Soft Skills Engineering - Episode 5: Developer Compensation

Episode Date: April 4, 2016

In episode 5, Jamison and Dave answer this question: What are common ways developers are compensated? Do developers usually get a bonus? Stock options?

Hello, everybody. Welcome to episode five of Soft Skills Engineering, the podcast where we talk about the everything else, the non-technical side of software development. I'm one of your hosts, Dave Smith. And I am one of your other hosts, Jameson Dance. And there is not a third host. The silent host. Well, today we're going to be talking about money. Yeah.

And Jameson, I think we have a question about money. Is that not right? we do so i'll just read it what are common ways developers are compensated do developers usually get a bonus stock options uh usually it's just good feelings right oh no it's it's with passion no passion is how you compensate oh right other people you give them your passion and then they give you money in exchange and then you get like respect maybe oh respect or do you your personal brand i was just gonna say that yeah oh no exposure working for exposure uh i think this there's a huge variety of of how people are compensated and it probably depends on the industry and also the size of the company uh yeah like are you a tech company whose primary job is

software development or is software development kind of a secondary concern for your company i think that makes a big difference i assume this person is also asking about compensation ranges also what's a a crazy or non-crazy amount of money to expect or ask for right right how much should i get paid in dollars yeah u.s dollars for our international listeners yes not canadian dollars is that a thing uh yeah i think it is a thing i know there's canadian pennies but i don't know there's something to do with toonies is that a coin or is that what they call their currency please let us know yeah let us know so this is an interesting time to be asking this question because i think there's probably more information out there than than

ever before there's sites like glassdoor or salary.com where you can go just like type in the name of your company and if it's a big enough company somebody might have put in a report about here's what i do here's my salary range they kind of anonymize the range too so if just one person submits and taxes their exact salary and you know there's only one person that has that job at that company you don't know what that person makes exactly but now you do yeah more or less i i actually recommend not putting your salary information if you're only a team of two or three people but if other people do it feel free to benefit from it yeah oh yeah um that's also biased of well all self-reported salary information is biased uh it'll always probably go up

oh really you think people who report their own salary will oh yeah inflate it um just in general self-reported things that reflect like that the people are tied to personally are always inflated okay um that goes with like body weight or body measurements or just any anything uh iq yep yep there's there's biases but handsomeness quotient i always like that one You can't go above 10, Dave. Once you're at a 10, you're already there. You're there. Another interesting thing is if it's a well-known company like a Google,

there's a ton of information about how this works at Google. And a lot of it is just in like random form posts from Google engineers. Well, they'll tell you like, here's what my interview process worked, what was, here's how I negotiated, here's what the offer was like. and um so so the advantage of working at one of those companies is you have a lot more information going in to what competing offers look like uh yeah you definitely have a sampling anyway of those people who self-reported but uh that's true maybe those are the famous people that have great negotiating power too i will tell you that um one of the things i've observed is that

salaries vary significantly i mean significantly it's it's uh strange in our industry but you know someone who's been working in the industry for 15 years uh could be making a lot more money than someone who just got out of college and is just starting out and maybe that's normal in all industries but i don't know it could also be the other way around too i've noticed that someone who just got out of college if they went to the right college or if they have the right internships or they just did something that made them famous in college could be making a lot more than someone who's been in the industry for 15 years. Yes, that is true. Especially with recent years, at least in the US, software developer salaries have gone up a lot faster in about the last four

or five years than they had historically. And so if you're a seasoned, experienced veteran, and you haven't been riding that wave, there's a chance that more junior people are making more than you now. Yeah. And I guess this comes up whenever we talk about salary, but salary is is so tricky because it's tied to your worth and at the same time it isn't tied to your worth like um from from people that i know what they make it correlates very little to how useful they are to the company and a lot more to the circumstances when they join like what you said about what's the hiring market like when they joined and also just how much they negotiated do they even do they just not want to negotiate or yeah did they work to get a bunch of competing

