Why Big Tech is struggling to keep employees happy

Big Tech finally seems to be at a crossroads when it comes to meeting employee expectations for salary. In the past month, there have been leaks from multiple big tech companies suggesting that employees are unhappy with the amount they're being paid.

For the past decade, the answer to "What career do I pick to make a lot of money?" has quite commonly been "become a software engineer". Especially as of late, there have been massive amounts of aspiring millionaires joining code boot camps with hopes of making it to silicone valley, bringing in a six-figure salary and sailing off to early retirement.

Tech salaries haven't decreased, so it begs the question – why are we seeing so many disgruntled engineers in Big Tech?

The stock problem

Across Big Tech, startups and even some agencies, the structure of employee compensation isn't just salary. Instead, these companies will offer employees equity in the company as part of the overall compensation package. Often, these take the form of Restricted Stock Units (RSUs).

RSUs are essentially a promise to the employee to give them a specified number of stocks after a certain period of time. This period of time is referred to as the vesting period, which is commonly 2-4 years. An example of a vesting period over 3 years would be for 33.33% of stocks to vest after 1 year (the vesting cliff), and the remaining 66.66% of stocks would vest quarterly over the subsequent 2 years.

The reasoning behind granting employees equity is generally touted as being a motivation to see the company succeed, because if you have a financial interest in the company, then you'll have a greater drive to meaningfully contribute to the company through your work.

To an extent, yes, this is true, but we're increasingly seeing that company stock prices don't correlate with company performance. Shopify CEO Tobi Lütke recently took to Twitter to propagate the fact that company performance on a level that employees can influence is unlikely to affect the stock price.

Equity as part of overall compensation is often favoured by companies going through large periods of growth, or for companies that are trying to get off the ground as it allows them to offer competitive compensation packages whilst maintaining cash flow.

On the whole, this works out as a good way to compensate employees, as Big Tech companies are generally considered to be great growth stocks – most employees see fantastic returns on RSUs, and more often than not, they'll have increased in value by the time they reach the vesting cliff.

2020 and 2021 bore witness to a lot of tech companies undergoing mass hiring due to the shift towards remote working allowing access to a wider talent pool. Naturally, this meant that a lot of employees were signing up to RSU schedules which – for a lot of companies – granted stock at what turned out to be peak values.

Spotify, Twitter, Shopify, and Meta are among many tech companies whose stock prices have significantly decreased in the past 12 months. The reasons behind this are complex and honestly slightly nonsensical, but in general, it doesn't reflect the value of the company's output – rather it reflects analysts' bearish predictions about the current economical climate.

Ergo, employees who have joined the aforementioned companies have now seen their total compensation decreased significantly since they first joined the company, essentially taking a pay cut during their first year of tenure.

Remote working

The COVID-19 pandemic has proved to many tech workers what's important to them in a working environment, and it's incredibly unsurprising what people actually value. It's not bar games such as pool or table tennis, it's not fancy "break out spaces" or meeting pods – it's being able to work from home.

Whether it's to take care of family, save time and money on commuting, or simply just being able to take care of chores during downtime, working from home has become the new normal at a lot of companies, but unfortunately for others, it's now becoming a compensation factor.

I've personally been made aware of companies that are now offering lower salaries for the same position if the candidate wishes to accept the position remotely, rather than on-site. Middle managers can't middle manage if employees are in the sanctuary of their homes, so it seems that it's worth it for some companies to offer higher salaries to those that are willing to commute and be at the mercy of managers who want to be able to scoot over and have a chat with their direct reports at any given time.

It's not just that remote working is starting to be viewed as a privilege, it's that the nature of remote workforces exacerbates the geo-based pay inequality that's existed within tech for a long time now.

US tech salaries are orders of magnitude higher than the rest of the world, and in general, both the US and Canada are higher-paying markets than in Europe. This wasn't such a problem until remote working gained such prevalence, as previously US companies would hire workers in the US, and Canadian companies would hire workers in Canada.

With remote working seemingly taking over in popularity, companies are now increasing their workforces outside of North America, and moving focus towards Europe. This creates a wealth of opportunities for European tech workers who wouldn't normally have access to such companies, but it's introducing a noticeable divide between workers doing the same job, with the same experience, but in different countries.

Tech companies generally pay based on "market rates", meaning a percentile value of competitor companies within that country, which makes sense on the face of it, but when taking into account the fact that individual teams are comprised of some people getting paid up to 3x more than others for doing the same work, it creates a raft of bitter sentiment within teams.

Cost of living

The cost of living crisis doesn't apply solely to the tech industry but across every industry.

It's no secret that a lot of the world is experiencing a cost of living crisis right now due to the pandemic, the war in Ukraine, and more local issues such as Brexit. Taking the UK as an example, the rate of inflation at the time of writing is its highest in 40 years at a rate of 9%. When workers' salaries have 9% less buying power than they did a year ago without raises to match, then it's obvious that it's going to cause frustration, especially when combined with issues with RSUs and remote working.