Employers use customized bonus plans to attract developers, survey says

Customized merit plans fell out of fashion during the recession but the demand for IT talent has resurrected them

Software developers may find more employers using customized bonuses to attract and retain them as the job market for their skills stays competitive, according to a salary survey from IT job site Dice.

The survey, which polled 700 businesses, found that 11 percent have performance and retention incentive programs specifically for developers.

While bonuses have been around for a while, not every company offers customized plans, said Dice President Shravan Goli. And compared to a standard performance bonus plan, the amount paid by a customized plan can prove more lucrative.

"It can be anywhere from 10 percent to 25 percent of their base salary," Goli said. Traditional standard bonuses were typically a lower percentage of base pay, he said.

Customized bonuses include those based on performance and those specifically tailored to retain valuable employees. Calculating a performance bonus entails weighing factors such as a person's experience and the job's responsibilities and location, Goli said. To determine a retention bonus, some of the variables that get weighed include the importance of an employee to a company and its projects, a person's skill set and the market demand for those skills.

"The performance bonus and the retention bonus now have become much more common and this is something that the candidates are looking for as almost a given."

Customized bonuses are being offered for a majority of tech positions, Goli said. Larger retention bonuses accompany jobs involving "hot and hyped skills" like data analysis, mobile development, security and cloud computing, where talent is especially hard to find, he said. For positions where the skill demand isn't as acute, Java programmers for example, workers in those roles can expect a standard bonus.

The poll indicates that more businesses are implementing these bonus plans after curtailing their use during the recession. Sixteen percent of respondents introduced their programs this year and 26 percent started in 2013. By comparison, 6 percent of the firms rolled out the tailored bonuses in 2012 and no companies did in 2011.

What changed is the skyrocketing demand for coders in recent years. The unemployment rate for software developers was 2.3 percent for 2014's second quarter, according to figures from the U.S. Bureau of Labor Statistics cited by Dice. By comparison, the overall U.S. unemployment rate for that quarter was 6.2 percent, according to the BLS.

"Given such low unemployment rate on the technology side and with the demand exploding, that's the reason why companies are trying to be more creative and coming up with programs for keeping software developers happy," said Goli.

The survey, which polled businesses in a range of industries, showed that offering customized bonuses isn't limited to traditional technology firms. With IT use being pervasive among all sorts of businesses, companies in a wide range of fields are trying to entice tech workers and need to keep pace with the salary perks the market offers, said Goli.

"If you're not offering [customized bonuses] then you're not competitive so from a retention and even from an acquisition standpoint it's a much harder sale."

Monetary bonuses appeal the most to developers, said Goli, making cash paid out on an annual or semi-annual basis the most popular incentive. Equity in a company is another common incentive.

"If you're utilizing cash, it has a little bit more tangible, meaningful effect on someone calculating their total compensation so when they're comparing new opportunities they can take that into account," he said.

With workers in major technology markets changing jobs every three years, short-term equity plans are becoming more popular, Goli said

Companies are developing incentive programs with short vesting cycles of 12 to 18 months to deliver an immediate impact.

"If you put something in front of people and say it is going to vest in four years the impact is not as much," said Goli. "Companies are trying to take this 12 to 18 months at a time and give something that is tangible that will make them feel unique and get them to stay."

Fred O'Connor writes about IT careers and health IT for The IDG News Service. Follow Fred on Twitter at @fredjoconnor. Fred's e-mail address is fred_o'connor@idg.com

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Fred O'Connor

IDG News Service
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