Ask HN: Why are London devs paid so much less than SF/NY?

[LondonEng]

London is supposed to be the next best market outside the US, yet from recent salary threads, developers are paid half or less of US salaries.

For example, with 5 years experience, I am on £75k ($110k) in a startup as a Senior Dev, and that is considered pretty good. I could get maybe another 10-20% if I had 10 years experience or was really exceptional. A Team Lead with 7-10 years experience can expect around £100k ($150k).

But my salary is only comparable to a fresh graduate at Google in SF. A Google dev with 1 year experience in SF will earn as much as a Team Lead in London with 10 years experience!

[madaxe_again]

It's mirrored in how tech firms are valued.

In the valley, you can have a so-so idea, land a huge investment, sell the product to other businesses for crazy money, and pay staff high wages.

In the UK, technology is this weird nerdy flash in the pan that "serious businesspeople" want nothing to do with, and investment and customers who value tech are in similarly short supply.

I write this as the employer of 50 people who'd love to pay everyone more but can't because our end customers undervalue our product, and investors are non-existent.

We saw this first hand when one of our clients sold our "worthless technology" for over $100m - yet in the UK £10k was the best valuation we could find at the time.

I sit in meetings with prospective customers who honest to God think that this system they'll be using to drive their entire £50m business through should be free because "it's just software". Simultaneously they'll happily pay a lawyer £200k to argue about the contract they're going to spend £20k with you through, because lawyers are real actual people, and we nerds are just soulless computer child-people. SEO agencies need paying well too because they have a marketing background, and marketing is also real.

Tech is seen as a utility like water over here. The people who provide it are viewed like sewer technicians.

So - it's not that employers are stingier, it's rather more that there's a lot less money in the ecosystem.

Finally, you're comparing to Google, who are a company who think nothing of putting a liberal arts grad with no experience on $600k to lead the spin fight against taxation in the UK - they pay crazy money, particularly to well connected people.

Oh, and fwiw, I'm cto/co-founder and I earn considerably less than you, so count your blessings.

I might have a small chip on my shoulder regarding this.

[noir_lord]

Absolutely this, wrote a scheduling system a while back for an engineering firm, after three years they came back and said it was slow (in that time they'd filed two bugs, quadrupled in size).

I quoted them a 900 quid (solution is about 10 hours work, 10 hours testing).

"Why should we pay, we paid already?".

Lovely people, haven't got a clue.

As it stands they have 6 staff members using a scheduling system all day that has a couple of screens that take 10 seconds to load, one of which is the primary dash... For the sake of 900 quid.

[sjclemmy]

Totally agree. I was chatting over drinks with a finance director at a firm I was working with and he couldn't understand 'why the IT cost so much', implying that he couldn't see any value in it. Similarly the sales guys at the firm were selling a solution to a large FTSE 100 company and they couldn't work out how to price it. They sold it for a fifth of what the customer later said they would have paid. If they are admitting to being willing to pay 5 times more, imagine how much they would have paid had the sales guys known the true value of the software. No wonder the finance director thought IT cost too much.

I've often tried to explain the utility vs strategically important nature of IT - it scares the shit out of some business people as they've been happily blundering along thinking IT is just a cost centre and serially underinvesting and seriously damaging their company's bottom line. </rant>

[bobcostas55]

This raises the question: why don't more reasonable VCs move to London? If valuations really are that low, there's incredible money to be made.

[alkonaut]

Social security and taxes is one factor. Overall salary structure is another. In Scandinavia where salaries are even more flat, I as a developer will likely not make more than 3 times a cleaner or 2 times what a teacher makes, almost regardless of supply and demand. The overall structure of salaries, the taxes in high income etc will dictate the ceiling. Not just the supply and demand. High taxes (50-60 margin) also means cash comp becomes less attractive after a certain point. At $80k with 55% margin tax rate I'll happily take a sixth week of holiday over another raise.

Job security is another thing. I'd want better pay if I could be fired on the spot. UK is more flexible than Scandinavia (which in the case of Sweden is basically last-in-first-out even for high tech workers, with exceptions allowed after expensive negotiations, think a years salary in severance for ditching the underperformer with longer tenure). This is not the case in the UK, and obviously not at all the situation in the US.

Same thing with holidays: If I had to take an unpaid leave holiday to get a month of continuous holiday, then that's a cost I'd want reflected in my salary.

