Retaining Top Talent: Salaries and Compensation Packages for Software Developers

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In today's job market, finding and keeping top tech talent is important for all companies, especially for software developers. They have specialized skills that are in high demand and short supply, so companies are offering generous pay raises to keep them from leaving for a competitor.

This blog post analyzes software developer salaries and compensation, including the factors that determine their pay and the latest trends. We'll also take a closer look at what software developers value beyond their paychecks to find job satisfaction.

Understanding the basics: Salary and incentives

Compensation is an important issue employers must carefully consider. It involves various elements, including base salary, bonuses, benefits, and stock options. Base salary is the fixed pay an employee receives, while bonuses are one-time payments for achieving specific performance goals. Benefits include healthcare, retirement, and other perks, while stock options give employees the right to buy company stock at a discount.

Incentives motivate employees to work harder, achieve goals, and contribute to a company's success. They can be financial, such as bonuses or stock options, or non-financial, such as recognition or time off. Incentives are significant in the tech industry, driving innovation, creativity, and productivity. Common incentives include bonuses for meeting product launch deadlines, stock options for key employees, and recognition programs for outstanding work.

A study analyzing a proprietary data set containing information from 284 software development firms suggests that companies offering more specific incentives may have lower rates of dysfunctional employee turnover.

However, companies must use incentives carefully to ensure they align with company values and goals and avoid creating a culture of competition that could negatively impact collaboration and teamwork. While salary is essential, factors such as work-life balance, professional growth, and non-monetary incentives are crucial for attracting and retaining top talent.

Establishing salaries for software developers

Determining the wages for software developers involves various factors that companies consider. While U.S. law prohibits employers from disclosing their employees' compensation information to each other, companies can still acquire and use aggregated data from third parties. Such data is commonly used by medium and large firms for salary benchmarking purposes.

This section covers the essential factors that affect a software developer's salary. We also provide examples and data to support each of these factors in this section.

Skillset and Specialty

The cost of a software developer is largely determined by their skillset and specialty. Those who possess in-demand skills, such as data analysis, machine learning, and cybersecurity, generally receive higher salaries. Furthermore, developers who specialize in a particular area, such as front-end development, back-end development, or full-stack development, can also earn more based on their level of expertise.

total pay software developers in us

Level of Relevant Experience

Experience is another critical factor that companies consider when determining the cost of software developers. The more experience a developer has, the more valuable they are to a company. As a result, developers with several years of relevant experience are typically paid more than entry-level developers. According to Glassdoor, a software developer with less than one year of experience in the United States earn an average of $72,000 per year, while the average salary for a software developer with 9 or more years of experience is $131,000 per year.

estimated total pay in us jr and senior developers

Work Location

The location where a software developer works has a significant impact on their salary. Those who work in high-cost-of-living areas, such as San Francisco, New York, or Seattle, typically earn higher wages compared to those who work in lower-cost areas. This is because of the higher cost of living in these areas, which requires higher wages to maintain a similar standard of living. However, the location is not limited to just different parts of a single country. Salaries can vary significantly across different countries due to differences in the cost of living and salary ranges.

The figure below provides an overview of the average salaries of software developers in various countries. These salary ranges are based on the local market and do not consider English proficiency. For example, in Colombia, a mid-level software engineer can expect a monthly salary of around $2,300 USD without English language skills, but the same profile with excellent English communication abilities could command a salary expectation of at least $3,500. There is an opportunity for companies willing to forgo the English proficiency requirement for their employees to save significantly on developer costs. In such cases, companies can hire bilingual project managers to help facilitate communication with developers who have basic English proficiency.

estimated total pay different countries

Type of Engagement

The type of engagement is another factor that companies consider when determining a software developer's salary. Full-time employees typically receive a salary, benefits, and perks such as paid time off and health insurance.  You can offer these benefits to local and foreign employees if you hire an EOR service or staff augmentation firm in the outsourcing country.   On the other hand, contract or freelance developers are paid on an hourly or project basis, which can result in higher hourly rates but without the security of a full-time position.  

In conclusion, determining the cost of a software developer involves taking into account various factors, including skillset and specialty, level of relevant experience, work location, and type of engagement. By considering these factors and utilizing industry data, companies can offer competitive salaries to attract and retain talented software developers.

Retention is a priority for US Companies

Acquiring new developers is not the lone challenge faced by employers. As indicated by the Stack Overflow Developer Survey, almost 60% of developers are not actively seeking new opportunities but remain receptive to them. For organizations, this presents a challenge and is one of the reasons for the current focus on retention. 

Losing an employee results in not just a loss of human capital but also provides competitors with the opportunity to poach high-quality talent. To counterbalance this loss, companies must expend time and resources to recruit and train new hires until they can contribute value to the company. A continuous employee turnover problem can have a detrimental effect on the company's reputation since potential candidates typically conduct research before submitting their applications.

In the competitive labor market of the United States, compensation has become a top priority for employers across all industries. A recent survey of 436 US employers revealed that 77.9% of them granted pay raises as a means of guaranteeing employee retention and financial health. This data shows that companies are willing to invest in their employees and provide competitive salaries to retain their top talent.

However, the same survey also identified some common barriers that prevent employers from including pay raises in their compensation policies. These include a lack of financial capacity, tightening budgets due to economic downturns, and a lack of understanding of how to determine fair compensation. Despite these challenges, companies are recognizing the importance of compensating their employees fairly and competitively in order to retain their best performers.

The increasing willingness of US companies to provide pay raises is reflected in the rising salaries for software developers. In addition to the factors mentioned in the previous section, such as skillset, specialty, and level of relevant experience, companies are now recognizing the importance of offering competitive salaries in order to attract and retain talent. This trend is expected to continue as the competition for top tech talent remains fierce.

What are software developers looking for?

Software developers are in high demand and compensation is a priority. However, there are other important factors for them when considering job opportunities.

According to a survey conducted by HackerRank developers, work-life balance was the most important factor for talent attraction, followed by professional growth and compensation. While compensation is still significant, the survey found that non-monetary incentives could also attract and retain talent.

This highlights that software developers seek more than just a paycheck when considering job opportunities. They want to work for companies that offer work-life balance, growth opportunities, and a positive work culture. Companies that provide these things will attract and retain top talent in the competitive software development industry.


The demand for software developers has been on the rise in recent years, and compensation for their specialized skills has been increasing accordingly. In this blog post, we explored the various factors that determine software developer salaries and compensation, including skillset, experience, work location, and type of engagement. We also discussed the latest trends in compensation and the importance of non-monetary incentives for attracting and retaining top talent.

Companies must carefully consider these factors to offer competitive salaries and incentives to retain their software developers, who are key contributors to innovation, creativity, and productivity across all industries. The importance of compensation as a retention strategy is evident from the fact that 77.9% of US employers have granted pay raises during the last year to increase employee welfare.

Overall, companies must stay up-to-date with compensation trends and understand the value of a comprehensive compensation package that includes both monetary and non-monetary incentives. By doing so, they can attract and retain the best software developers and ensure their continued success in the highly competitive tech industry.

If you're seeking a larger pool of talent, you may want to consider nearshoring software developers in South America. At BetterWay Devs, we assist tech-savvy businesses in locating their perfect new team member and establishing productive and enduring employment partnerships using our open and tailored staffing approach. Book a call with us to discover more.  

Paula Tellez

BetterWay Devs Inbound Marketing Manager

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