offers so they could say well this person offered me this much and um and it also has to do with your previous employer like if your previous employer paid you an unusually high salary then you will carry that for the rest of your job your professional life um usually yeah especially if you answer when they ask you how much you made at your previous job and you and you don't say here's how much i want to make yeah it's actually really hard to weasel out of that question i've had a co-worker try to do that during negotiations where he said he was getting an offer and of course the recruiter wanted to know how much are you currently being paid and he said you know what i don't want to tell you how much i was currently being paid because i want you to make me your best

offer so that you i can understand where your values are and they that made them really uncomfortable they really sweated through that one and he said look here's my minimum i need this much to just live on like this is what i need to pay my bills now what what do you offer and uh he was pleasantly surprised with how big of a raise he got doing it that way but i think that could go either way i i don't think there would be a downside to at least trying that though i mean well you run the risk of anchor bias like if they throw out a number and then that becomes the basis for future negotiations but that number is extremely low then you're you know it creates this psychological effect where they're like well he wants 40 more than we offered you know it's no

good do you want to work for a company that would lowball you like that though i mean do you think that if you said a number first and it was 40 higher than what they were thinking that that that would work out i don't know i don't either okay we've gotten into negotiation which is a little i don't really want to talk about negotiation anyway i don't think you do either um but this person asked about bonuses stock options so let me tell you what i've seen there are typically four parts to developer compensation you have a base cash salary that's paid out in a traditional paycheck you know monthly or bi-weekly or something you have um stock options which are often included and that's we can talk more about that later you have benefits like health insurance

dental insurance paid time off 401k matching contributions things like that and then you have um a bonus like an annual or quarterly bonus that's based on your performance it's typically like a percentage of your salary that you can earn above and beyond your salary so like you know it's pretty common in our industry to see single digit to 10 percent uh bonuses paid out annually um i've seen that have you seen that jameson uh not personally but i've heard of it yeah okay so that's those are the four most common uh components of compensation in the developer landscape that i've seen have you seen anything else besides that like maybe payment via chicken or land segue autonomous robots no no that seems pretty basic and it's

also fair to note that um different businesses will have different strengths in in those different areas and and some place might not pay very much in annual salary but they have a lot of money set aside for bonuses yes or they might have really bad benefits and really great salary and then you have to weigh okay i have to pay a bunch more money if i ever have to go to the doctor so yeah exactly and i i remember one time i got a job offer to go work for a company for like i want to say it was like a 15 or 20 000 raise and it was going to be awesome but their benefits air quotes were so expensive that it erased like 80 of that just in freaking health insurance premiums that i would have to pay out and so i was really glad to have the full picture because

i could have gotten over there and been like yay i'm rich you know and then really you just are not really getting much of a raise at all yeah um i guess one more thing is the the the cost of living if you have to relocate oh absolutely huge i mean often people pay relocation expenses but if if that that's a one-time thing and then if the cost of living is 50 higher or like 300 higher If you move to downtown San Francisco, um, your, your salary is probably not 300% higher. Maybe it is, but no, not usually. I've usually, so I've worked for companies that have headquarters in California with satellite offices outside of California.

And I've seen as low as a 12% differential in salaries where they say, if we pay you X to live outside of California, when you moved to California, we'll pay you X times 1.12, you know, that was a weird way to say that 1.12. that's yeah maybe you can throw some other variables in there and then we can do some linear algebra to solve for what you mean just do the following brute force chain matrix multiplication and yeah uh i think one other aspect of compensation that is a little bit invisible is the effect on future salary i guess you talked about it a little bit where if you get a high salary you're you're probably gonna earn not a lot less than that um but but also if there

are opportunities to uh grow career-wise like to to become a more experienced developer that can carry over and and and be a big difference i i guess that's that's hard to judge for real though pretty intangible and and every place every every kind of like junky little one person startup is like huge growth opportunities and then most of them will fail so yeah you'll grow back to your mom's basement that's what they mean by growth we're gonna humble you in that physical strength as you move all of the furniture back to the repo man oh i'm sorry if that's happened to you i'm really truly sorry uh you're probably a great person i don't mean that i just