So to do my Scandinavian math which might partly apply to London (living expenses, supply/demand differs): I make $80k. If I had to pay anything of that for healthcare or daycare for kids, I'd want that money on top. If I didn't have 5-6w paid holiday I'd want that money on top. If I didn't have practically unlimited sick days and paid leave to care for sick kids, I'd want that money on top. It doesn't matter that none of that is paid by the employer, it still affects my salary requirement. If my total effective income tax rate was 20% instead of 35%, I'd need less. And so on.

[ownagefool]

You can earn north of $200,000 or even $300,000 a year in the London contract market.

Given that you apparently don't get resonable time off when earning the big bucks on SV, my Ltd would gross around $300,000 p/a if I billed for all 253 business days and I only work 9-5.

Basically, if you're actually good, become a contractor and move into a niche paying the higher rates.

Edit: Plus it's not really just about headline rates, it's what you're left with at the end. Let me break that down for you.

£700 p/d x 253 x 1.2 (vat) = £212520

- subtract 14.5% flat vat rate = 181704.6

- subtract 8k tax free income = 173704.6

- subtract 20% copr tax = 138963.68

- subtract 32k tax free divs = 106963.68

- subtract 6k expenses (laptop, travel, phone etc) = 10000.00

You now have paid yourself £40,000 to live on (and don't have to pay for travel yourself) and you have £100,000 ($144710) saved in your company to invest, etc. I'd be suprised to see a single male in SF living that lifestyle, but it's not uncommon in London.

[Silhouette]

I'd be suprised to see a single male in SF living that lifestyle, but it's not uncommon in London.

£700k/day is not uncommon? For experienced specialists in the right niches, it's certainly possible, but "average developers" aren't going to command that kind of rate even in London.

[ldnthrowaway80]

How do you get the money out of your limited company without paying the higher rate? The only option is dissolving the company and claiming entrepreneurs relief, but then you are back to FTE or umbrella (or phoenix). Also my understanding of investing company profits was that you are taxed twice on profits, and it could change your company status if you want to claim ER in future.

[gambiting]

Question - why ltd and not self employed?

[UK-AL]

Lack of respect. In the UK software developers are just considered "techies", nerdy and replaceable for a dime a dozen. Anyone with serious skills and ambition goes into banking, finanance or maybe a founder.

Software developers in sf/sv are considered highly talented respectable people which companies will fight over.

[mabbo]

I'd argue reverse causality in your argument.

In SV, software guys were disrespected, considered replaceable until they became the company breadwinners. Good finance guys are in the same situation in other places, like London perhaps.

The respect follows the money, not the other way around.

[hkmurakami]

What do Googlers in London make vs those in Mountain View / SF? If you're comparing a cohort to Googlers, the only applicable cohort for comparison is other Googlers (or FB). This is because even in SF/SV, they make significantly more than your average VC backed hot startup dev, factoring in total comp and liquidity considerations for equity packages.

If you're at a VC backed startup in London, then you should compare your compensation to other VC backed startup devs in SF/SV. I'm not familiar with NYC salaries, but $110k base is definitely much more than "half" of what your typical startup senior dev is making in SF.

[adwf]

Contracting pays far better in the UK than salary. I remember being offered £1k/day just to travel round the country installing servers. I didn't take it, as I work on the data science side of things, but was still very tempted to just chuck it in for that sort of cash...

[BjoernKW]

Contracting doesn't seem to be that well-paid throughout. From time to time I get enquiries for contracting work in London (mostly for the financial industry) with a 'maximum budget' of 450 quid / day.

Compared to market prices in metropolitan regions in Germany that's on the lower end of the range and by and large those though prosperous are much less affluent than London.

[kami8845]

If you're a decent dev in London you can quite easily land a ‎£400/day contract.

Congrats you are now making ~£90k or $130k / year!

(This is where it starts. £400/day is aiming low)

[SandB0x]

The problem with contracting is nobody is paying into your pension, you have no paid leave and because of the (real or perceived) lack of security it is extremely difficult to get a mortgage and harder to even rent.

[TempLDNAccount]

Things are getting better. Five years ago startups were not paying £75k to developers.

The big US tech companies now have an increased presence here and are raising salaries across the city. Your estimates of the max you can earn are pessimistic: I work at one of these companies at the level below Senior and make about the same as you do as a base salary and about 1.5x the amount in total comp. Finance also pays developers well in London.

Many of my colleagues have been hired out of startups, who have to pay more to find replacements than before. My friends at companies trying to offer £40-50k to experienced developers simply can't hire anyone with the skills they want, whereas a few years ago they used to have no problem finding people who would take £35-40k.

