The trends that shaped the tech employment ecosystem in 2023
The past year began with a global crisis, continued with a domestic constitutional crisis and, when high-tech was already at a low point, the war against Hamas broke out. Despite all of this, the forecast for 2024 is optimistic
The year 2023 was particularly tough for the Start-Up Nation’s tech sector; we began the year amid a global economic crisis, compounded by a domestic crisis due to the political upheaval, and then the war broke out. We spoke with key figures in the industry to understand the trends in employee recruitment, salaries and benefits, the day-to-day work, and what to expect in the upcoming year.
1. No salary increases
The good news is that Israeli tech is still alive and kicking, with no layoff trend. However, the bad news is that salaries are stagnant at best and, in some cases, experiencing a downward trend. "Salary increases don’t exist at the moment. It's not happening at all, not even bonuses. We do see alternatives to the compensation structure – maybe slightly reducing salaries and offering more options, altering the framework of compensation packages to incentivize employees to stay, rewarding them for the special effort they’ve made due to the current situation," says Yodfat Harel Buchris, Managing Director at Blumberg Capital Israel. According to her, following several waves of layoffs, there are no significant workforce reductions expected next year.
Salaries, as mentioned, are not increasing, and in certain cases, they are even slightly decreasing especially for new employees. According to Dana Lavi, CEO of Nisha, the human resources division of the Danal Group, there have been almost no changes in salaries this year, and the estimation is that the average salary in tech will not rise in the coming year. However, algorithmics, AI, and software engineering roles will continue to earn high salaries.
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2. Fewer jobs and job-seekers
In the third quarter of 2023, there was an 18% increase in the number of job-seekers compared to the second quarter. However, the war has led to a 10% decline in the number of candidates in the last quarter, according to data from AllJobs. At the same time, the number of open high-tech jobs this past year has declined by 22%, with a slight upward trend of 1% in the last quarter.
Times of crisis and uncertainty are characterized by employees hanging on to their jobs, and less inclined to seek new employment, with fewer job transitions. "People are more hesitant to make changes, and the market is more of an employer’s market than an employee’s market, as it was in recent years," says Harel Buchris.
3. Benefits with meaning
Employee benefits no longer include exotic vacations or trips abroad, but companies still want to reward employees and engage in activities that address their current needs. Instead, they are doing things like assisting spouses of employees in reserve duty, conducting webinars on various topics related to dealing with the current situation, such as resilience, crisis management, and more. "All the perks have decreased, but there is an effort to provide solutions and reward people who have made special contributions," says Harel Buchris. "Almost every company has significantly cut perks."
According to Sivan Shamri Dahan, Managing Partner at Qumra Capital, the focus now is on benefits with meaning: "We no longer fly the entire company to Italy or Cyprus. The benefits are now focused on places with contribution and significance. For example, support for displaced communities near Gaza, both financially but also through volunteering, such as harvesting or enrichment activities for children in the hotels hosting the refugees."
4. Hiring core positions
"Global inflation and the rise in interest rates in the past year, along with the lack of political stability and the war that broke out in October, have led tech companies and startups to be more focused, and it goes without saying that now is not the time for extravagant spending and gifts. “Many companies in our portfolio have continued to hire new employees, primarily for core technological roles such as team lead, back-end, front-end, and full-stack developers and DevOps. In the current situation, strong companies with a lot of savings or those on the verge of profitability have good access to talented employees who can choose stable companies and reduce personal risk," says Dor Lee-Lo, Co-founder and Managing Partner at IBI Tech Fund, an early-stage investment fund.
While at the moment employers are mainly hiring for “core” tech roles, this will likely be reflected in other roles soon. There is no return to the mindset that prevailed three to five years ago in tech, when marketing and sales roles were often outsourced to employees abroad, typically from the United States. "Growth in these areas will return," says Shamri Dahan.
"I think the perception that these areas aren’t our strength has been proven incorrect. The transition from startup nation to scaleup nation is a process that has already happened and is evolving. We already have many companies here with revenues of $100 million, something we've never seen before in Israel. The past two years have strengthened these companies, strengthened their infrastructure, and turned them into companies that, in the near future, will need more sales, marketing, and customer service roles. We are not in the same place that we were five or eight years ago."