yep so how do you judge those intangible things because well i mean clearly you should ask about the four things you mentioned i think that's that's a pretty pretty sound framework and and no one if someone is offended by you asking that you don't want to work there yeah i actually think this is a really good point because developers are often pretty uncomfortable talking about these topics. But usually the person you're asking is, this is their bread and butter. They deal with these things every day. And so for you to say, you know, tell me some more details on this compensation, they'll be like, oh yeah, no problem. And you might be like, oh boy, I'm sweating under my collar here asking these uncomfortable questions, you know, but it's not, it's generally

not uncomfortable. So ask, ask, ask. I even take it a little further. Like I'll say things like, oh, you have a, you have a 10% annual bonus. What, what is the distribution like? What percentage of people get the full 10% every year. You know, like I'm trying to figure out if I can count on this, um, or if it's, you know, going to be something that they promise and then never deliver on. Yep. Um, so yeah, like these are questions you need to ask. Um, yeah. Is there anything else you want to cover about that? I feel like we talked about it. Are you going to tell the internet how much you're getting paid right now? Uh, I, it was my birthday the other day and i turned 29 so my wife put one dollar in 29 separate balloons so i just i got paid 29

dollars the other day in one day yeah in one day wow but you had to pop all those balloons i had to pop all the balloons and then i had to clean them up afterwards i didn't figure out the hourly rate but it was pretty good oh oh boy but no i'm not um yeah so why don't we talk about it like why don't we tell people? Because we're scared that we either make more or less than the people that are asking. And either way, someone's going to be mad. Yeah, it can be. So I've got a friend of mine who he likes to play what he calls the salary game. And this is where you agree that you would like to know how much someone is making and they would like to know how much you are making. And you both must promise upfront to disclose. And then you both also have to promise

that you won't be mad no matter what. And if you can agree to those terms, then you can play the salary game there i mean there are some companies that do open compensation where it's just in a spreadsheet and you can just look up how much everyone makes and there's some people in your company that have that spreadsheet even if you don't do open compensation there's some hr person that knows how much everyone makes probably there's probably surprisingly a surprisingly large number of people who have access to that like the people that run your payroll your hr your manager maybe your manager's peers you know it depends on the company um and also the people who do open financial or open salary disclosure what i have found is that they typically will

publish uh bands where they say you know between x and y dollars per year if you perform at this level you're in this band and so you don't usually don't know exactly how much but you'll know like oh yeah dave's in band three and therefore i know the range of dave's salary i think buffer is the big one that i know of where i believe they actually do publish everyone's salary oh yeah you can look up CEO makes this much, like a hundred and something thousand dollars a year. Most state governments will also publish that. So if you know that one of your neighbors works as an accountant for your state, you can usually go online and find their salary. Yeah. Or professors at state schools or something like that.

Oh, and I will say that going back to the four components of compensation, I've noticed that state employees have a lot of compensation benefits that you might not be able to see on that spreadsheet. For example, in the state of Utah, uh, state employees get something like a 14% retirement savings contribution, uh, that just automatically gets added to the savings account. It doesn't come out of your check. They just put it in and that's pretty big, you know? Uh, so you gotta, you have to keep, take that into account when you're considering how much they get paid there. We, yeah, we didn't specifically mention 401k matching or retirement savings, but that's, yeah, that's a pretty big deal to just get free

you money it can be um uh i've seen so what are some of the numbers you've seen where companies offer a 401k match uh i think i've seen like two to four percent is about so the company will put in about that much uh and you have to put in some match up to qualify for that of your salary yeah the best the best i've ever seen is they'll match dollar for dollar up to six percent and that was at a humongous oil company a few years ago wow um more i've seen more common is i've seen four to five percent and of course 401k is kind of weird but what that basically means is that that money you put in gets deducted from your u.s federal income tax obligation so it's as if you made less money as far as the irs is concerned and then later when you take that money out at retirement

