Scouut's EoFY Market Update 2024
A market update for start-ups & scale-ups hiring software engineers.
In early April, we released the previous edition of our Quarterly Market Update, and I started that edition by saying that things had been extremely confusing throughout the first few months of the year.
This time around, there are a few more clearly defined trends to speak of, as well of a handful of trends that many need to be aware of if they’re planning to hire over the next few months.
Luckily, we’ll be diving into all you need to know in our EoFY market update today!
A Quarter Of Two Halves
April in particular seemed to spell more of the same with regards to Software Engineering hiring. The information we were getting from company to company was displaying no trends of note at all, and the inconsistency that clients were experiencing with their own efforts (even from role to role within the very same teams) was extremely confusing.
However, almost overnight, something changed in early-mid May, and from that very moment we’ve seen extreme momentum behind improved candidate demand, job opportunities, salary growth, interview speed and more.
We will jump into all of these factors in far more detail, but in the meantime, I don’t want to understate the changes seen in the market over the past 6-7 weeks. Whilst the amount of opportunities, candidate demand and interview speed are not at the same peak that we saw in the post-COVID boom of 2021 - the change we’ve seen, and how quickly it’s happened has been equally extreme, if not more so than in 2021.
Many companies are already getting caught off guard with the speed in which they need to move again to secure great people, as well as how much competition there is at offer stage, both from current employers in the form of counter offers, and from outside employers who are also moving quickly and efficiently.
And at the time of writing, this is all still evolving as more and more companies come back to the table to compete in a constantly tightening market.
Demand for Quality
A theme that has been emerging since the backend of last year has been the clear desire from many start-ups and scale-ups to do more with less (even more so than the usual lean nature of these businesses).
As a result, we saw demand for all forms of Management and Leadership positions drop, whilst demand for Staff and Principal Engineers soared to new highs.
This has continued, and we’ve now seen it spread to many Senior, Mid-Senior and Mid level roles as well.
The recurring theme though is this: “Excellence only”.
Particularly at a Senior level, we are hearing stories that many candidates with a ‘Senior’ title are no longer performing at the expected level during interviews, and are instead being ranked as Mid or Mid-Senior engineers.
From what our clients have told us from their own direct interviews, System Design and Software Architecture skills are an area of regular failure for many applicants, with more than one client showing both surprise and concern at how poor candidates from historically strong technical environments were performing.
And similarly, with the Senior roles we’ve been getting engaged on, strong Sys Design & Architecture experience is almost always a must now - many interview processes have standalone interviews purely focused on System Design, which is generally quite new outside of a select few clients that have always done it that way.
With Mid and Mid-Senior level candidates - clients are demanding a calibre of engineer with the potential to be one of the best in the country down the track. They want individuals who have the potential to reach the level of a Staff and Principal in the future (which is generally not going to be the case for the majority of engineers out there).
And finally, as I warned earlier in the year, clients are asking for candidates with highly relevant experience in startups already, with a desire to actively poach and turn heads of top performers in these teams and make offers that are too good to turn down, as opposed to trying to uncover hidden talent.
We are being engaged more and more to tempt obvious talent from target companies as opposed to searching for diamonds in the rough that may not be known about. Perhaps this is shortsighted, but it’s happening nonetheless.
For me, I see it as a bit of course correction… the start-up space in Australia has essentially seen a 12-18 month holding pattern throughout 2023 and some of 2024 due to a poor market for funding and minimal growth opportunities - that’s 12-18 months of runway down the drain alongside it.
Now more than ever, absolute guarantees are in high demand, and the willingness to pay for those guarantees (in both recruiter fees and higher salaries) over taking perceived risks is clear, with the poaching and headhunting for genuinely exceptional people being a result of that.
We’ve also seen that demand across the board has been quite Back End leaning, with many pure Back End roles coming through, and even a number of Full Stack roles being quite Back End focused under the surface. Demand for Front End roles is significantly lower at the moment, but that may change.
Redundancies, Disguised Headcount Reductions and more
For the most part, we’ve been over the start-up & scale-up redundancy hurdle for some time. They still happen here and there, but generally speaking, you can look at the founders and poor management rather than any other factors these days.
However, this doesn’t mean it’s all fine and dandy for employees either.
Over the past few months especially, we’ve seen and heard of a few cases of ‘disguised headcount reductions’ - where a company chooses to implement a quite frankly strange approach to doing something, in the hopes that many people leave the business.
We’re currently (I think anyway) seeing this at one of the top tech environments in the country, but we’ve also seen it in many other businesses that are enforcing a stricter return to office policy purely to lower costs and cut numbers (because if you’re asking people to come back into the office more than they have been, you will lose people, just as a heads up!)
Quiet firing, which is basically a fancy term for managing someone out of the business, has also become far more common. Not including certain people in important meetings, giving them boring and un-impactful work, not training them or giving them growth, putting them on areas that they aren’t keen on - these are all things we’ve been hearing from candidates, and it understandably drives them to leave.
Whilst for some companies this is just how they do things, based on the conversations we’ve had with multiple candidates at historically great employers, it’s clear that for some, it’s purely a tactic being used on them to get them to move on.
During a time where the best talent is being well and truly bolted down with pay-rises, promotions, extra responsibility and considerable opportunities for growth - when a great company has chosen to not do that for someone, it’s rarely an accident.
P.S - if you’re not going above and beyond for the team members that you value, start, now, or someone else will…
Hiring Etiquette Is Changing (For Good!)
In our last edition of this market update, I made a pretty clear statement to many that they needed to do better in terms of candidate experience and everything that surrounds it.
Whilst I don’t think it’s because many have suddenly started to care about the candidate, we have seen quite a significant improvement in the speed and efficiency in which interview processes are being run.
