Michelle Watson
Michelle Watson

Senior Consultant – Rewards Solutions


  • Many of our technology industry clients have been asking us “why are we having to pay new hires so much more now when the market data does not seem to reflect this?”
  • Using our extensive remuneration data, we have crunched the numbers to better understand the factors at play and specifically which parts of the market are most under pressure.
  • We also provide some options to respond and what this could mean for your technology talent reward strategy.

‘Great Resignation’ or Not, the Tech Talent Market is Running HOT – Understand Why, and How Your Business Can Respond.

Many of our technology industry clients have been asking us “why are we having to pay new hires so much more now when the market data does not seem to reflect this?”

Using our extensive remuneration data, we have crunched the numbers to better understand the factors at play and specifically which parts of the market are most under pressure. We also provide some options to respond and what this could mean for your technology talent reward strategy.

Unprecedented market pressures

The talent market is like any market – prices are governed by supply and demand – and the last two years has seen a fundamental shift in the dynamics of these opposing forces in the Australian tech talent market.

Three key factors are shaping the current unprecedented demand for tech talent in Australia:

  1. The Australian start-up ecosystem has accelerated in the last two years. Organisations undertaking $25m Series B and $100-200m Series C rounds are now becoming commonplace, and unicorns (private companies with a $1b+ valuation) are being minted nearly weekly. These organisations are investing a significant portion of this funding into engineering and product talent, and have an imperative to hire quickly to build out their product offering.
  2. Organisations across all industries are undertaking digital transformation projects to modernise both their back and front office functions. Many are building customer-facing platforms and now require product owners, data scientists and security professionals.
  3. International technology companies are expanding their footprint in Australia. Recognising the outstanding quality of local talent, these global players are increasingly establishing research and development and product development capabilities in Australia, as opposed to simply running a local sales and service centre. In 2021, Google announced the Digital Future Initiative which will see $1b invested over five years in an Australian research hub, partnerships with the CSIRO and academia, and enhanced cloud computing infrastructure. A significant portion of this spend will go towards hiring technology talent.

With borders only just re-opening for immigration, there is minimal meaningful activity on the supply side to meet this increasing demand. The Tech Council of Australia has predicted the industry will be short 260,000 technology workers by 2025 and has identified the following priorities:

  • Achieve 1 million tech sector jobs by 2025.
  • Grow the pipeline of skilled workers and pathways into tech sector jobs.
  • Refine Employee Share Scheme rules to keep and reward Australian talent.
  • Target skilled migration programs by improving availability of the GTES visa and re-evaluating processes for allocation of TSS Visas.

Apart from improving immigration access, it will take some time for most of these activities to increase the supply of technical talent in the market.

The premium for new hires in tech roles is real and significant

Aon’s Radford Global Compensation Database (RGCD) is a  leading source of remuneration market data for technology companies, with the Australian database alone comprising 135,000 lines of incumbent data submitted by more than 700 organisations.

With the added ability to filter data by employee tenure, the enhanced platform can give subscribers clear insights into the impact of talent market pressures on new hire pay rates on a role-by-role basis. To get a broader picture of new hire rates for technology roles, for this analysis we’ve aggregated the tenure-filtered data from all roles in the Technology job module in RGCD. This module mostly comprises various types of engineers, but also covers product owners, UI/UX roles, data science, cybersecurity, and technical support.

Chart 1


Chart 1 shows the differential between the average Fixed Remuneration for each employee tenure group compared to the overall average Fixed Remuneration for the same role (where that overall average is 100%). This analysis indicates a trend towards higher average rates of pay for more recent hires, and demonstrates that pay is on average 8% higher for incumbents hired in the past 18 months compared to the overall rate. For some particularly hot roles in the market, this premium can be as high as 15-20%.

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Understanding the range gives you the full story

Let us come back to the original question – if new hire pay rates have gone up so much, why has Aon only reported 2-3% year-on-year salary movements in the Australian tech market?

The first reason has to do with basic statistics. On average, new hires account for just 5-10% of a typical data sample and this volume is not enough to dramatically shift the median, especially when the market is emerging from a period of salary stagnation. For the bulk of employees in the sample who have not changed organisations in the past 18 months, the last two years of negligible salary increases across a large portion of the industry has compounded the effects of 4-5 years of low increases of 2-3% prior to the pandemic.

However, there is more to the story. Averages can only tell you so much, but the range of values in a sample can give you a better indication of what is going on in a dataset.

If we look at the fixed remuneration range from the 10th to 90th percentile in the overall market data and compare it to the same percentile range in the new hire market data, we see a big difference – the range for new hires is narrower but starts higher.

This is what gives us our higher median rate for new hires, but at the 75th and 90th percentiles the difference disappears, with new hire rates capping out at about the same level as the overall rates.

Chart 2


In practice, this means that if your reward strategy is to pay at the higher end of the market (i.e. at the 75th or 90th percentiles), you are probably not going to have the same challenges as an organisation that aims to pay at the median or below – because the current new hire median is closely aligned with the overall market 75th percentile.

For organisations that do aim to pay at the median of the market – which is a significant number – this is a critical dynamic to understand. It is more easily illustrated if we move away from our statistical mindset for a moment and think about this from the perspective of an individual employee. This data shows that if you have a mid‑career employee who is paid just 5% below market for their role, being recruited into a new organisation at only the new hire median can equate to a $20,000‑$30,000 jump in salary.

So what can you do about it?

We have seen almost non-existent salary increase budgets for the last two years across much of the sector, and historically low salary increase budgets for the 5 years prior to that. It is therefore no surprise that employees are seeing an opportunity in the current market to make up for lost time and get a meaningful, potentially life-changing salary increase by moving externally. When they move, their position needs to be backfilled, the organisation is forced to pay the ‘new hire premium’ to attract fresh talent, and the cycle of attrition and recruitment continues to ripple across the industry.

As an HR or Reward professional, what are your options?

  • Advocate for a larger salary budget: Individuals do not make decisions in an information vacuum – they take their current salary into account when deciding whether they should leave or stay with their existing employer. With new hire pay rates climbing, even people who quite enjoy their job could receive an offer that is too good to refuse. Remove that option by paying your best talent what they are worth.
  • Spend it wisely: Whether you can get approval for a larger salary budget or not, you can do more with less by using an aggressive merit matrix at your next remuneration review. A merit matrix provides a consistent and defensible methodology for giving your best and brightest big, meaningful salary increases at the expense of those who aren’t performing.
  • Hire for growth: Not all roles need to be filled with someone who has ‘done it before’. Consider hiring more junior employees (from external or internal sources) that have the right aptitudes to grow into a role, particularly if working under a great manager who can upskill them quickly.
  • Build out your EVP and have a compelling total rewards offering: Few employees will jump ship for a 5% discount on a gym membership, so create an offering built around unique benefits with a high value‑to‑cost ratio that can help differentiate your employer brand and encourage talent to join your organisation.
  • Rethink your job architecture: If your salesforce is no longer working ‘in the field’ due to the shift to remote working arrangements, do you now have just a very highly paid inside sales team? Similarly, remote working is the new offshoring – consider location-agnostic hiring to increase candidate pools.
  • Stay informed: Use a robust and relevant source of market data to keep on top of new hire pay rates. Instead of overall market rates, consider referencing new hire benchmarks for the people you really need to retain.

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