The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe
fetched at March 8, 2021

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe

I've been a hiring manager at Uber, in Amsterdam, for over 4 years. The market - and compensation - for software engineers have moved upwards at an incredible pace over during this time.

Interesting enough, many engineers did not notice any meaningful salary changes these years. The 2019 Honeypot Amsterdam developer survey says, "the most experienced developers earn an average of €55,000 high as over €70,000". The 2021 Talent.io salary report puts the most experienced software engineering salaries in Amsterdam at €60,000.

Meanwhile, I've observed the average senior total compensation figures at Uber nearly double from €110,000 in 2015 to €170,000-€230,000 by 2020. It's not just Uber: Booking.com senior total packages have gone up by 50% from around €100,000 in 2016 to €150,000+, as part of the EU salary research I've been running (I'll share the survey reports in-detail in later blog posts).

Where is the disconnect?

I'm seeing the software engineering compensation market becoming "trimodal" - split into three distinct groups that "spike" and that have little overlaps. Many engineers are being aware of this third, "Big Tech" pillar and the compensation ranges it introduces:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe

#1: Companies only benchmarking against their local competition and non-tech companies, competing with their local competitors. Most of these places call engineering as IT, and often view it as a cost center. Examples would include IT teams for local supermarkets, e-commerce sites. They'd aim to pay right around or slightly above what the "other" local supermarkets or e-commerce sites pay.

Startups with little capital and bootstrapped companies might fall in this category. In the Netherlands, these companies would pay €50,000-75,000 for a senior engineering role in the Netherlands, everything included (apart from the hard-to-value early-stage startup equity). For an entry-level role, this number would be €25,000-40,000.

#2: Companies benchmarking against all local companies, even if they are not direct competitors. In the Netherlands, examples of these companies would be eBay classifieds, Adyen, Nike, Disney Streaming, Booking.com, and well-funded, high-growth startups like Catwaiki or Miro would also be in this category.

These companies would typically pay €75,000-125,000 total compensation for a senior engineering role in the Netherlands. For an entry-level role, this number would be €40,000-65,000.

#3: Big Tech: companies benchmarking against all regional or global companies. In Europe, this means competing against all other major EU companies, and often recruiting people from London, Berlin, Barcelona, and outside the EU. Examples of companies in this space are Amazon, Uber, Databricks, Flexport, Stripe, Apple, or Netflix.

These companies would typically pay €125,000-250,000+ total compensation for a senior engineering role in the Netherlands (base salary + bonus + equity value: either liquid or "paper-value"). The equity part of the compensation can be up to easily 30-50% of the whole package on an annual basis. With equity appreciation, it can go even above.

For an entry-level role, this number would be €65,000-100,000. For example, at Uber, a standard new grad offer was around €87,000 in 2020 (€70,000 salary + €7,000 target bonus + €10,000/year in stock).

What this means is both a new grad and a senior software engineer could be making up to 4x the annual compensation, depending on what company they are working at. Of course, there are overall fewer openings at Big Tech, and the competition and expectations are more fierce. Still, putting in the time to prepare for these interviews might make sense, knowing the ranges.

The "Silicon Valley"-Effect Pulling the Top of The Market

The top of the market has accelerated rapidly in the Netherlands, the past 5 years. In 2015, Booking.com was the highest-paying employer across Amsterdam - and the Netherlands. Then, Uber opened an office. At first, Uber paid similar to Booking.com - though more generous on options, and later with double-trigger RSUs. However, Uber soon stopped competing "just" locally.

Between 2016-2018, Uber re-benchmarked its compensation model to go head-on-head with the highest-paying tech companies in Europe: Facebook in London, Google in Zurich, Twitter in Dublin, and similar organizations.

The updated Uber salaries in 2018 were pretty much identical to that of Facebook London. This was no mistake: during these times, many candidates had offers both from us, and from Facebook or Google. I'd like to take credit for convincing people with Facebook/Google offers to choose my team: but without a compensation package that was competitive, all my efforts would have been worth nothing.

Silicon Valley companies opening EU offices have been a huge source of moving the market upwards - and swinging the "balance" back a little bit towards Europe / The Netherlands. The total compensation packages in the US have been shockingly high from the perspective of EU software engineers: and many engineers from the EU have packed up and left, seeing the wide gap.