age you have to pay taxes on it at whatever the current tax rate is there there's all kinds of arcane uh logic around you can also do where you you do pay tax up front oh right so that's called a roth 401k yeah and then and then it's you're kind of betting like will taxes go up or down yep exactly in the time while this money is in here and how much and so i just picked the easy one because i don't want to have to worry about it which one's the easy one uh whichever one is the default the one that was already checked on the checkbox yeah i think i think where i currently work it's the the normal the non-roth 401k it's like an extra step to do a roth so i didn't do it because i don't want to stress out about choosing because you don't want to retire why

would i ever retire i love my job retirements for suckers yeah um great so now everybody knows how to get paid i i have one more thing i want to talk about please do so when we started talking about why don't we just tell the salaries everyone's salaries to each other i don't think we ever answered that yeah why don't we yeah why don't we do you know i think uh businesses certainly have an incentive for their employees not to talk to each other about their salary they do they do they could they can maintain an advantage over you yeah and it's super illegal for them to punish you for talking about it but oh really yeah well is this only in california this might just be one of those like i'm not a lawyer hacker news comments i read but i i'm

pretty sure it's illegal for them to to punish you for discussing salary oh interesting um so i think a lot of it is just like people's bosses will tell them don't tell so-and-so how much you got made or how many stock options you got have you ever had a boss tell you that overtly i've never had that i can't remember an incident even in companies where it's clearly the culture is we do not disclose our salaries to each other i've still never had anyone i think it's just a cultural expectation yeah it's funny how that has evolved huh yeah but i i think a lot of it is also this stuff we talked about earlier where um if you find out you make a lot less money than someone that you perceive as doing less than you you're going to be mad yep and you can go demand a raise

um but that might not always have a happy ending they might just say like we don't have money to give you a raise and i don't know so i've actually heard one interesting argument in favor of keeping salaries private and that is that salary is a very personal decision and the the the value of dollars of money to each individual is different depending on your circumstances you know like a fifty thousand dollar salary to me will mean something very different to someone who's in a different circumstance for me. Maybe it depends on people you're providing for. Maybe it depends on where you choose to live.

And so the value of money is different. And so why would it be a universal measure? Why not say, well, everyone can negotiate that individually so that they can come to a conclusion about what the money means to them for their needs? I think that's a really mature way to look at it. And I think I would have a really hard time not looking at the number and being like,

that number is bigger than my number. so they are better than i am or they should be and if they're not you're pissed yeah and or feeling like they're valued more than i am and jameson let me tell you no one should be valued more than you nobody puts jameson in a corner yeah uh should we talk about stock um we could but we i don't know that we have time to do it justice it's been it's been about 20 minutes and okay we want to let's talk about silly uh compensation schemes that you've seen before have you seen anything weird that's outside what we just talked about it sounds like you have so i want to hear yours no i actually haven't i just was wondering if you

had uh no not off the top of my head like let's say you go to work for a uh donut company and they'll pay you in donuts or something you ever seen that pay you in heart attacks um no i i worked at a dry cleaner when i was in college or sorry when i was in high school and we worked next door to a pizza place though and so we traded dry cleaning for pizza sweet so you could clean their clothes and then they could you clean the pizza stains off their clothes and then yeah back clean um what it really turned into was them getting their clothes clean once a month and then us getting a pizza every single night and it would gradually get just crappier and crappier until it was just like a piece of bread with a little drop of sauce on it and then the rest was probably

They just spit from them being mad at us. But we still ate it because it was free. Oh my gosh, that's so funny. Yeah, yeah. Yeah, it was really weird. Dry cleaners are weird places. Oh gosh, that's awesome. I have not, I have really, truly,

