Talent is the No. 1 challenge for tech leaders, and the competition for the best people is global. In this four-part series, Tech News takes a deep dive into Canada's talent crunch, talking with more than a dozen founders, recruiters, front-line workers and industry observers. This is Part 1.
The pitches come via email and LinkedIn – two to three a day, sometimes more. Each one urges Prateek Madhikar to do the same thing: Leave your job and come work for us!
“I get headhunted by a lot by companies of different sizes,” says the 27-year-old software developer. “Every company is poaching from every other company because they have a lot of money and need to hire talent, and the way they do it is by putting a big paycheque at the start of it.”
Madhikar, a Senior Developer with Kitchener-based marketing firm Hive, isn’t looking for a new job. But if he was, there has never been a better time to be a tech worker.
Talent is the No. 1 challenge for tech leaders everywhere. Software developers, hardware engineers, product managers, cybersecurity specialists, data experts and experienced executives are all red-hot commodities right around the planet.
According to a recent report by the Business Development Bank of Canada (BDC), at least 55 per cent of Canadian tech entrepreneurs are “struggling to hire the employees they need.”
“The talent market is more competitive than I can ever remember,” says Marcelo Cortes, CTO and co-founder of tech unicorn Faire, which has grown its Waterloo engineering team continuously since launching in 2017.
Recruitment professionals agree.
“Our business has probably tripled in the last two years,” says Kristina McDougall, founder and Managing Partner of Artemis Canada, a Waterloo-based executive search firm that specializes in leadership-level prospects. “For every individual on the candidate side that we’re talking to, they’re getting multiple reach-outs from all over North America.”
Kristina McDougall, founder of recruiting firm Artemis Canada,
has seen business roughly triple in the past two years.
(Communitech photo: Anthony Reinhart)
By most measures, Canada’s tech industry is thriving as never before. Investors pumped a record-breaking CDN$14.7 billion into Canadian tech companies in 2021, more than double the previous record set in 2019, according to the Canadian Venture Capital Association.
Yet that very success, coupled with a worldwide hunger for talent, has raised the stakes for Canadian tech companies and the national economy.
“If Canada cannot get ahead of the sector’s immediate shortage and demonstrate that it has ‘talent ready and waiting,’ the country will risk being left behind in the race to grow the sector’s economic base, keep companies here and attract new ones,” Sheldon Levy, a veteran university administrator and policy adviser, wrote in a recent opinion piece in the Globe and Mail.
The Council of Canadian Innovators is sounding a similar alarm. In late March, it released a strategy document with 13 recommendations for creating, attracting and retaining more tech workers.
“It is clear that Canadian companies must offer competitive wages and incentives to compete in this new labour market,” the report states. “However, there is a significant onus on policymakers who must adapt their thinking to reflect the needs of the 21st century economy.”
Recent layoffs at Vancouver-based Thinkific reflect a decline in valuations for publicly traded tech companies. But VC and private-equity investors remain active, and many tech companies have the cash to continue hiring. In Waterloo Region alone, a record $1.4 billion was invested in area tech companies in 2021.
Dozens of reports forecast a seemingly insatiable demand for tech talent. The Information and Communications Technology Council (ICTC) says Canada will have several hundred thousand tech jobs to fill over the next three years.
“By 2025, ICTC forecasts employment in the Canadian digital economy to reach 2.26 million – triggering a demand for an additional 250,000 jobs,” the report says.
In early April, Communitech’s national Work in Tech employment site had more than 10,000 job listings from nearly 1,500 companies across Canada.
There are more than 26,000 people working in tech in Waterloo Region. In the last two years alone, tech companies here have created well over 1,000 jobs – and the hiring continues:
Google has grown to more than 1,400 employees in Kitchener, up from 1,000 in 2020 when it announced plans to occupy an 11-storey building that’s still under construction next to its existing engineering hub in downtown Kitchener.
Cybersecurity unicorn eSentire, which raised another US$325 million in February, plans to hire an additional 400 employees by mid-2023.
Wholesale market platform Faire, another unicorn that has raised more than US$1 billion in five years, has been hiring steadily and is in the process of adding another 250 engineering roles on top of the 200 already affiliated with its Waterloo office.