An example is a Dutch engineer I know leaving their €80,000/year ($94,000) job in the Netherlands for an initially $350,000/year position at Lyft. Following promotions, they are now making more than $450,000/year (€378,000/year). Yes, healthcare and the cost of living are more expensive in the US: but this person has told me their only regret is they had to leave home to get paid their worth.

Equity, IPOs and The Impact on Compensation

Much of the high total compensation numbers are linked to equity that software engineers receive. Publicly traded companies that compete globally issue high equity packages - this is true for Uber or Apple. Unicorns and decacorns competing for the same engineers often issue large private equity packages for employees.

This equity can become very valuable on a successful IPO - but is not guaranteed to do so thanks to the nature of equity:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe
The value of private equity for software engineers. Following a successful IPO, the total compensation of engineers can jump significantly. It all depends how much stock you have, if, when and how the IPO goes, and how the stock does afterwards.

Databricks, Flexport, Miro, MessageBird, and other companies are all ones that are expected to go public in the next few years. An engineer who joined Databricks in late 2018 has $6M worth of stock - on paper, that is. However, joining rapidly growing companies that offer good equity packages can increase your compensation significantly.

I have seen the upsides of having a good equity package: at Uber, about half of my compensation was tied to equity. Of course, until an IPO, I could not realize any of it. Once the IPO happened and the lockup expired, I was free to sell - or to hold - these stocks.

Risk, rewards, and luck often go hand in hand with engineering compensation on the high end. The higher the ration of equity in your compensation, the higher gains - or losses - you can see with the equity price going up or down.

For example, Uber was not always considered as the "top of the market" for salaries in the Netherlands. In 2015, Uber paid in-line with Booking.com, and it was uncertain if there would be an IPO in the foreseeable future. In 2017-2018, Uber started to issue larger packages, and the IPO timeline became more certain:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe

However, most Uber engineers would describe the IPO in 2019 as disappointing. Many engineers had RSUs issued at a $48 preferred price, Uber IPO'd at $45, and the stock traded at $30 when the lockup expired, and people could sell:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe
By the time Uber employees could sell equity in 2019, the stock was "down" from a $48 preferred RSU price to $30. The stock would trade as low as $21 in 2020, before bouncing back.

The "total compensation" number of anyone with Uber stocks would go down at this point. However, anyone lucky enough to join late 2019 or early 2020 was issued stock at a price that is less than half of where Uber is trading now - and they could now have a much higher total compensation than most employees in a similar role.

The highest compensation packages will also typically be the most volatile ones, value-wise. This is also why it's hard to answer how much an engineer working at the likes of Uber is earning. The base salary and bonus: those are easy to quantify. But the equity that can make up a major portion of your salary? It is much harder to predict.

Performance on the Job and Compensation

The "Silicon-Valley" mentality of paying high-leverage engineers very well does not stop at salaries. It also includes how bonuses, and equity refreshes are awarded.

At some companies, the top performers can be paid outsized bonuses and stock, in ways that push their compensation well above the next level. While working at Uber, I was lucky to have engineers who were perceived as top 1% or top 3% of engineers. Here's the type of rewards some people got:

  • A €190,000 bonus at the end of the year: €50,000 in cash, and €140,000 in stock, vesting over 4 years, on a monthly basis. The "normal" end of year bonus for this role would have been around €62,000 (€22,000 in cash, €40,000 in stock vesting over 4 years).
  • A $80,000 spot bonus to be paid out in 4 instalments over 2 years ($20,000/6 months). This was on top of the "normal" bonuses.
  • A $220,000 stock refresh award, vesting over 4 years to bring a person up to the range they should be, based on their performance. The usual stock refreshes for this role would have been around $50,000 every year.
  • A $50,000 spot bonus vesting 12 months later, serving as a retention grant.
  • 24% salary increase on promotion, taking performance into account. The usual increases were 10-15%, and depended on where the salary band of the person was.

At Uber, I've seen people who were a level "below" me, but still making more per year than I did, thanks to their outstanding performance, impact, and the bonus that followed. Some of these people were on my team - and I loved that the system allowed this difference. Because we could reward high performers disproportionately, these people did not even think of leaving. Why would they?

