In the past, software engineers were often underpaid and overworked. However, NodeFlair's Tech Salary Report 2021/2022 with Quest Ventures discovered that over the past 12 months, their salaries have increased by 22% and as much as 32% (now we are just overworked, hooray!).
This drastic increase has caused a lot of speculation about why it happened and whether or not it is sustainable. In this post, we will explore the reasons behind the high salaries of software engineers and how they got to be so high.
In the last twelve months, the average salaries for Software Engineers reached an all-time high after increasing by 22%.
The median base salary compensation for a junior software engineer is $4,750. On the experienced end for mid-level and senior software engineers, it increases to $6,500 and $7,500; at the lead level, it reaches $9,000.
This does not include bonuses, stock options and other benefits.
As Ashish Awasthi, CTO of Series C startup Homage and previously held the role of Vice President at Lazada and Redmart, put it across:
We try to stay competitive to attract tech talents and we do it through two components: cash and equity. We understand that employees should feel valued and compensated for their skills and contributions.
Interestingly, the salaries of software engineers have reached an all-time high, but there is a wide range in pay. At the 90th percentile, the median base salary can be as much as 3x more than those in the 10th percentile.
For instance, junior software engineers at the 90th percentile have gone up to $7,500. Mid-level and senior software engineers can command $9,500 and $11,500; it is not surprising that lead software engineers can command an eye-popping base salary of $15,950.
So what's driving this huge salary disparity?
"Always pay top dollar for top talents," Julius Uy, CTO of Kydon Group & ZilLearn said. Julius added that many studies have discovered that the top 10% of engineers outperform the top 50% by as much as 2.5x. "What this basically means is that companies save a lot of money by paying top dollar for top talents."
"Here’s one example. The Viki Android app streams billions of minutes worth of videos per month. While there, we only had four engineers working on Phones, Tablets, Android TV, Amazon Fire TV, Android Instant App, and Chromebooks. Netflix and Amazon Prime at that time had more than ten times the size of our team. Yet the team was able to consistently deliver top-quality output. Viki’s Android app beats the major streaming platforms on all benchmarks such as cold starts, app size, crash rate, and so forth, all with only four engineers. Paying top dollar for top talent saves companies a lot of money."
Lastly, like any free market, price is determined by demand and supply. In our case:
If there is an increase in demand or a drop in supply, the salaries of software engineers will increase. Well lucky for us, both of these are happening fast at the same time, leading to a surge in the past twelve months (just like my Grab's ride during New Year's eve, unfortunately)
Firstly, the high business value that software engineers bring to the table. Technology scales very well that a few software engineers can create products used by millions across the world. For example, when Facebook acquired Instagram for a lofty sum of $1 billion, it only had 13 employees. The value-to-cost ratio for software engineers is one of the highest and not easily matched by any other industries.
Secondly, in 2021, venture capital was booming. Investors poured $30 billion into blockchain and cryptocurrency because of the growth and demand for Web3 technologies. This has caused an increase in the number of companies looking to hire software engineers with experience in this field. Unfortunately, the lack of experienced blockchain engineers led to companies competing to hire any software engineers interested in blockchain development, further driving up the demand.
However, we both know that the market for software engineers undergoes further fragmentation due to the different specializations such as backend and frontend development. The issue worsened as the pool of talents is artificially shrunk more due to the rigid hiring requirements and unnecessarily long interview process of many companies in Singapore and Southeast Asia.
Yes, software engineer salaries are predicted to continue increasing through 2022. They are projected to grow even more than they have in recent years! It is no wonder so many people are interested in entering this field—the potential for earning a high salary is there.
So what is driving this upward trend? A few factors are at play.
Amongst the reasons why talents are looking for new opportunities, it is not surprising that a better salary package is the top reason (65%). Salary ranks higher than other reasons like their desire to work on new technologies, work-life balance and growth opportunities. While companies can, and will, work on the non-compensation aspect to attract talents, the easier way out in the short term will be to increase their hiring budget, especially when they are on a hiring spree.
On the demand side, the bullish venture capital funding scene, competition from foreign tech firms and the huge spike in demand for Web3 technologies will continue to drive up the demand for software engineers. Armed with deep pockets, companies will “buy time with money” by prioritizing experienced hires, as they are more operationally ready and take less time to onboard and contribute.
Furthermore, on the supply side, while the border is opening from the pandemic, companies are moving toward a more remote engineering approach, this transition is expected to take some time.
The bottom line? If you're a software engineer, the future looks bright! Salaries are only going to continue increasing as the demand for your skills grows.
So, you are a software engineer. Congrats! Your skills are in high demand and your salary reflects that. As more and more businesses require software engineer expertise, you can expect to see your salaries continue to increase.
But how do you know if you are underpaid?
Or how do you know you are not being lowballed for your new offer that just came in?
You can check out how much your fellow software engineers are actually getting paid on NodeFlair Salaries. It is a community-contributed salary data, verified with documents, such as payslips and offer letters. Within a few months since its launch, it already has the largest pool of verified and trustworthy tech salary data in Singapore.