5. In-demand roles
Companies are mainly focused on hiring for highly technological roles, with the largest increase in demand in the last quarter for experienced C# developers (an increase of 48%) and DevOps professionals (31%), according to data from AllJobs, a recruitment organization. There has also been an increased demand for UX/UI professionals, back-end engineers, and IT professionals in the last quarter.
"Despite the freeze in the job market, there are companies that are still hiring, such as security companies, information security and cyber companies, and medical companies. In general, companies that are more established are surviving the crisis better compared to young startups that have not yet reached significant funding rounds,” says Lavi. “Also, tech companies have many employees on reserve duty, with over 35% of the workforce at some companies currently in the reserves. This requires companies to consider hiring freelancers or to expand the responsibilities of existing employees, and some will not be able to manage. The remaining sought-after and hot roles during this period are essentially all software development roles, including full-stack, back-end, front-end developers and RT roles in both tech and medical companies. Roles related to algorithms and AI are also growing."
6. Working harder to fill in the gaps
For the vast majority of tech companies, roughly 70%, 5-20% of their employees are in the reserves, according to a survey conducted by the Viola Group and Compete. This means that in order to continue operating and compensate for the absence of employees, those who aren’t in the reserves need to work harder, and companies have to find solutions for working with a depleted workforce.
"Within the companies, people work more than 100% of the time - it's a kind of emergency situation at work. They understand that they have a meaningful role to play in covering the absence of their closest friends who are now in Gaza. There is a kind of mobilization within the tech community to maintain economic strength, and it is patriotism in action, and concern for the country both now and in the coming years," says Shamri Dahan.
7. Back to the office
A notable development this year has been the return to working from the office. Since the pandemic there has been a shift towards full or partial remote work, but now the trend has reversed with more companies working more days from the office. At the beginning of the pandemic, companies allowed maximum flexibility for employees to choose whether to come to the office or not, especially since, in some places, it was not possible to go to the office due lack of secure spaces, or lack of available childcare, for example.
However, the war has led both employees and employers to want to spend more time in the office, and most companies have transitioned to three or four days of work from the office at least. "I think there is something about setting common goals and support that makes people want to come to the office more. Additionally, it allows you to disconnect a bit from what is happening at home, from this pressure. During a state of war, being alone with yourself can be hard; in the office, there is a slightly lighter atmosphere. Our companies, in particular, both some of the more mature ones and the newer ones, transitioned to working from the office for at least three to four days a week, and I think it's a blessing," says Harel Bukhris.
At the start of the war, talent company Gloat switched to working from home, but after two weeks, they opened their office to give employees the option of coming in. "In the last month, without instruction from us, we’ve seen employees come several times a week, and attendance in the office increases each day. As kids have returned to school and the number of rocket sirens in the central region reduces, employees are seeking to return to having direct personal and human contact. There is personal and professional value to social interaction, at the team and departmental levels, and it is evident that employees benefit from it. In these difficult times, returning to some kind of work routine feels like a contribution to national resilience, economic stimulation, and gives meaning and strength to all of us," says Anat Gil, VP Human Resources at Gloat.
8. An optimistic 2024
Despite a war with no end in sight, the many uncertainties and challenging situation, recruitment companies express optimism. "The many challenges that the tech industry faced in 2023 are actually a testament to the industry's resilience. In many markets, an almost perfect storm of high-interest rates, reduced funding, job cuts, and geopolitical crises would have caused fatal damage, but in Israel, the challenges of the past year seem to be coming to an end in the final quarter, with an improvement trend for 2024," says Liran Chen, CEO of AllJobs Match.
"When looking at the first quarters of 2023, we saw sharp declines in the number of positions alongside numerous headlines in the media about layoffs and workforce reductions. However, especially with the end of 2023, we have begun to see a recovery by almost all important measures, including the number of positions, hiring and the willingness of companies to invest in growth engines. The change in trend is very noticeable in the last quarter of the year, in which the decline halted, and there is an initial increase and shift towards growth. Significant increases are particularly noticeable in core areas, such as DevOps, senior developers, UX/UI designers, and engineers. In our opinion, 2024 holds considerable growth potential for an industry that has overcome many challenges and seems to be at the beginning of a renewed growth path."
Many in the industry believe that the crisis will actually strengthen entrepreneurs and companies. "I think the tech industry will become stronger," says Shamri Dahan. "Out of this crisis, more great tech companies and new, amazing technologies will emerge. There will be a huge wave of fantastic companies."
