Over the past few years, the technology industry has been growing at an astounding rate, with giants like Google, Facebook, and Amazon leading the way. However, along with the growth of these big tech companies also comes the rise of smaller tech companies trying to keep up with the competition. With the ever-changing landscape of the industry, smaller tech companies are facing hurdles when trying to hire and retain top talent. This often results in the less-than-desirable practice of poaching employees from bigger tech companies. However, what if, after being poached and subsequently fired, these employees were told that they wouldn’t be paid anymore.
This scenario may sound extreme, but it has been happening more frequently in recent years. Smaller tech companies often lure employees from larger companies with the promise of more responsibility, better pay and the potential for larger financial rewards through stock options. However, when economic factors change, smaller tech companies can be left in dire straits. This leaves them unable to pay the high salaries of the high profiled big tech employees they hired, leading to layoffs and redundancies.
This story began to get traction towards the end of 2019, when start-ups were failing at a rapid rate. Many of these start-ups, in the tech sector in particular, were competing with established tech giants like Google and Facebook. These smaller companies were unable to keep up with the salaries and benefits offered by the bigger tech companies, causing experienced employees to jump ship.
Between 2014 and 2019, only a third of tech start-ups founded had raised any venture capital funds. This meant that only a few founders managed to find any significant investors. These founders still had to compete with bigger and established tech companies for employees. Smaller start-ups had to offer higher salaries, benefits and equity to attract employees.
According to a CNBC article published in September 2019, this competition was, in turn, causing a “war for talent.” A “war for talent” refers to the competition amongst companies for the best employees. Smaller tech companies offer stock options in lieu of the promised salaries. However, these stock options aren’t worth as much when the company goes bankrupt. Additionally, companies poised to go public, may never find a suitable investor or may finally publicly launch but worth significantly less than projected.
The layoffs of hired big tech employees by small tech companies is common in the technology industry. Many small tech companies lure experienced big tech employees with promises of better benefits and the potential for larger financial rewards. However, when economic factors change, smaller tech companies can be left in dire straits. This leaves them unable to pay the high salaries of the high-profile big tech employees they hired, leading to layoffs and redundancies.
So what does this all mean for employees? The technology industry still remains a lucrative industry for job seekers. However, it’s important to not just focus on compensation and equity packages when evaluating job opportunities. In the startup world, vetting your employer is more critical than in other industries. Make sure the companies you are considering has stable finances, is truly innovative and not just a copycat, and has the proper leadership team in place. Researching all these factors can help prevent you from joining a company that may not be stable enough to support your career growth.
In conclusion, smaller tech companies’ promise of better salaries and benefits may seem tempting, but they can’t always be trusted to deliver. Big tech employees who have been poached by smaller companies must be careful and ensure that they’ve done their due diligence before making a blind move. It’s important to ensure that the companies that are offering big salaries and benefits are also stable enough to fulfill their promises. Ultimately, big tech companies are still the safest bet for job security and long term stability.