"What they do is lay off a bunch of people. Then they reset the salaries lower and hire people back," Calacanis said on the podcast. "That's a de facto salary cut."
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