Ranking among the highest-paying employers, are Silicon Valley firms going overboard in luring talent? In 2015, America\u2019s tech companies paid around $40 billion in stock-based compensations. That\u2019s an estimated 60% higher than the aggregate bonus given to Wall Street banks\u2019 employees, as suggested by the Economist.<\/p>\n
Several mid-career executives at the largest technology companies such as Apple, Google and Facebook get paid millions of dollars annually, including stock compensations. Not just that, entry-level engineers at Silicon Valley firms can easily pocket $120,000 a year, more than what a similar age-group usually earns on Wall Street (Source: The Economist).<\/p>\n
According to a survey by UC Berkeley\u2019s former student Rodney Folz, even a summer intern at some of the biggest U.S. tech firms earns a median monthly base salary of $6,800 for an engineering job. When annualized, the figure comes to $81,600 \u2013 almost 77% higher than national average wages of $46,119.78 in 2015, as computed by the Social Security Administration.<\/p>\n
Even as non-tech S&P 500 firms pay less than 1% (on average) of their revenues as stock-compensations, technology behemoths shell out 5% on average. Facebook and Twitter paid out 17% and 31% of their sales as stock-based compensations, respectively. Alphabet gave away $5.3 billion \u2013 20% of its gross profits.<\/p>\n
Apart from the high living costs in California (Bay Area\u2019s 41% more expensive than the national average, as suggested by Brant Shelor of Mercer) as a factor behind lofty salaries, tech firms\u2019 vying for the best talents could be fueling more rewards\/pay hikes in the sector. It\u2019s rumored that in 2011, Google laid out a $100 million stock offer before senior executive Neal Mohan to keep him from moving to Twitter. Amazon offers large stock-compensations upon an employee\u2019s completion of the third or fourth year with the company. Bonus as a retention incentive is reportedly common in Apple, Google and Facebook.<\/p>\n
Will Incumbents\u2019 Fat Paychecks Thwart New Entrants?<\/strong><\/p>\n With big names shelling out big tips to employees, where does it leave start-ups? Unicorns \u2013 that is, larger start-ups valued over $1 billion \u2013 are also offering handsome stock-grants to workers in exchange of the latter serving at least four years with them. In trying to procure workers against bigger players\u2019 alluring paychecks, absolute neophytes or smaller start-ups could be challenged, and perhaps see their funding requirements soar \u2013 something which could entail added pressure on these beginners to prove their earnings potential before prospective investors.<\/p>\n Bottom Line for Investors<\/strong><\/p>\n Silicon Valley\u2019s generous mood towards employee compensations shouldn\u2019t hurt if it translates into higher worker productivity. But, in the race to outdo each other, some tech-firms might be going too far in their munificence towards employees \u2013 something that could restrict those companies\u2019 spending capacity in other areas and even squeeze their profit margins.<\/p>\n That\u2019s why investors need to be highly selective when picking tech stocks for their portfolio. At Zacks Investment Management, we can help you make this selection by offering an in-depth analysis on companies\u2019 fundamentals, so you can optimize your portfolio for long-term returns without compromising your risk tolerance. To learn more, contact us today at 1-800-245-2934 at no charge to you. In the meantime, to get insights on various market sectors, you can download our latest Stock Market Outlook, by clicking on the link below:<\/p>\n \n","protected":false},"excerpt":{"rendered":" Ranking among the highest-paying employers, are Silicon Valley firms going overboard in luring talent? In 2015, America\u2019s tech companies paid […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,72],"tags":[],"class_list":["post-3577","post","type-post","status-publish","format-standard","hentry","category-private-client-group","category-steady-investor-news"],"acf":[],"yoast_head":"\n