Edtech unicorn ApplyBoard, which has raised US$483 million since launching in 2015, employs 1,500 people globally and continues to hire.
Cybersecurity unicorn Arctic Wolf Networks said it planned to add 150 more people to its Waterloo R&D and security operations after raising another US$150 million in July 2021.
Edtech company D2L, which went public on the TSX last year, has added more than 330 staff since the start of the pandemic and now employs more than 1,000 people globally.
Fast-growing Magnet Forensics, which also joined the TSX last year, has hired at least 130 staff since the end of 2020 and now employs more than 400 people at multiple offices.
In addition, a long list of smaller outfits like heavy equipment rental platform DOZR are hiring dozens of new employees each after securing new rounds of investment cash.
“Everyone is on the hunt and there is a lot of activity,” says Daphne Gorman, Head of Talent Acquisition for Kitchener-based construction tech company Bridgit, which raised CDN$24 million through a Series B round last October.
As the supply-and-demand balance tilts in favour of employees, skilled workers are demanding higher salaries, more equity incentives, flexible hours and a variety of remote-work arrangements.
The going rate for a software developer with two to three years experience is now north of $100,000 per year. If you want someone more senior, you’re looking at $150,000 or more. And don’t forget bonuses and equity payouts such as stock options and restricted stock units (RSUs), which can add thousands to a tech worker’s annual compensation.
A report released in March by U.S. employment platform Hired found that the average salary for a software engineer in Canada in 2021 had risen to CDN$128,000. That compares to US$156,000 south of the border generally, and US$168,000 in the San Francisco Bay area.
(Communitech graphic: Grace Stallard)
Earlier this year, Amazon more than doubled the maximum cash component of salaried employee compensation to US$350,000 per year, up from US$160,000 – a mind-boggling increase that highlights another interesting stat: the rate of salary growth.
According to Hired, Canada led the international pack of tech hubs with a 9.2 per cent increase in software salaries between 2020 and 2021. The UK followed with an average increase of 2.7 per cent, while U.S. salaries grew by just 0.8 per cent.
If you look at salaries paid to remote workers – those located outside the employer’s geographic area – the Canadian increases are even more eye-popping.
“Remote salaries grew across all markets between 2020 and 2021,” says Hired. “To stay competitive with U.S. salaries, Toronto even saw an astounding 14 per cent increase in average remote salaries.”
Some companies in Waterloo Region have seen even higher salary expectations. A number of executives who spoke to Tech News say qualified candidates are seeking as much as 20 to 30 per cent more than before the start of the pandemic two years ago.
“Salaries in Canada are getting higher,” says Cortes. “We can’t even do benchmarks anymore because whatever you do today, three months in the future seems to be outdated already.”
So, what’s driving the demand?
Industry veterans will tell you that finding enough tech workers has always been a challenge. A 2009 study out of Ryerson University begins with the line, “For more than a decade, companies in the Information and Communications Technology (ICT) sector have discussed the problem of the skills shortage and the need to develop the ICT labour pipeline.”
The challenge today is arguably more urgent and complex.
While the need for tech talent has grown steadily over the past decade, the COVID pandemic that started in March 2020 created a flywheel effect that accelerated the need for technology across all industries. With the demand for tech solutions skyrocketing, investors have poured unprecedented amounts of cash into tech companies, providing them with the resources to hire and pay more for the talent they need.
Among the forces shaping the current talent market, the rise of remote work is one of the most powerful. After being forced to work from home early in the pandemic, employees and employers soon realized that, hey, this new arrangement is not only workable but often desirable. As a result, employees no longer have to uproot themselves and their families to switch jobs, and employers are no longer confined to searching within their own geographic regions for talent.
The market has moved and shifted very, very quickly."
– Paul Salazar, Director of People and Talent, Vital Bio
The phenomenon was most visibly exemplified by Shopify, Canada’s most valuable tech company. In May of 2020, just two months into the pandemic, the e-commerce platform announced it would move permanently to a “digital by default” model of remote work and liquidate most of its physical space. Around the same time, Waterloo-based software giant OpenText said it would not be reopening 50 per cent of its global offices after the pandemic.
