What’s a reasonable base salary for hiring really great senior software engineers in Amsterdam in 2022? As always “it depends”, but the answer is also jarringly different in 2022 than it was in 2019.
Sample goal: cool company where no-one worries about money
FAANG pay high salaries but not everyone wants to work for them. You may choose to work for a smaller company, or a cooler one, or one with better values. Perhaps then we can pay a bit less?
Let’s look for a really cool small company with solid values, and see what they pay. Bryan Cantrill’s Oxide Computer pays everyone who works at their company a $180k base salary (€160k). That is enough:
- to live comfortably with 3 kids in the Bay Area;
- to be in the top 5% of income in the US;
- to not worry about money, even when putting extra organic raspberries in your shopping basket.
They also provide good benefits like healthcare and stock options. For them, €160k is enough to take money of the table as a employee demotivator, enough to assemble a great team.
The people that work at Oxide Computer could earn more at other employers. That’s ok: beyond some amount, more money simply matters less than other things, like pursuing autonomy, mastery, and purpose. What they offer candidates is something like join a great team, try to make something cool following decent principles, live comfortably, and have a small chance to become independently wealthy.
While it’s not a goal for them forever, Oxide so far has (quite) senior engineers only, of which Bryan writes “engineers at the earliest stages of their career are unlikely to be a fit for us right now”.
Let’s imagine we start a similarly cool company, with similar hiring goals, but in Amsterdam, The Netherlands. Let’s imagine we want to hire (someone like) Bryan as our first awesome senior engineer. He’ll get options or shares of course, and a nice pension, and so on, but what base salary should we pay him so money is not a worry?
The estimated modal income in The Netherlands for 2022 is €38k gross. €38k is the income where 50% of employees make less and 50% make more than that. An example of a job where you can expect to make about €38k is as a nurse with a college degree.
€76k is double that modal income. Ignoring market conditions, I consider double-modal quite a decent benchmark salary for individual contributor senior software engineers with a lot of experience.
- Until our recent housing crisis, a double-modal income was enough to buy a house, support a family, and otherwise live quite a comfortable life in The Netherlands;
- €76k is more than the average senior software engineer makes in The Netherlands, which is probably about €60k;
- Above-average does seem reasonable to me, after all this is Bryan Cantrill we’re trying to hire!
- It feels right to me.
Unfortunately, with the rising house prices, €76k salary is currently not enough for Bryan to buy a comfortable Amsterdam family home, and it’s definitely not enough for unlimited organic fruit. We should deal with our housing crisis and make healthy food cheaper, but in the meantime…
- To live in a modern 4 bedroom house in the greater Amsterdam area, Bryan’s mortgage will be about €550k, for which he will need a salary of about €100k;
- He’ll pay about 40% income tax, so will have net income of about €60k, which puts him in the top 5% of income in The Netherlands;
- After base costs, perhaps €30k remains as disposable income, which should be plenty for all the raspberries he’d like, plus a couple of family ski trips a year, plus buying carbon offsets for that trip.
€100k ought to be enough of a base salary based on the goals we picked. It’s is a lot more than most software engineers make in The Netherlands, but $180k is of course also more than most software engineers make in the USA. We want excellent people so we will have to pay an excellent salary 🙂
Most expats prefer living in Amsterdam itself instead of merely close to it. It’s nice when the staff at the local organic grocery shop speaks fluent English as they point out the organic raspberries isle. To live in Amsterdam itself, Bryan’s cost of living goes up a lot, especially for housing.
- He will need perhaps an €800k mortgage, for which he needs a salary of about €140k;
- His taxes will then be a bit higher too, for a net income of about €80k, which now puts him in the top 2% of income in The Netherlands;
- Perhaps €35k of that is now disposable income, still plenty for those more expensive Amsterdam raspberries.
Beyond just money, the living standards for the top 5%/2% of earners in The Netherlands are arguably quite amazing compared to the Bay Area. After all The Netherlands is one of the best places to live in the world! Rather than try to flesh out that argument here I’ll point out the excellent YouTube channel NotJustBikes.
So is this €140k enough to get Bryan to join us? Of course €140k isn’t €160k…but since The Netherlands is so awesome, it does seems somewhat reasonable to me to have to take a bit of a paycut to live here, just like it also seems reasonable to take a bit of a paycut to work for an amazing company such as Oxide Computer. That 12% paycut might be ok to Bryan, and is a bit less than the 15% cost of living difference between the Bay Area and Amsterdam, so day to day it may not feel like a big paycut to him.
It’s 2022 and many US tech companies are all-in on full-remote work, often no longer adjusting for cost of living when setting global salaries. More and more of these companies will pay those Bay Area salaries over here, so to be globally competitive in the job market €160k now really is the rate to match and that’s what our imaginary Amsterdam startup should probably do.
Wow. While €100k is already considered a high salary by most Dutch standards for just about any regular job, €160k plus benefits is more than most Dutch software engineers imagined they could make at any point in their careers. Over here that €160k makes you a part of the 1% even before considering the rest of your benefits package. Many software engineers are loyal employees who don’t like to change jobs, but finding out a life-changing amount of money is perhaps on offer (while building cool things with Bryan Cantrill, no less!) many of us are tempted!
On the other side of the negotiating table, as a hiring manager who pays their engineers €76k or perhaps €100k and thinks that it is quite a generous and reasonable amount, it can be jarring when we hear that those same engineers now earn 60-100% more somewhere else for the same (or more fun!) work. Should we try and somehow match the US salaries, or, should we accept we’re not a globally competitive employer and risk losing some of our best people? Ugh! That also doesn’t feel right.
How high will salaries go?
Over the last few quarters a lot of Dutch employers are bumping engineering salaries by 10-20% or more, German IT salaries are going up fast too, and probably this really is true across Europe. Employers are trying to remain competitive in the job market…but is a 10% bump enough when 60% or 100% more salary is on offer elsewhere?
Since the scarcity of senior software engineers won’t be fixed change quickly, and the BigTech companies can afford to pay a lot, it seems like the top global salaries are poised to still go up further in the short term, in turn creating further strain in our local job market, and keeping the money topic on the table for most IT employers and employees everywhere.
Will salaries come back down?
Perhaps. The global economy seems to be overheating. It could be we are in another bubble, which could burst, which could turn the scarcity of engineers into surplus of engineers really quickly as investment drops. Since no-one really understands how the global economy works, it’s hard to be sure.
(Disclaimers: I work in outsourcing, not at a startup. I work and live in the Amsterdam area but not in Amsterdam itself. This is not how compensation is set up where I work. I make a lot less money than Bryan Cantrill, who was also not consulted about this blog post (I owe you some raspberries, Bryan).)