Hiring across European tech startups is down nearly 40 percent

A new report on startup compensation, hiring, and growth rates published by hrtech Ravio reveals that hiring sprees at European tech companies are a thing of the past, and an increasing number of firms have shifted their focus towards retention.

In addition to increasing base salaries (but still lower than a year before), startups are also working on closing the gender pay gap and creating a more equal working environment.

The new reality

Last year was characterised by a zero-interest rate environment, remote working policies, and the great resignation. Ultimately, this led to high hiring rates for a small pool of talent. Today, the European tech environment is looking at decreased VC funding deployment, an all but shuttered IPO window, ballooning interest rates, and a heightened focus on profitability. This all leads to a different approach to hiring policies among tech companies.

Affirming this reality, Ravio's numbers revealed that hiring across European startups has decreased by nearly 40 percent year over year. When examining late-stage startups this figure increases to 50 percent. 

Ravio founder and co-CEO Roy Blanga shared:

"We now analyse well over 150,000 compensation data points in real-time in the Ravio platform. This volume of information means we can generate a level of insight that previously did not exist in the market. We're looking to create this report regularly as a bellwether for Europe's technology ecosystem.

"We hope to not only help startup employers navigate this new economic reality, but also employees understand what fair pay looks like for them in this job market."

Less hiring and smaller raises

The period during and post-pandemic was characterised by different hiring foci, creating unprecedented demand for tech talent, and resulting in higher compensation packages.

Thus, even with the global macroeconomic instabilities and higher inflation rates (around 10 percent in the EU), the average startup employee could expect a salary increase of approximately 8 percent, a figure well above the non-tech industry standard of around 2-3 percent.

Adjusting to a new market condition, the majority of the startups (55 percent), aim to keep the number of employees at the same level in H1 2024. With a decreased demand for new employees and a tighter focus on financial stability, tech companies are budgeting for a much reduced 4.8 percent increase in base salaries for employees this year, a 40 percent decrease from the year before.

Raymond Siems Ravio co-founder and Chief Product and Technology Officer, comments:

“The current economic environment is putting enormous pressure on HR and people leaders, who are being challenged to do even more with less. With budgets limited, there's an increasing need to use non-cash incentives like equity and benefits to help retain and motivate their best people.

"Making these decisions can't be done in a vacuum, it requires detailed knowledge of how the market is moving and the total compensation packages other companies are offering." 

Gender pay equality — are we close?

As the EU Pay Transparency Directive is coming into effect in 2024, startups are under pressure to deliver improvements in gender pay equality. According to the report, startups have to focus equally on pay and representation in order to close the pay gap. 

The report highlights that in C-suite, women have the lowest representation versus other seniorities at only 19 percent and in terms of median salaries there is no difference between genders.  

The gender pay gap is the highest for individual contributors, where women represent 41 percent of the workforce, but earn 22 percent less than their male counterparts.

On the matter, Ravio founder and co-CEO Merten Wulfert commented:

“Every startup is keen to close their gender pay gap. But the unfortunate reality is that despite good intentions, other business priorities too often take precedence, especially in fast-growing companies where existential business threats are a routine occurrence for leadership.

"By providing more transparency around pay disparities and making it easy to quickly spot and address systemic issues, we hope to gradually remove the hurdles that prevent companies from taking action.” 

Lead image by drobotdean