Over the past year, the buzz around the proverbial water cooler has ranged from Great Resignation to Return to Office to Quiet Quitting. 2022 was a year of fast-paced market shifts, and employees and HR teams alike struggled to calibrate expectations against the dueling forces of mass layoffs and rising inflation.
Real-time data provides a needed lens into market dynamics to promote transparency and equity in compensation practices. At Pave Data Lab, we analyze data from thousands of growth-stage companies to help demystify hiring, salary, and equity trends. Read on for our retrospective on the key themes of 2022.
Four Key Themes of 2022
1. Compensation benchmarks show salaries up across the board
Among several analyzed job categories, salaries are on the rise. Professional-level engineers remain the highest paid job family, with the median Q4 salary growing by 8% year-over-year. But in this slowing economy, base salaries for the recruiting team have been hit hardest, down by 10% over the same period.
Among analyzed VP roles, those hired in the 2022 Q4 expected an average pay bump of 8% over the year prior. That number grew most for Engineering, where VP new hire salaries rose by 12% year-over-year. Engineering salaries have slightly outpaced Product new hires, whose starting pay rose only 10%.
While most salaries are still rising year-over-year, equity grants are trending the other way. For software engineers, the median new hire grant in 2021 offered between 1.7 hundredths of a percent stake. Over the next year, that median fell to 1.3 hundredths. Other analyzed job families declined similarly.
Why might companies give away less equity to new hires? As high interest rates make capital more difficult to access, valuations are not expected to rise as quickly as they once did. This leaves companies to stretch their existing equity pool further.
2. The Great Resignation finally fizzles out
The Great Resignation began in 2021 and continued to capture headlines into early 2022 as disillusioned workers left their jobs en masse in pursuit of higher purpose or higher wages. Turnover peaked in May when over 5% of analyzed workers churned.
In recent months, however, fewer workers are leaving their roles as churn rates have cooled. November saw some of the lowest churn of the year, at 3.3%. Some contributing factors might include hiring freezes, which reduce mobility between jobs. Furthermore, even for those not directly impacted, layoffs sent shockwaves through the tech sector where some might be looking to hunker down to ride out the threat of recession.
3. Layoffs shake up H2 job market
In the second half of 2022, layoffs dominated the workforce narrative, rising steeply mid-year and peaking in October. While fresh tech layoffs are hitting the press daily, recent data suggests the worst may be behind us. Layoff events have declined month-over-month for the last two months in a row.
To isolate layoffs in our dataset of compensation records, we define a layoff as when a company with more than 50 full-time US employees experienced their headcount decline by 5% to 30% over a single day. To measure the relative frequency of these layoff events, we normalized the findings by dividing the raw count of layoffs in a given month by the number of active companies in the dataset during that month.
4. Inflation shows little impact on raises
With frequent layoffs alongside rampant inflation, many wonder how comp cycles will respond to opposing forces in the labor market. According to public data, inflation peaked in June of this year. But, despite the higher cost of living, raises have not grown proportionately. In the last quarter of 2022, the average raise was 12.9%, nearly identical to the year prior.
Analyzed raises encompass a mix of promotions and merit increases. As many companies proceed with annual reviews in the weeks ahead, the season’s merit cycle could provide tremendous signal into the health of growth-stage companies and the trends expected in 2023.
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