Money and rewarding methods in software industry

Companies are spending enormous amounts of money on compensation and benefits solutions, aiming to motivate and retain current employees, and attract new employees. Fitz-enz (2000, p.

97) highlights that talent shortage led to many incentive programs and it is hard to compare whether incentives are there for maintenance and which are for retention. There is a constant battle between similar companies operating in the same geographical areas. However, in the new digital era, enterprises can attract talents from outside of their operating areas and this affects the competitiveness of compensation and benefits packages in the eyes of current and potential employees. As this study follows the principles of ethnographic study, Author herself adds her knowledge from reward methods used in the Finnish software market. Software in-dustry in Finland has been a forerunner in the diversity of benefit packages. These benefits cover aspects of financial and non-financial rewards and go way beyond what other industries can offer. What makes this topic interesting, is why software developers working as freelancers are giving up those benefits? One explanation can be raised from the transparency; people working as software developers talk openly of their salaries and benefit packages with their peers from other companies. One extreme example is that Vincit, leading Finnish software con-sulting company, publishes employees’ salaries internally twice a year. This covers 90-98 per cent of the entire personnel, even though this disclosure is completely volunteer. (Lipponen, 2017). Jensen et al. (2007, p. ix) presume transparency and flatter organizations to enable better productivity. This new kind of environment where every employee comprehends company’s

goals, mission, and strategy, and they communicate freely which allows them to know what different employee groups are doing.

Rewards (i.e. remuneration) can be tangible (i.e. monetary), intangible (i.e. nonmonetary), or appropriate. Intangible compensating methods can be considered as examples of career devel-opment or work-life balance. Also, for the permanence of the employment relationship, matters relating to the organization of working time and the significance of work are intangible (Bussin, et al., 2016, p. 4). People want time, respect, independence, trust, opportunities for development and meaningful work. (Jensen et al., 2007, p. 5) Other examples of intangible rewards include opportunities to influence and participate and receive feedback. Rewarding can also be psycho-logical: giving appreciation, giving positive feedback, or paying attention to the employee.

(Armstrong, 2010). As pointed out by Jensen et al (2007, p. 5) often managers focus on the money when they criticize rewards programs, even when there are countless other ways to en-gage employees. Lloyd Hill mentions fulfilling jobs, development programs, future career pos-sibilities, and recognition. (see Jensen et al., 2007, p. viii).

The monetary remuneration includes, for example, salary, benefits, shares and options, variable remuneration, and bonuses. Other worthwhile benefits include, for example occupational health, retirement schemes or holiday benefits. (Jensen et al., 2007, p. 68; Fitz-enz, 2000, p.

141). Material rewards can be long-term or short-term. Wages can also be divided into work-based, personal, or group-based and performance-based pay (Jensen et al., 2007, pp. 14 and 19). Today, the younger generation appreciates financial rewards, such as opportunities for de-velopment and flexible time management. Future work must be able to motivate people accord-ing to their needs. (Bunton & Brewer, 2012). In Finland Labour Union’s recommendations are setting the baseline for hourly or monthly based salaries. Employees working in ICT-positions are under various collective agreements which are agreed between labour unions, employers, and government (Nyman, 2016). Pay can be based on time, per piece-rate or performance-re-lated. In the software industry all of the above can be used if we are analyzing gig economy and standard face-to-face employment. When focusing solely on the software programmer in Fin-land salaries are often hourly or monthly based.

Fitz-enz (2000, p. 237) found seven principles in what employees, across levels and functions, expect and value in employment relationships; (i) receive job-related training, (ii) receive career development support, (iii) have advancement opportunity, (iv) be treated as contributing adults,

(v) have their knowledge and experience put to use, (vi) be kept informed about company mat-ters and changes, and (vii) be compensated fairly and equitably. In other words, six out of seven are non-financial rewarding methods. Vartiainen & Kauhanen (2005, p. 22) lists non-financial rewarding methods which include development and progression opportunities, feedback from the work, ability to make an impact, permanence of employment, working time arrangements, experience of the relevance of the work, and appreciation gained through work.

Järveläinen (2014) studied work motivation, reward methods, innovativeness, and organiza-tional culture among informants of Finnish Technology Industry Union. One group of inform-ants was companies operating in the field of “62 Software programming, consulting and other related activities” (Järveläinen, 2014, p. 87). Based on her research the total reward framework was created to depict Finnish technology companies. This aggregates intangible and tangible reward methods and it is originally adapted from Kauhanen’s (2012, p. 111) book of human resource management. Many of these rewarding methods are used in companies in the Finnish ICT sector to attract best talents. In the Appendix 2 is a list of rewards (ref.: Järveläinen, 2014;

GPTW Integrata, 2018; Heiskanen et al., 2018; Puro, 2019; Rakettitiede, 2020), not entirely limited to these, used in the Finnish software enterprises such as Futurice. It depicts the amount of rewarding methods used, yet, some employees leave. Software enterprises can be product or service organizations, or both. Jensen et al. (2007, p. 21) points out that generally up to 80 percent of service organization’s revenue goes to employee compensation. Base monthly salary for software developer who has less than three years of experience is 2 500 - 3 500 euros, and SW developer with more than five years of coding experience will earn 3 500-13 000 euros per month depending on seniority, requested technology, location and the project phase. New pro-jects require more talented people to overcome obstacles of different project phases. (see e.g.

Puro, 2019; Stack Overflow Salary calculation, 2020; Sieppi, 2017; Tiilikainen, 2017). Grounds for software developers in Finland are outstanding if compared to other industries in Finland.

Despite the information managers have at hand of different remuneration methods, it may be impossible to reward employees’ outcomes without proper measurement. As stated in Fitz-enz’s (2000, p. 4) book, communicating expectations, knowing the current status quo, identify-ing performance gaps, provididentify-ing feedback, recognizidentify-ing performance, and supportidentify-ing HR re-lated decisions, all require effective measurement policies. Pension, health care insurance, and lack of labour law and union protections are few examples which self-employed individuals are losing when transferring from employee into private entrepreneur. (Kalleberg, Reskin, Hudson, 1999, p.2).