Thanks to this policy, as a manager, I was able to work with some of the best engineers throughout my career - for an extended period of time. Did I mention that over 4 years, no person who reported to me left Uber  - up to the summer 2020 layoffs, that is? I'm sure it was not just compensation: but it sure played some part in this.

At companies who pay top of the market, people who are seen as key engineers often see outsized rewards, on top of the already great salary. And even the "normal" bonuses are what would be considered very large at #2 type of companies.

COVID Tilting the Balance to the EU

COVID has also been a major boost for high-paying senior jobs. A growing number of EU software engineers are considering or have moved back to Europe. And more US companies realize they can hire "cheap", but world-class software engineers in Europe.

A Dutch software engineer with 15 years of experience has joined a pre-IPO US company, working remotely to build large-scale distributed systems. They said:

I live in The Netherlands and in software development since 2000. I freelanced from 2008 to 2018. In 2018, I was recruited by {US startup acquired by a Big Tech company}, and boy, did a whole new world open for me. I'm moving into a new role at {Pre-IPO US company} Monday and my salary is roughly double (sometimes even triple) of what I could earn at the average enterprise or consultancy. And that's not even counting equity. At {US startup acquired by a Big Tech company}, I was a bit too late, but here, I'm in a good position. I should make enough to get rid of my mortgage, assuming a conservative IPO.

I learned more at three years of {US startup acquired by a Big Tech company} than in the 15 years before that. And the people I got to work with and are in my network now are invaluable.

COVID helped a lot too, IMO. Companies realised full remote is an option and you can increase your talent pool to include the entire planet.

I talked with the head of mobile engineering at a pre-IPO decacorn, who told me he's amazed he can hire staff-level engineers for $180,000/year (€150,000/year), who work extremely well, and on par with their Bay Area engineers who cost 2-3x this much, at $400-600,000/year. This organization is deciding which EU countries to open an office, the head of mobile already getting budget approval for a major hiring spree. The Netherlands is a front-runner for them.

Stripe and Spotify have both started to hire for permanent remote positions in Europe as well, expanding their hiring pool to all of the EU. Both companies are competing across Europe, and not with the local market. They join companies like GoDaddy, GitLab, GitHub, and others who have been doing this for years.

Getting Into Big Tech

The majority of companies in the Netherlands will fall into the #1 and #2 categories of companies aiming to compete only on the local market. Getting an offer from companies in the #1 category is usually the easiest, while #2 can be more challenging. However, the "Big Tech" companies in the #3 category are by far the most competitive ones to get into:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe

For entry-level roles, you'll have to really prepare for the coding interview. Data structures, algorithms: the works. Like it or not, this a hoop that these companies will want all successful applicants to jump.

For more senior positions, it gets trickier. You'll need to get good at large-scale systems design. For above senior positions, you'll only have a shot if you've solved similar-scale challenges to what these companies are hiring for and are up-to-date with where the industry is at: may this be backend, web, mobile, or ML systems.

Many of the companies in #3 represent exciting professional challenges that companies in #1 or #2 do not have to offer. Even if it was not for the compensation, they might be worth exploring at some point during your professional career.

I'm writing up my raw Big Tech interview preparation thoughts in emails that you're welcome to subscribe to if interested. I'm doing so as, unfortunately, there's little practical advice on how to prepare - and I have first-hand experience both preparing for Facebook and Uber, as well as interviewing candidates while at Uber.

It's Not Just About Comp

There is far more to what makes a good job than compensation. Places that offer high compensation usually mean higher competition to get in and stay on the job. It usually means unpaid oncall, often working with various timezones, and it can mean poor work-life balance compared to other places.

Work-life balance tends to be drastically better in the #1 category of local-only companies, compared to #2 and #3. In the Netherlands, these are also companies where it's common for the majority of the people to work less than 5 days a week, work to be steady and easy to plan, and work not starting betfore 9, or running beyond 5.

Compensation is just one data point - though one that tends to have little transparency in Europe. I'll be publishing more detailed data points on this blog on the Netherlands, UK, Germany, and other EU countries' software engineering salary data that people have shared- and you can share as well.

Just make sure you're weighing not just the salary but other important things like professional growth, autonomy, mentorship, working directly on a product, work-life-balance and the things that matter to you:

The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe

I'll follow up with more detailed compensation analysis for the Netherlands and Europe. If you work in tech, in the EU, please consider anonymously sharing salary data you are aware of via this form.

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