The various salary models in IT recruitment - Which one fits you the best?

Individuals might look for different things when it comes to salaries. Typically preferences relate to, for example, personality and life situation. Some people might look for new exciting opportunities and are willing to take higher risk, whereas others value security and stable income.

Thus, salary models in the IT consulting industry are getting more diverse to meet the different preferences. Each model has its pros and cons depending on what a person considers as ones. 

Increasing number of tech consultancies build differentiation in the eyes of employees with salary models that enable sharing business risks and rewards. Models that are based on employees’ individual contributions for their company. Instead of fixed salaries, many employers have created salary models that include a bonus element or are based on revenue the talent brings in. These types of salary models serve employees who are willing to accept the risk of variation in their income in exchange for the opportunity of getting a higher pay if they succeed.

Mavericks, a Fusion Ecosystem company, has created this kind of differentiating salary model for their employees. Their commission-based salary model is built and developed for those, whose key motivational drivers for compensation are fairness, transparency, and freedom. Their consultants’ gross salary equals to 50,7% of customer invoicing per month. The commission rate is the same for everyone. Only invoiced hours and hourly rates affect the specific salary of individuals. 

Lately, salary models that are tied to employees’ contributions have appeared compelling among senior software consultants who value freedom and control over their work-life balance and income. Experienced software consultants are highly demanded in the market, which is why many experts are not threatened by the negative risk of this kind of model.

In October 2022, Tivi wrote that based on the statistics of The Union of Professional Engineers in Finland, monthly salary is still the most common salary model in most IT companies.

Many Fusion Ecosystem companies have also chosen a fixed salary model. New Things Co, one of the Fusion Ecosystem companies, has chosen a fixed salary model because they want their employees freedom to focus on any client project without fearing salary impacts of that specific project. New Things Co has also set the billable rate target at 85% instead of full 100% to ensure their consultants have time for skill building, community work and activities that take the business and the company forward. 

Also Wunderdog, another ecosystem company, wants to ensure their salary model supports people and company development. Wunderdog believes that having a fixed salary model is the best way to foster collaboration, build a culture that encourages knowledge sharing and optimize succeeding as a team.

Hidden Trail, also one of Fusion Ecosystem companies, shares the same thoughts. They believe a fixed salary model encourages individual growth as there is no personal trade-off for spending time learning instead of project work. It also enables stronger community building, or at least makes that a lot easier by removing any barriers from supporting colleagues and sharing.

Not having to worry about your salary in between projects gives a different kind of freedom compared with contributions-based salary models. A fixed salary model allows employees to take the time to process anything learnt from a previous project and creates a more stress-free environment for individual employees.

How about a salary model that is not entirely based on employees’ individual contributions nor monthly salary? Nieve, one of Fusion Ecosystem companies, has created a salary model that is in between a fixed and a commission-based salary. Their model consists of a base salary that provides employees with a foundational financial security, and a monthly contributions-based bonus element. After deducting direct employee costs, Nieve gives each employee a 30% share of the revenue they bring in through billable project work.

A salary model that is based on a fixed base salary and individual contributions allows flexibility for the experts to balance their workload and income in relation to their personal preferences and needs.

The so-called “in-house 9-to-5 employment” has started feeling unattractive for many tech workers. Digital advancements and remote work have made both employers and employees realize that work and productivity may not be completely linked to physical place and time. Thus, many companies have become more open to freelancer collaboration when in need for some additional brainpower.

Finitec, one of the Fusion Ecosystem companies, is a mature talent agency for freelance developers, designers and product development professionals. According to them, freelancers’ compensation is highly market driven. For example, duration and allocation of the engagement, responsibilities, and market demand for similar talent affect a freelance software developer’s compensation.

It is no secret that on average a software developer makes about 60% more as a freelancer than in a permanent position. That said, the world of freelancing can be a great opportunity for  independent professionals who appreciate freedom, high profile work, and can bear their individual entrepreneurial risk.

The compensation model at Coventures, one of the Fusion Ecosystem companies, is fairly uncommon in the consulting industry. Instead of employing personnel or freelancers, Coventures welcomes entrepreneurs to work together via its platform. Essentially, the company welcomes other businesses (often solo-employees) to build their own business on top of the shared brand and assets offered by the Coventures’ platform. In this way, Coventures’ model has similarities with a franchising model.

Coventures salary model is designed to suit people who are senior enough to pursue a full-time entrepreneurial career instead of being employed. Their lean cost-base and sales commissions break the traditional “taking a cut” -mentality of commission models. Individual experts do not need to work alone. Provided they are also active in sales, meaning they can get paid more than 100% of their consulting work revenue.

Every person is different and has different preferences. People value different things and are in different life situations, which is why it is good to have different models. One size simply does not fit all, and people might change their minds over time.

This is the core idea of one of the Fusion Ecosystem companies, Witted. They offer most of the models presented in this article through its employer brands Mavericks, New Things Co, NeXec and Witted Partners. The different brands represent a different salary model. Some of them emphasize freedom and high salary. On the other hand, there are models that put a lot of weight on stability and community.

Looking for new opportunities might seem exhausting especially in the tech industry where the demand for skilled consultants is high. While salary is not everything when making career decisions, it is a highly important determinant. That is why it is worth thinking about what kinds of elements you value in relation to income. Should you explore the opportunities in freelancing or would it be more pleasing to have a predictable monthly income?

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