The combined changes in the tech landscape have produced companies that are flush with cash, growing rapidly and competing across borders for the talent needed to sustain their success.
“The market has moved and shifted very, very quickly,” says Paul Salazar, a veteran recruiter and Director of People and Talent at Toronto-based medtech startup Vital Bio. “The rules are different, the goal posts have shifted, and now we have to catch up as an economy.”
Of the many factors shaping Canada’s talent challenges, Salazar points to the sheer size of the American economy and the number of companies based there.
When a tech giant like Google or Apple decides to embrace remote work, they become an even bigger magnet for Canadian tech talent. Add in the vast number of smaller tech companies in the U.S. – many of them moving quickly to embrace the new recruiting reality – and it’s easy to see why Canadian tech companies are feeling under siege.
“Just by sheer capacity and numbers, it’s naturally going to impact us,” says Salazar. “It's not for lack of effort, it’s not for lack of focus or any of those things, it’s just that we are impacted by the volume.”
As with any change, there are opportunities as well as challenges. Communitech, for example, set up its Outposts program to make it easier for Canadian companies to find and manage talent in new geographical markets around the world.
Still, the remote-work phenomenon is a double-edge sword, says Kristina McDougall.
“The talent pool opens up to a much bigger pool, but now we’re competing with everybody for that same talent,” she says. “For every individual we’re talking to on the candidate side, they’re getting multiple reach-outs from all over North America. And that has driven comp expectations up.”
Not only are U.S. salaries higher, the American dollar is worth more than the Canadian dollar, a double-whammy that’s reflected in Hired’s finding that Canadian companies have jacked salaries more for remote workers outside their geographic regions than for those employees living closer to the company’s HQ.
The cross-border compensation issue is a hot topic for recruiters.
“I have this conversation often where we talk about what’s competitive in Canada versus the United States when we have equal peers in terms of what they are responsible for and how they contribute to the organization,” says Salazar. “I want to be competitive, but where do we settle?”
It’s an issue that raises yet another challenge for Canadian tech leaders: How to compensate all employees equitably, regardless of where they live.
“Organizations that we’re talking to, they’re looking internally and realizing that they might have retention issues if they don’t level everyone up,” says McDougall. “It’s like watching the housing market and asking, ‘Is this an anomaly that’s going to go up and come right back down? Or do we just level everyone up to that new amount?’ That’s obviously an expensive conversation but we are seeing that, to be competitive, those numbers need to go up.”
Charles Plant agrees.
A tech founder and researcher who studies rapid-growth companies, Plant says “every jurisdiction in the world has shortages of talent in any (sector) that’s growing... that's just the way the market works.”
The key to hiring talent in a competitive market is to become more competitive.
“Being competitive and getting talent is what Google does,” Plant says by way of example. “They are out actively recruiting, they are paying top-notch dollars and are giving people interesting things to do. If you can do that, you're not going to have a shortage.”
In addition to rising compensation, other recruitment challenges involve speed and volume. Rapid growth often requires the hiring of new staff on a continuous basis. With the competition heating up, that means getting employment offers out much faster than before. As a result, companies are hiring more recruiters and improving their recruitment processes.
“The key challenges are volume, competition and velocity,” says Dee Falkiner, Director, People and Culture at cleantech startup EnPowered. “The velocity with which we need to post, interview and select has increased as it continues to be an employee-driven market for job searching.”
Not surprisingly, one of the developments is a growing need for skilled recruiters.
“The speed to hire has meant that it’s imperative to have a dedicated, talented resource for hiring in order to succeed,” says Falkiner.
Despite the challenges, Canadian tech companies are adapting to the new realities.
In addition to compensation increases, most companies are bending over backwards to satisfy candidates’ other priorities – work flexibility, a supportive culture and the chance to work with talented colleagues on challenging projects.
“Different people are motivated by different things,” says Marcelo Cortes of Faire. “Some people are motivated by who they’re going to work with, the potential to grow, the mission of the company and, of course, everybody – they might not say it’s first – but everybody is motivated by the financial outcome.”
