Three Ways to Prepare for the Tight IT Labor Market

by James P. Gardner on May 30, 2017



If you are hiring technology professionals, you are certainly not alone. For example, Web Developers are one of the fastest growing occupations, with a projected 26.6 percent increase in the number of jobs by 2024, according to the Bureau of Labor Statistics. Web Developers are just a fraction of the estimated 4.4 million IT jobs that will exist by 2024, an increase of almost half a million since 2014. The question is, how does this rapid growth impact supply and demand for top IT talent?

It is important to note that while Web Developers are one of the fastest growing occupations, professionals in fields like data science and analytics are in much higher demand, with a projected 39 percent increase in demand by 2020, according to a study from IBM. As current statistics stand, it is clear that supply will not catch up to demand in the foreseeable future. The national unemployment rate stands at just 4.5 percent in April 2017, while the IT unemployment rate is at a mere 2.5 percent. When today’s pool of available talent is already so limited, what does this mean for companies faced with increased demand three, five, or ten years from now?

In short, it means it is imperative that companies adapt. The IT talent shortage requires a shifted perspective on your hiring, retention, and compensation strategies. Who is going to start this dialogue at companies that are resistant to change? Below we explore how to be proactive in preparation for this tight IT labor market.

Employee Retention Comes First

According to, the number of voluntary quits in the IT profession is currently 48 percent higher than the 10-year average. This report outlines two key considerations. First, employees are more confident about the job market today than ever. This encourages professionals to explore new opportunities and leave their current employers short-handed. Second, employers who are faced with a short supply of IT talent are heavily recruiting candidates from other companies, winning them over with attractive opportunities and competitive compensation packages.

On top of this is the fact that Millennials are expected to form 50 percent of the workforce by 2020, according to a report from PwC, but only 18 percent of them currently expect to remain with their current company for long term employment. This is why a conversation about employee retention is so critical in today’s workplace.

A valuable first step in addressing retention is administering an employee survey to receive honest feedback and actionable insight about why your current team members choose to stay. Gain a thorough understanding of how people work within the existing management styles of your leaders, of what your corporate culture looks like, and how your teams communicate and engage with one another. What processes and protocols are outdated? Are your IT people still forced to work in a suit and tie? Are you providing a healthy work-life balance? It will be impossible to improve your retention rates and prepare for the tight IT labor market unless you first get a measurement of your current environment.

Long-term retention strategies should cater to both your current and future workforce. In other words, companies should not only consider the results of their employee surveys, but also the values of the growing population of Millennial workers. As Baby Boomers continue to retire in droves, building a workplace that engages Millennials is the only way to sustain a strong workforce. According to PwC, Millennials highly value opportunities for training and professional development – particularly through mentorship and coaching – as well as flexible hours and strong work-life balance.

IT professionals across all generations share many of these same values. According to a survey of 500 IT workers, the top reason for exploring the job market is to advance their technical skills. If you can deliver training, mentorship, cross-functional opportunities, or even tuition reimbursement, your IT professionals are much more likely to stay on. The survey also revealed that these individuals want a company that makes IT a greater priority. That means ensuring you leverage technology to its full potential. Evaluate your current IT environment and be open to introducing cutting edge technology.  Many IT professionals do not see a career path in maintaining legacy technology.

Finally, the technology field can be a demanding one with high pressure to deliver, innovate and problem solve. This can quickly impact an employee’s work-life balance and workplace mentality. Be aware of these factors, and evaluate how you can integrate flexible hours or nurture a more positive work environment. Explore the pros and cons of a remote workforce, even if it means starting a difficult conversation with members of your organization who are opposed.

Hiring Top IT Talent

Ideally, your retention strategy should align with your hiring strategy. Being able to craft your employer brand around opportunities for professional development, work-life balance, and exciting technology will naturally lead to being an attractive company to work for. Take a look at some “old school” technology companies, like GE and IBM, and you will see they are attracting Millennials by reevaluating and reenergizing their corporate purpose and mission. They understand that long-term hiring strategies require strategic adaptation to the future workforce.

However, even with optimal employer branding, a recent survey of over 1000 hiring managers and tech recruiters revealed that 86 percent of respondents say it is challenging to find and hire IT professionals. While in 2009, employers had free range of a largely unemployed talent pool and a selection of less confident workers, today’s story is the polar opposite. Candidates have a lot of leverage, receiving multiple job offers in a single job search and confidently counteroffering potential employers. As a result, 75 percent of survey respondents claim that the time-to-fill ratio has increased significantly in the last three years.

Responding to this challenge looks different for every company, but many are realizing the importance of becoming more flexible in their requirements. 53 percent of survey respondents say they have hired IT professionals who do not fully meet the job requirements. With less access to the “perfect” candidate, it is vital to understand what areas and skill sets are not necessary to the role. Investing in training programs or adjusting your technical environment to allow for these gaps might be a viable alternative.

Evaluating Your Wage and Compensation Structure

There should naturally be a lot of overlap between your retention strategies and hiring strategies. In particular, your compensation structure is essential to both. It is clear that one of the top reasons IT professionals leave their old job is for better compensation. In fact, 64 percent of IT jobseekers are aiming for a more competitive salary, a statistic which helps to explain how the national average wage has grown 3 percent year-over-year. In short, if your compensation plan is not aligned with the market, you run the huge risk of losing your existing talent and failing to attract new employees.

Using highly reputable sources for compensation research is vital. Accurate data will enable you to proactively adjust your compensation packages before your employees and candidates start looking elsewhere for better offers. Additionally, comprehensive market research is a necessary tool in making the argument for adjustments in the first place, as some management roles that are not aware of current market trends may resist these changes. Providing an opportunity for education will strengthen their understanding and help to gain their buy in on compensation increases.

But evaluating your compensation structure alone is not enough. Candidates might want top dollar, but if your benefits package does not measure up as well, then you may be seeing more rejections than acceptances. Unfortunately, this is often more of a challenge for smaller companies than it is for larger organizations whose large workforce gives them leverage in the benefits marketplace. Small to mid-sized employers need to get creative in this scenario, whether by seeking out PEO providers or making up for lesser benefits with higher pay or exciting perks.

Finally, after compensation and benefits, you can begin to look at the incentives and perks your company offers to its hardworking team members. With a cross-generational perspective, assess your options carefully. It might be a more generous vacation policy,  a ping-pong table in the break room, a gym membership, childcare reimbursement, or, simply, cash bonuses. This is where feedback from your current employees can help you determine how best to motivate your people.

What the Tight IT Labor Market Means for Your Company

Your company has unique business objectives, which means how you address and prepare for the tight IT labor market will differ from anyone else. But at the core of this challenge, is the need to understand the current market fully, which includes supply-and-demand, compensation research, and employee values.  All of these factors interact with your compensation structure, retention rates, and hiring strategies.

Evolution in your company can be difficult. Some people will be resistant to any nontraditional changes but it is not about changing who you are as a company. Instead, it is about shifting your work environment and its infrastructure to engage and welcome both your current and future workforce. Now is not the time to be paralyzed by these changes. It is time to be proactive.

If anyone is ready for this shift in the IT labor market, it is Resource 1. For 35 years, we have navigated this evolving marketplace and continued to deliver highly skilled IT professionals to our valued clients. We leverage our deep technical expertise, our passion for innovation, and our focus on non-transactional relationships in order to find you the people you need. Contact us today.