Guidelines to our clients are now back to where they were in 2021.
Application to offer in 14 days or less is a must, but 7-10 should be your target
Offer & Contract within 48 hours of a final interview is an absolute must, but same day should be your target
Make your best offer first time around, you won’t have the time nor the opportunity to make a 2nd offer for good people
3 interview max, 2 should be your target to be competitive.
Tech tests should really be avoided in this market, the best candidates are once again avoiding them unless you are particularly unique or special as an employer.
Top candidates (the ones you want to be offering and hiring) are comfortably getting 2-4 offers again. Do everything you can to make sure yours is first.
Expect a counter offer. Its more likely to come than not.
Feedback for everyone you meet, no exceptions.
Whilst you should have good hiring etiquette regardless of the market conditions - it is the changing market conditions that now demands it. Those that aren’t able to fix up their act quickly we find out how problematic that’s going to be for them equally as quickly.
Serious Salary Growth
If you haven’t checked it out already, we released a comprehensive and updated salary guide for start-ups and scale-up hiring software engineers last week, you can find it here!
But to summarise, the growth we’ve been seeing this year, and especially the past 4-6 weeks in particular, has been staggering.
We are now at a point where many roles are sitting at a higher peak level than we saw during the post-COVID boom, and it has not shown any sign of stopping.
Something worth noting with these increases is that it’s often easy to point fingers and make excuses that “big tech are throwing around their unlimited money”. What we’ve been seeing is quite the opposite. It’s the smaller more agile clients that have decided to increase their spending on wages, and actually, some of our historically better paying clients are getting caught off guard.
One of our clients has almost always been about 15-20% above market, and I had to tell them last week that for the people they generally hire, if they decided to come to market today, they’d be below average from a comp perspective.
The biggest growth numbers have actually been from Seed stage businesses raising purely to hire exceptional people that they wouldn’t be able to afford otherwise, or Series A (pre/post, in and around) start-ups that understand the game they are playing, and know that an average hire is a complete waste, and so paying more for someone exceptional is almost always the right call.
Now, this salary growth is alarming some people, mostly because it’s eerily similar (on the surface) to the post-COVID boom, which many attribute as a key reason for the poor market over the past 2 years.
I disagree that it was a (major) cause, but nonetheless, I don’t believe that we should be as concerned this time.
As long as the standards for hiring remain incredibly high, the salaries on offer don’t worry me. If and when average people get mental salaries (which happened every day in 2021), that’s when we can start to worry.
All in all, salaries in Australia are still very low to the US and a few other markets, and we are still losing the very best talent as a result. Until that changes, I believe they will keep increasing - and as a recruiter, I know we are nowhere near the market squeeze that we can and may get to, there’s a lot of room for things to tighten further.
ESOP and Bonuses
At the risk of sounding like broken record, ESOP is still is not a motivator for anyone joining a business post Series A.
This is now also being amplified by the fact that many Series A, B and beyond stage businesses are scrapping (or limiting, lowering, hiding in the corner) their ESOP offering in favour of cash bonuses (10-20% is quite standard).
These are yearly, all but guaranteed (in most cases) bonuses paid direct into a bank account at a pretty solid level. For a Staff Level Engineer, a yearly bonus of say $30K-$35K wouldn’t be unrealistic, and this is on top of their already significantly increased base salary.
The reality is, if a Staff Engineer gets an offer of $210K + Super + $35K, or $210K + Super + ESOP for two companies that have already closed a Series A, there is almost no further consideration in their mind right now, they are taking the bonus and it’s not even close.
Until ESOP offerings become significantly bigger, and hypergrowth scale-ups (that genuinely will do $100m ARR in their first 10 years) become much more common in this country, ESOP is always going to be an afterthought for most people.
I don’t like it, and I think it’s a little sad as ESOP should be a key part of start-up employment, but here in Australia in the present day, it just isn’t.
(Having said that, if you don’t offer ESOP as a pre-Series A start-up, it’s mega weird and you either need to pay bonkers money or you’ll face serious problems with hiring).
By the way we are writing a book
If you’ve read our salary guide, you might have seen that we’re releasing a book.
This isn’t one of those cash grab things where we tell everyone to start dropshipping and write a book about it to make money because our own dropshipping side hustle no longer pays the bills.
In fact, with the time that’s gone into it and the price we’ll sell it for, we’re about to make sweet f-all.
BUT, we are genuinely really good at this start-up hiring stuff, and thought it was about time to share a few of the secrets behind our processes, and how we achieve the results we do for our clients.
So, if you aren’t:
Securing 80-90% of people that you offer
Filling your roles in 3-4 weeks
Interviewing from start-to-finish in 10 days or less
Just consistently able to hire genuinely world class talent
Then you need to buy it.
Look at it this way - it’s maybe the cost 2-3 cups of coffee if you do, and maybe $200-$300K (or more) in hiring mistakes if you don’t.
https://forms.gle/Thr7itE4yeTH8fD16 - 👈 Register your interest here for 15% off!
And finally, thanks for reading!
Thanks for reading!
If you think any friends or colleagues would benefit from this blog, please do feel free to share it and pass it around!
For those that are new here, I post (mostly) fortnightly content, addressing the nuance, challenges and secrets of placing talented engineers and designers into Australia’s best start-ups & scale-ups.
Founders, CTOs, Managers and TAs from businesses such as Linktree, Dovetail, Eucalyptus, Sonder and 100s more get value from this blog - maybe you will too!
Finally, if you’d like the go to recruiter for start-up & scale-up hiring (that’s us by the way) to help build your software engineering or design teams, get in touch to find out how we can work together 👇
Matt@Scouut.com.au // 0477 622 408 // Book a Meeting