The Trimodal Nature of Software Engineer Compensation: Why Positions Pay a (Very) Different Salary

Episode Overview

• This episode explains the "trimodal" nature of software engineering salaries in Europe, arguing that there isn't one single average salary for any given location.
• It breaks down the software engineering job market into three distinct categories of companies: "Hyperlocal," "Top of the local market," and "Top of the regional market (Big Tech)."
• The speaker highlights the crucial difference between base salary and total compensation (which includes bonuses and equity), explaining why public salary data is often misleading.
• The video discusses the various tradeoffs associated with each salary band, such as work-life balance, professional growth, and the competitiveness of securing a position.

Key Concepts

• Trimodal Salary Distribution: The core idea that software engineering salaries are not on a single bell curve but have three distinct peaks corresponding to different types of companies.
• Three Tiers of Companies:
  • #1 "Hyperlocal": Local companies competing for local talent, where the offered salary is typically the full compensation. These roles often provide the best work-life balance.
  • #2 "Top of the Local Market": Companies that want to hire the best local talent and pay above the "hyperlocal" average. Total compensation, including bonuses and sometimes equity, becomes more important.
  • #3 "Top of the Regional Market (Big Tech)": Large, often US-based tech companies competing for the best talent across Europe. They offer the highest total compensation, with significant equity and bonus components, but are the most demanding and competitive.
• Total Compensation vs. Base Salary: For higher-paying tech companies, total compensation (salary + bonus + equity) is the key metric, not just the base salary. This is often not reflected in public salary data sources.
• The "Secret" High-Paying Market: The highest compensation packages are often not public knowledge because employees have little incentive to share these details, and public data platforms primarily focus on base salary.
• The Wheel of Success: A framework suggesting that career success and satisfaction are composed of multiple factors beyond compensation, including professional growth, health, work-life balance, and the people you work with.

Quotes

• At 01:04 - "There's a 'trimodal' nature of software engineering salaries, three very distinct groups." - The speaker introduces the central thesis that salaries are not uniform but fall into three separate categories based on company type.
• At 03:32 - "Equity is (almost always) part of higher engineer compensation packages." - This quote emphasizes that to reach higher earning levels as a software engineer, understanding and receiving equity is essential, as base salary alone has a ceiling.
• At 06:34 - "The first rule of the club: You don't talk about the club. (in Europe, that is)" - The speaker uses a "Fight Club" reference to explain why data on the highest-paying tech jobs is scarce, as employees in these roles are less likely to share their compensation details publicly.

Takeaways

• To accurately assess your market value, understand which of the three company tiers you are targeting or currently in, as compensation structures and expectations vary significantly between them.
• When evaluating job offers, especially from tech companies, focus on total compensation (salary, bonus, and equity) rather than just the base salary to get a true picture of your potential earnings.
• Recognize that higher compensation often comes with tradeoffs, such as increased competition, higher stress levels, and potentially poorer work-life balance; define what "success" means for you across multiple factors, not just pay.