In addition to competitive salaries, stock options and restricted stock units (RSUs), Faire offers employees the option of working remotely or hybrid; a strong mentorship program; the ability to work with new technology at a fast-growing company; and a mission that Cortes says resonates with employees – helping independent entrepreneurs grow their businesses.
“We’re trying to attack from every direction, all the things that people can be motivated by,” he says.
Our guiding principle is to be as flexible as possible with our employees' schedule, provided we still meet customer and internal team needs."
– Marco Osso, Vice President of Employee Success, Tulip
Retail tech company Tulip “pays very well and, in some cases, above market,” says Marco Osso, Vice President of Employee Success. But the company is also laser-focused on flexibility. Tulip was one of the first tech companies in Canada to try a form of shortened work week in which employees can use four hours out of their work week as they see fit – “personal time, learning time, or just time to unplug.”
“Our guiding principle is to be as flexible as possible with our employees’ schedule, provided we still meet customer and internal team needs,” says Osso.
Kitchener-based EnPowered takes a similar approach, even offering “workcations” – the freedom to work from a remote location for up to three months.
Over at Axonify, which provides a learning platform for frontline workers, Senior Talent Acquisition Partner Brooke Hudon says that, in addition to flexible hours and days off, many candidates are looking for an employer that values the health and wellness of employees.
“The term used to be called ‘work-life balance,’ she says, “but it really is truly about health and wellness – understanding that there’s a meaningful time for work but there’s a meaningful time just to stop and get away from work so that you can enjoy your evenings and weekends, and that you’re not burning the midnight oil every single night.”
Workplace flexibility is a must-have for Prateek Madhikar.
The senior software developer has grown to love the work culture at Hive, which values his contributions, trusts his judgment and allows him to take days off or work remotely on short notice. In February, for example, a friend in New York invited him to come visit. Madhikar grabbed his laptop and worked remotely from the Big Apple for a week. Previously, the company let him work remotely from India for 11 months while he attended to a family emergency.
“I’m not willing to sacrifice that just to make a few more bucks somewhere else,” he says.
Another priority for talent is knowing that the product or service they’re working on is ethically sound.
“People want to be doing good in the world and they want it to matter,” says McDougall. “We really would struggle selling an opportunity that didn’t have a tech-for-good angle.”
Something else that helps Canadian tech companies attract talent is the country’s reputation as not only a stable, welcoming and affordable place to live, but also a dynamic tech hub where ambitious tech workers can advance their careers, work on leading-edge technology and build a company.
“Toronto, the quietly booming tech town,” declared the headline on a recent New York Times article. The story itself went on to note that “Toronto’s tech workforce is also growing at a faster clip than any hub in the United States.”
Real estate services giant CBRE ranked Toronto No. 4 out of the Top 50 Tech Talent Markets in North America in 2021. The rankings, which are based on a wide set of criteria, also found Toronto to be the fastest-growing major tech talent market with a tech-employment growth rate of 42.8 per cent, or 81,200 tech jobs added, between 2016 and 2020. (Waterloo Region, No. 21 on the CBRE list, had a growth rate of 47 per cent, or 8,300 tech jobs added, over the same four-year period.)
That reputation is part of the reason that many Canadian tech workers are returning home after gaining valuable experience in major tech hubs such as the San Francisco Bay area.
University of Waterloo graduate Mike Bishop returned to the region recently after honing his skills at Apple headquarters in Cupertino, Calif. He and his wife wanted to be closer to family, but a priority for Bishop was relocating to a community where he could continue to advance his career.
“I was looking for a culture that offered the chance to do big things and engage with really interesting challenges and technology,” says Bishop, now the Director of Product Development and Hardware for illumiSonics, a Waterloo startup that makes innovative imaging systems for the medical industry. “I also wanted to come back to Canada and play for the home team.”
As the transformation in tech employment continues, Paul Salazar says employers need to embrace flexibility, be willing to adapt and move quickly.
“We have to learn as we go,” he says, “and sometimes that’s a challenge in itself.”
First in a four-part series.