Market & Sourcing
IT salaries - significant regional differences
by Gerold Hauer
You don't have to look to India first: IT salaries also differ significantly in European countries. We compared two regions in the south of Germany as well as cities and countryside in Bavaria.
The lack of IT specialists in Europe and correspondingly high salary expectations make successful recruitment a search for the (golden) needle in the haystack. In addition, the market for IT salaries isn’t transparent, because people tend not to talk about money in public. Nevertheless, or precisely because of this, the topic is extremely interesting for IT organisations and HR: what do I have to invest when I need new software developers or an architect?
Nearshoring or offshoring is one possible answer to bring resources up and the price down. However, it is not suitable in all cases, and sometimes this solution also has downsides, but you don't even have to look as far as Bangalore - IT salaries in Bristol or Bamberg may already be significantly lower than in hotspots like London or Stockholm. A truism? Out of interest, we have evaluated relevant salary studies (information at the end of the article) in Germany and consulted figures from our data lake. Our learning: the market for IT experts is anything but homogeneous.
Average IT salary per year 2022 in Germany: €59,632
First the starting point: The current (end of 2022) average salary for IT employees in Germany is €59,632 per year, including bonuses, premiums and commissions for full-time employment, but excluding other salary components, non-cash benefits, company cars or other perks as well as ancillary salary costs (pension contribution, social security, etc.) or allocations. Nevertheless, the insight gained from this figure is severely limited.
Our analysis focused on two typical roles in IT organisations:
Typical profile: 3 to 5 years' experience, full IT operations spectrum excluding development.
Typical: 5 to 10 years' experience, team leader level, entire IT operating spectrum except development
The following salary boosters and brakes were taken into account:
- Age: Compensation increases with experience. The average salary is usually reached after five to ten years.
- Function: Also in IT, there are some stars and many starlets. The latter tend to work in support, whereas IT architects and security experts are higher paid.
- Sector: Sector has an impact on salary. Banks are traditionally at the top here, while commerce is at the bottom of the field with a discount of nine percent on the average.
- Number of employees: Companies with more than 10,000 employees pay around 30 percent more than the average for the same role, companies with less than 250 employees are below the average.
- Region: The factors mentioned are supplemented by surcharges/deductions for metropolitan areas or structurally weak districts. Depending on the region, these can range from minus to plus 20 percent.
These factors result in an enormous range of IT salaries as you can see in two illustrative calculations:
Bavaria: Metropolitan vs. rural region
The differences between Bavarian IT clusters of Munich and Nuremberg/Erlangen and the rest of the state are striking. For example, an IT administrator earns an average salary of about €69,500 per year in an urban area. This is about 25 per cent more than the comparable job in the countryside, where there are significantly fewer IT jobs on offer.
Baden-Wuerttemberg vs. Rhineland-Palatinate
An IT manager in Baden-Wuerttemberg earns an average of €88,300 per year. Under the same conditions, the manager next door in Rhineland-Palatinate only makes €79,500. The economic strength of Baden-Wuerttemberg is impressive. Measured by the districts in which more than 500 IT jobs were offered in 2022, the state is clearly ahead in Germany with a quote of 44 per cent. In Bavaria it was 24 per cent, and in Rhineland-Palatinate only eleven per cent. At the same time, Baden-Wuerttemberg also shows the highest demand for IT personnel with 9.2 IT jobs per 1,000 inhabitants, followed by Bavaria with 6.9.
The bad news is there is a large supply of IT experts in urban areas, but they are relatively expensive. In the countryside, there are only a few experts, but they would generally be cheaper - if you can find them and persuade them to join. Apart from higher salaries, this can only be achieved with the full programme of benefits, such as home office and flexible working hours or the establishment of small regional structures of an organisation. Those who have to commute long distances to the hotspots of Munich or London will think twice about changing employer or have it paid for.
Average values of salaries like “€59,632 per year” can provide IT and HR managers with an initial orientation, but a nationwide average for recruiting an "IT expert" is not suitable to support decisions. It may be worth taking a closer look here.
In addition to the values from the Metrics Data Lake, figures from the following sources were used for the analysis:
- Hays - Skilled Worker Demand / Evaluation by Region
- Stepstone - Salary Report 2022
- Compensation Partner - Salaries in IT 2022
- Kienbaum - Compensation Report for Management and Professionals in IT Functions 2022
- Current statistical data of the federal states in Germany