In an age where every person has access to an average of 3.47 connected devices, technical talent is increasingly prevalent at companies not traditionally associated with the technology sector, especially automakers, banks, manufacturers, and retailers. As more corporations look to boost their digital businesses, they are beginning to bring technical talent in-house, including teams of software developers and engineers.
Accelerating demand for these skills creates more competition, and as a result, technology companies are now more willing to expand eligibility for long-term incentives (LTI) and/or raise the value of LTI awards for employees in technical roles. (In this case, we define technical roles as engineering and product development positions requiring a bachelor’s of science degree (or higher), usually in engineering or computer science. Employees in business functions like marketing, sales, and finance are classified as non-technical.)
Further complicating the situation is the fact that most technical employees hold large amounts of unvested ‘in-the-money’ equity awards at their current employers, usually in the form of restricted stock. As such, large new-hire awards are often required to attract key talent. However, what is often less clear for companies is the extent of equity award premiums required to move technical talent compared to non-technical ones. Nor is there good data on how these premiums vary in Asia, Europe, and the US.
Equity award levels
To address these issues, we analysed data from the Radford Global Technology Survey for technical and non-technical employees at the individual contributor professional job level 3 (P3), the mid-career point for most individuals. As expected, when it comes to LTI awards, technical employees receive higher amounts compared to their non-technical colleagues. However, these premiums ranged widely from as little as 4% in Germany to as much as 45% in Canada.
Technology companies are well-known for their broad-based approach in equity eligibility. However, equity eligibility is still far from universal. According to data from the Radford Global Technology Survey, LTI eligibility for technical employees is higher in most countries. Only in India and Germany do non-technical employees enjoy marginally higher eligibility rates.
Equity receipt rates
Actual equity receipt rates are even more indicative of the premiums attached to technical employees.
In every major market except Germany, a higher percentage of technical employees at the P3 level received LTI compared to non-technical employees. However, aside from the UK, less than half of the work force at the same level—regardless of job role—received any form of LTI.
Based on these findings, it’s clear that LTI and equity compensation strategies are fast becoming key differentiating factors in attracting and retaining technical employees in the technology sector. In spite of the equity premium, companies with lucrative packages for technical employees stand to benefit from a better choice of the talent pool, which ultimately leads to the opportunity to enhance performance over their competitors.
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Radford delivers compensation data and advice to technology and life sciences companies. It's part of Aon Hewitt, a business unit of Aon plc (NYSE: AON).
If you need advice on attracting and retaining the best technical talent, get in touch with us today.