When economic downturns hit, startups often find themselves scrambling to stay afloat. This can involve everything from renegotiating rent contracts to having company-wide pay cuts or redundancies. Staying nimble is key.

The good news is history has shown us that the tech sector is one of the most resilient in the face of an economic crisis. Just look at the tech giants that emerged from the Global Financial Crisis in 2008.

Despite the challenges that come with economic downturns, the tech jobs market often remains steady. Many businesses continue to thrive, and for some, growth is both inevitable and essential to their success.

Yep, you read that right…

Caution is normal. Expected. But partner that with a generalised assumption about the state of the market? And suddenly that sentiment leads to actions that may not support your business’s or team’s success.

I’ve seen this happen many times over the years, one drop in the global markets after the next. While money is only one piece of the puzzle, it’s a big one that we must address. Because the truth is, the repercussions go far beyond a few (uncomfortable) conversations.

Here are 5 myths that seem to be pervasive in the tech jobs market during economic uncertainty. The truth about them could end up hurting your business more than you realise.

Myth #1: The market is saturated with unemployed people

While some businesses have to let go of employees, others quickly take advantage of the new talent on the market.

Take any of the big tech companies or Aussie unicorns in recent times for example. With large employee numbers have come mass redundancies throughout the businesses, including in their development teams. This leaves many of the best of the best developers looking for their next gig. Scale-ups fortunate to be in a cash positive position quickly try to hire these devs, knowing they won’t be open to opportunities for long.

So chances are, the developer you’re talking to is going through the process with more than one business.

That’s why it’s in your best interest to be transparent about the salary package from the beginning. Offering a salary under market value makes amazing talent turn towards the next offer that comes their way.

Now more than ever, being competitive is crucial to hiring and retaining the best talent. Because your shortlist of talent won’t wait around forever.

Myth #2: Candidates expect to be paid less during a recession

The type of talent you’re willing to pay for is the type of talent you’ll attract. If you’re hoping to hire someone with 5+ years of relevant experience, proven client results and leadership skills but offer them a Junior’s salary… good luck.

You see, there are no shortages of tech jobs on the market. It might be a controversial statement seeing as there are many businesses who are doing it tough. Many others are playing it safe and keeping growth 1.5m away. But week after week, new jobs are coming up and new jobs are getting filled. Why then, would a talented software developer expect less pay?

Best case scenario, you’ll attract talent with far less experience than your team needs. Worst case? You don’t attract anyone at all.

Myth #3: Candidates are desperate and will take any job that comes along

Let’s put aside the likelihood of candidates interviewing with more than one business. Another thing to remember is people aren’t stupid. Sure, desperate times might call for desperate measures. But a Full Stack Developer knows better than to accept a role for a salary they earned 5 years ago.

Job offer rejection rates have increased in the last four years according to a 2020 study by Glassdoor. In the United States alone, 17.3% of job offers are rejected. That figure jumps to 19.4% when looking only at technology jobs. Due to the high demand for tech professionals, nearly 1 in 5 candidates in tech reject job offers.²

To reduce your risk of losing out on valuable talent, it’s crucial to have a fair understanding of the market. Show a prospective candidate you value them by offering an attractive salary package (equity, shares, etc.).

If the timing isn’t right but you want them on your team, agree to tee off a salary review in a few months time. Add it to their calendar right away and show them this is as important to you as it is to them.

Myth #4: Once hired, candidates will forget about salary

Your new hire might be keen to be on your team, but the initial tension around salary means you’ve started off on a bad foot.

In social psychology, the primacy effect is used to inform our first impressions of others.³ This first impression can influence how we interpret other information about that person later on. Chances are, whatever feeling or impression your new employee felt throughout the interview process (devalued, distrustful or resentful) could shape their experiences at work.

The short of it is, they care and they remember. Salary might not be front of mind at all times, but feelings of distrust or resentment could lead them to share their experience with colleagues or other professionals in the industry.

In which case, it can quickly lead to a tarnished brand reputation. Your business might be known as the employer who doesn’t pay fairly, value employees or worst of all take advantage of people’s economic circumstances.

Myth #5: If a candidate cares about their career, they’ll work harder for a raise

When employees don’t feel valued their motivation, engagement and performance can fluctuate. A recent Gallup report shows 71% of Australian employees are not engaged in their workplace. With as many as 15% being actively disengaged.⁴

The cost of disengagement? Is far greater than you might realise.

For starters, your new hire could have a harder time adding real value to the team. Low morale, self-doubt or fear to ask for feedback could all result from feeling undervalued. In turn, you miss out on their insights, innovation, creativity and more.

Lack of employee engagement is also a direct indicator of employee turnover. Research has found that teams who score in the top 20% of engagement have 59% less turnover.⁵

Not to mention, the immense cost associated with it. In Australia, the loss of productivity⁶ from annual turnover is $3.8 billion according to PwC.⁷

Talented developers are always getting the attention of other businesses and recruiters. Pair that with low engagement and this puts them at risk to leave before their probation period ends.

It’s easy to see why to have the best talent, you must remain competitive as an employer. And if you want to both attract AND retain the best? You need to give them the best you’ve got.

Some final thoughts:

Look, we get it. The last few years have been tough. As founders and business owners, it’s easy to play it safe when those around you are playing it safe too. But it’s crucial to remember there are various ways to cut costs without infringing on the trust and skills of others.

At the end of the day, it’s all about being fair and creating an environment in which your team feels safe and valued.

However, everyone’s story and situation are different. So if you find yourself having to offer a candidate a salary package under market value, here are two tips:

1. Be honest with yourself and with the candidate.

Offer the salary package your business can *actually* afford from the beginning. Consider other forms of incentives and communicate why it is what it is. If appropriate, offer a salary review 3 or 6 months into their employment. Schedule it into your calendars and make it happen.

2. Share other ways the business has cut costs.

This one might feel a bit too personal. But by sharing ways you’ve already cut costs around the business (e.g. company-wide pay cuts, reduced resources, new commission structure), the candidate will understand they’re not the sacrificial lamb. Most importantly, they’ll respect your transparency.

As a final piece of advice – ask questions, do your research and talk to others. The state of the market is always changing. That burden isn’t yours to bear but it’s crucial to feel confident when making important business decisions like hiring.

Asking questions will also help you better manage your expectations and avoid disappointment. Talk to friends in your industry or your trusted recruitment consultant *ahem* to gain the confidence you deserve to grow your business.

Want to know how your business matches up to market rates? Schedule a chat with me and we’ll dig into it. We’re here to help (and learn too).