Pay in tech is dropping fast as firms like Microsoft, Snap and more use layoffs and a looming recession to wrest power from workers

In November, Snap employees heard some frank talk from CEO Evan Spiegel on his plans for compensation after he conducted a mass layoff a couple of months beforehand.

During one of his weekly talks with employees, dubbed “Ask Evan,” where the founder answers a few preselected employee questions, Spiegel acknowledged there would be a further delay to Snap’s annual review of compensation because of the rapidly changing labor market. The review is done to ensure company pay is comparable to that of rivals.

Given the waves of layoffs rolling through tech, employees took the explanation to mean Snap was keeping an eye on downward adjustments to pay and stock awards happening elsewhere so that it could alter compensation as well, two people with knowledge of the call said.

“I was surprised at the transparency,” one person who listened to the call said.

A spokesperson for Snap said the compensation review was delayed, in part, because of its restructuring and because it found that the third-party data it used for the compensation review was inaccurate. Whatever the reason, tech executives are looking to cut costs where they can, with layoffs and reduced pay, as the plush economic environment tech companies have operated in for over a decade has come to an end.

“It’s relentless,” one tech-industry worker said of the pressure to perform at a higher level for either the same or less pay than over the past two years. 

Tech executives throughout the industry are taking the opportunity to reset worker pay, presented by a looming recession and a tech job market that’s gone from white hot to in decline in about six months’ time. Companies are now wresting control from employees, pushing compensation back down after demand for workers earlier in the pandemic gave them a rare upper hand, with salaries, stock awards, and bonuses hitting new heights.

In the wake of Meta’s layoffs, its managers are being told to be tougher in worker performance reviews, which are used to decide how much stock-based bonuses should be, as the company cuts back on perks. At Microsoft, offers to prospective employees are being cut by 30% amid layoffs. Twitter under Elon Musk has hired a few people for no pay at all, among layoffs and other cost-cutting moves, the most drastic the tech industry has ever seen.

“In general, we’ve noticed a decrease in pay across the entire tech industry,” said Zuhayeer Musa, the founder of Levels.FYI, a platform that collects data on tech compensation. In 2022 alone, Musa said median pay for a software engineer fell by almost 9% between the first and second half of the year. Pay for a hardware engineer is down 7%. For software-engineering managers, it’s down by 10%. For product designers, it’s down 13%. And negotiations among people who are managing to get job offers are getting tougher, he said.

“We’ve definitely seen a pullback in terms of compensation and offers,” Musa added. 

Aalap Shah, a managing director at Pearl Meyer who advises tech companies, said he’d been expecting such a retreat on pay. Tech leaders have been waiting for the opportunity — higher interest rates and investor sentiment moving toward demand for profits presented that window.  

“Already in 2021, many executives and directors on boards, people who had been around for a while, basically said, ‘We’ll pay the ransom now because it’s what we have to do to keep pace, but there will be a reckoning,'” Shah said. “They knew it was not sustainable for their enterprise.”

Now, after nearly every company in tech “finally realized they overhired,” Shah said, the subsequent layoffs are just part of the reckoning.

“That environment we were in, where pay demands were just met without question — that’s definitely shifted,” Shah said.

Now employers are pushing back much more on compensation — if they’re hiring at all. And if a prospective employee’s demands are too steep, companies are fine with not hiring them.

In addition to resetting salaries for new hires, tech companies are “downshifting” other forms of compensation, Shah said, like grants of equity and retention bonuses, which is happening at Snap and Meta.

“Companies are reducing their entire compensation structure,” Shah said. “And the early indication from employees is, ‘OK’ – companies are not getting a lot of pushback.”

An estimated 200,000 tech employees have been laid off since last year, according to Layoffs.FYI, which compiles data on hiring in tech and is not part of Levels.FYI. In light of companies’ new take-it-or-leave-it stance on available jobs, it would be rare for an employee to kick up a fuss over a reduction in stock grants.

In a set of messages seen by Insider among a few Snap workers reacting to Spiegel’s comments about wages and the labor market, there was no outrage. As one employee put it, “Fair enough.”

Are you a tech employee or someone else with insight to share? Contact Kali Hays at khays@insider.com, on the secure-messaging app Signal at 949-280-0267, or through Twitter DM at @hayskali. Reach out using a nonwork device.