I have not seen a lot of unusual compensation. Although I will say this, a good friend of mine down in utah county which is a county just south of us actually that's the county that jameson is in right now he runs a company and he hires people who have atypical backgrounds to come do software development for him and he pays them minimum wage and he says look i'm taking a risk on you you're not proven you've maybe been doing software development in your basement for a few months and now you want to try it out i'm going to pay you a minimum wage and then as you demonstrate that you're good i'll start i'll pay you a real wage but you know i'm

going to give you a chance to break into the industry and i'm going to pay you very very little um to just see how you do have you ever heard of that before uh i mean i guess there's yeah there's stuff like that with internships or junior developers or also people that do contract to hire where you don't get any benefits you don't get any bonus it's just all yeah just cash salary and and then maybe if it if it goes well then you come on as a full-time employee so i do want to talk about internships real quick i think that's a hugely underutilized resource for people who are learning especially if you're in college maybe pursuing computer science there are opportunities to go and make 20 to 25 an hour all around you and i'm pretty sure some of the google and google

interns make a lot more than i do yeah or microsoft interns yeah i think you're right i think you're right um but even that is a fabulous income for a college student you know um and so that's the the very bottom of the scale i mean if you're going to go work for one of those big elite companies now when i was in college i remember thinking oh i want to go work for a big tech company as an intern but i just never could make it work because i had to relocate or they were super picky but around your location where you are now there's a very good chance that there's companies who are willing to pay you 20 to 25 bucks an hour as an intern and it'd be a fantastic experience for you and decent money so never discount that okay i have one final question

and then I think we need to wrap it up. Do you want to talk about what a range could be at all? If someone is listening and they're just like, I have no idea. Minimum wage is X amount of thousand a year. I don't know off the top of my head what it is. Do I make something near that? Do I make a million dollars a year?

Do you want to go on the record as here's the typical range or do you not want to risk that? I'll tell you a few data points that are outside of my own direct experience right now, because I think that would be the most, that would be most respectful of people's privacy. I've actually got some interesting data that I think from a bootcamp,

a software developer bootcamp that I think would be interesting and also something that I know they publicize. So it's not, you know, it's not private. They have, their bootcamp graduates will graduate from like a 12 week full-time course in web development. And they'll go make anywhere from mid $50,000 per year

to mid $70,000 per year. So these are people with only three months of software development training and they go and can make that kind of money. So I think that that can help inform a little bit, at least what the, I'll just say that's the bottom end of the salary scale that I've observed in present day. I mean, when I started working, which was almost 15 years ago, salaries were much lower than that. But also another interesting fact about that is that a few years before I got out of college and started working was the dot-com boom. And people were getting paid $80,000 right out of college with a $20,000 signing bonus to go work for companies like Intel and Microsoft. And just about a year before I graduated, that boom turned into

a bust. And I was lucky to get a salary of $49,000 per year. So that there are seasonal fluctuations depending on the current prospector status of the stock market that will greatly influence what you can get paid yeah i actually did an anonymous survey in our local javascript users group i'm trying to find the data and i cannot um so it was totally anonymous um i think i ended up pulling out all the responses that you could optionally include years of experience and some people did not and i just made a little plot of uh the people that did so the years of experience versus salary and it was kind of weekly correlated trending upward okay but but there were definitely exceptions where people were a few years in and we're making a lot and people were

many years in and we're making less than those people and i think the range was something like 70 to 150 or 160 grand or something like that and this is this is uh very biased it's people that respond in community um settings and it's self-reported yeah and self-reported and stuff but so even take 10 or 15 off of that and i think that's a reasonable ballpark you know account for inflated self-reporting and then and then if you go to one of the big companies i think you're you could easily look at um over 200 000 in total compensation with stock and all that stuff so that's kind of but then you have to live in california and not everyone wants to must be willing to relocate to san francisco yes yes

all right so you're still not going to tell me how much you make is what i'm getting out of this uh you really danced around that one james no i'm not sorry dave that's not on the air james and dance dancing around questions what a monster yeah well we should uh we should wrap this one up where can people hear more about us dave they can go to our twitter page which is uh our handle is at soft skills eng feel free to send us a direct message or tweet us we love to hear from you if you enjoy the show let us know if you don't enjoy the show let your enemies know i'm why would they let their enemies know to make them suffer oh i thought okay force them to listen all right got it they don't enjoy the show yeah that one fell flat i'm not gonna pursue that more

Great. And of course, if you have a question you would like us to answer, please send it and then we will put it in the queue. Thank you for listening. We'll talk to you next week. Bye-bye. Bye.