Competition for Talent Triggers “Dog Fight” in Colombia

In this third article in our review of tech salaries across Latin America we focus on Colombia. The previous article on Chile can be found here.

Booming Nearshore demand and the expansion of the region’s digital native heavyweights in the Colombian market is acting like a pincer that is pushing up the country’s tech salaries at an “alarming rate” say recruitment experts.

Sebastian Hoyos, IT Recruitment Manager at Hays Recruitment Colombia, says that the rapid rise in tech pay packets is reminiscent of another recent wage explosion: “We’re seeing the same boom that happened five or six years ago in the oil industry. People were changing positions every six months and 30 years old were making 30 million pesos monthly (US$8,000),” he told Nearshore Americas recently.

Demand and such quickly climbing rates are creating a salary bubble,  he believes. “In the IT industry here, employees can usually expect to receive up to 30% increase when they switch between companies. Right now, they’re receiving 45%, 50% or even more,” he said. He isn’t sure how long it can last.

In the case of the country’s oil workers, the salary bubble soon burst. Will this be the case for tech workers too, or will salary increases continue to chip away at the wage arbitrage benefits so fundamental to the country’s Nearshore proposition?

‘Dog Fight’ For Talent

Colombia has positioned itself as a major tech hub through promotion of its so-called Orange Economy and tech-friendly initiatives. It’s a strategy that has worked well. Ruta N, a science, technology and innovation-focused center in Medellin, houses 320 companies including Chinese multinational Huawei and Deeplearning.ai, an education start-up founded by Coursera CEO Andrew Ng, have offices. IT talent has been fostered in the country, and companies are knocking firmly on its door.

Tech recruitment is rocketing in spite of the country’s general employment outlook. The March ManpowerGroup Employment Outlook Survey,  says that most employers in the country ”forecast a mild climate during the second quarter of 2021.”

According to estimations from Hays Recruitment Colombia, a full stack developer can expect to earn between US$3,550 and US$4,370 per month at present. A DevOps engineer will earn between US$4,000 and US$5,450 monthly depending on seniority, while a QA automation engineer is likely to earn from US$2,450 per month to US$4,350 depending on experience.

Bernardo Carvalho, CEO and Chief Happiness Officer at multinational tech recruitment company The Bridge,

offered similar salary ranges.  The Bridge, estimates that a full stack developer should command a salary of US$3,000 to US$4,500 monthly, while a Salesforce developer can receive up to US$5,000 a month and data scientist between US$5,500 to US$7,000 monthly. 

These wages compare favorably against other regional markets. In Chile, a senior full stack developer could earn up to US$5,450 per month, though the average for the position is US$4,100. In Mexico, the average senior tech salary across positions was US$4,968, though an intermediate full stack developer salary was only US$3,156 monthly.

The rise is being pushed from two sides. Major consolidated U.S. companies are attacking Colombia’s IT talent pool to build on digital transformation efforts while large digital economy companies from Latin America are also expanding in the country.

Rappi, the e-commerce company headquartered in Bogota, is growing rapidly while Argentina’a Mercado Libre recently announced it would double its Latin America workforce by the end of this year. Last year, the company announced its second technology and innovation center in the country.

Marco Casarin, Colombia Country Manager for Facebook, forecasts that the country will have a tech specialist deficit of 200,000 by 2025

Bernardo Carvalho says that the situation is exacerbating competition for tech workers in Colombia. But cost arbitrage is so high that the wage increases pose no problem to North American clients.

“Our U.S. clients are happy to cover the 20-30% increase in Nearshoring costs due to the increase in salary expectations from Colombians, as these are still more than 50% lower than local workers,” he told Nearshore Americas. “As for the local market, SMEs are feeling the strain of a potential bubble, simply because they find themselves forced to compete with local deep-pocketed fintechs, banks, unicorns as well as the global players. It is truly a big dog fight, and we do not see any short term signs of this demand slowing down.”

Whether the slow down will happen in the long term remains to be seen, though Marco Casarin, Colombia Country Manager for Facebook, forecasts that the country will have a tech specialist deficit of 200,000 by 2025.

Shifting Perspectives

The impact of the Covid-19 pandemic and the move to remote work means that both talent and companies are changing their tact prior to hiring. According to Hoyos, the increase in wages has allowed tech workers to shift their perspective.

“The first the thing I’m being asked when I call talent as a recruiter is whether the position is remote or they have to go to the office. When they’re making this amount of money they want to be able to travel,” he said.

Carvalho reports that The Bridge has seen a 16% increase of Colombian tech talent in its remote workforce, despite a previously conservative attitude towards Nearshore work. 

“Companies are questioning if they should reconsider letting more people work remotely, permanently” — Sebastian Hoyos

“In the previous years up to 2020, Colombian talents were generally suspicious of international contracts and did not generally desire to leave a steady job to work for a USA creative or tech consultancy, due to historic economic instability and therefore job safety. It was far more difficult to persuade them to go into temporary contracts, and still is, but this is changing,” he explained.

Workers’ job hopping and the desire to remain outside of the office for the long term is prompting Nearshore companies to ask themselves whether their intentions to get back to the physical office space remains a priority in this new competitive hiring environment.

“Companies are really questioning how they work: should they accept that they’ll have to let talent go once the return to the office takes place or should they reconsider letting more people work remotely, permanently,” Hoyos said.

With the dust yet to settle on the pandemic and vaccination progress patchy across the globe, how long Colombia’s salary bubble can continue growing  is hard to say. But Hoyos, with his knowledge of the oil boom five years ago knows one thing: “It can’t last forever,” he said.