There are plenty of companies that treat development as an "IT" cost; the stereotype of the awful British version of Initrode and Initech. I have worked at one of these before and it is horrible working at a place that everyone is desperately trying to leave. It is up to you to try and politely avoid these places, and if you have to take one of these jobs, work incredibly hard (https://blog.stackoverflow.com/2015/09/how-to-be-awesome/) to expand the options available to you.

[henson]

I recently wrote an article comparing London to San Francisco from a tech standpoint: http://jh47.com/2016/03/01/london-vs-san-francisco/

I currently work as a contractor based in London for a company in SV, but I totally agree with what's said here in that it's a matter of differing viewpoints. There's an inherent stinginess here on the whole, a disparagingly utilitarian viewpoint that software engineers are just "IT guys" - technicians who maintain the digital plumbing. There was a lot of pressure coming out of university to go into finance.

But on the other hand - there is a lot of hot air and shaky foundations out in SV, a lot of money changing hands that is likely to dissipate when confidence is lost in the ecosystem. One could argue that while devs here are paid too little, devs there are paid too much - relatively speaking.

[dizzy3gg]

Contracting is pretty popular in London. Is contracting as popular in SF? I don't hear much about it. In London a decent mid-level developer can earn £500 a day, the shortage of developers at the moment, it's a no brainer for me. Obviously it's not for everybody. Any idea what a Senior/Team Lead earns contracting?

[k-mcgrady]

Any idea how to go about getting those contracts? Is it all about connections or do you go through recruiters? Also how long do they usually last before you have to find a new one?

[ldnthrowaway80]

15 years "senior" developer here. £900/day at a bank with little stress, and 9-5 hours. I've been a contractor for ten years and built up a lot of contacts, but some of my gigs I have gotten through recruiters and I'd recommend just applying for contracting positions. The hardest part when starting out contracting is getting past the recruiter (who just want to match your skills to the letter of the job specification).

[shivinski]

Software devs in Banking are paid slightly more, but again compared to a baking software dev in the likes of NY it's still low. I work in a front-office team (so effectively on the investment side) at a bank as a quant dev VP, 3 years experience and earn £105k (that's including my bonus).

[binarymax]

This is not just technology. Salaries in general are paid less across the board in the UK than in the US. If you think you have it bad, take a look at the average salary of a GP, who went through 10+ years of education, just so they could earn £45k per annum.

[id122015]

So why does a Macbook cost more in the UK than in the US ?

[agounaris]

Is there a rule that in every country in the world the salary levels should be the same? Also whats the cost of living in SF? London is expensive, but apparently SF is more expensive...

http://www.numbeo.com/cost-of-living/compare_cities.jsp?coun...

[mirekrusin]

Maybe it's an artifact of currency exchange drop in 2008/2009 where 1 gbp ~ 2 usd dropped to 1 gbp ~ 1 usd.

[ldnthrowaway123]

I ask myself this question also. And to my eyes I agree your salary is pretty good for London.

I'm on ~£60k in London as a development lead with about 6 years experience. Mostly PHP though and php roles seem consistently lower paid than other languages, even though it shouldn't matter.

[mabbo]

The answer is very simple: supply and demand.

Silicon valley has a demand for talented developers and a limited supply, so developer wages are high.

This is also the generation that is least likely to be willing to move for work, here in the Western world. This makes imbalances in wages between cities worse.

London's supply better meets it's demand, and so wages are lower. Companies like Google will pay more in London than usual for the city because employees at different offices will compare salaries- but I'll bet you they still pay less in London than they do in California.

This is also a key point in the American immigration debate- you can indeed hire as many people as you need in SF, but only if you'll pay enough money. Immigration increases supply, lowering the price.

[UK-AL]

Which is weird because we're constantly told there's a massive shortage of developers in london

[radicalbyte]

It's better than in The Netherlands, where Leads earn 60-80k EUR with a higher effective tax rate than the UK/US.

It doesn't really make sense to work for an employer anymore, contracts pay better and if you can build your own business it's better again.

[nomercy400]

I must be doing something wrong. I'm near 60k with five years of experience, and done two lead roles. Contracting, so lots of variety, but the boss takes the biggest chunk. Small dev contracting company, 30-ish people. I haven't started on my own business, because I don't know how to find contracts.

[raverbashing]

Do you have a comparison/breakdown of contractor vs. perm earnings?

[over]

There's just way more capital per capita for developers in SF. You might want to consider why bankers in SF are paid so poorly relative to London.

[devopthrowaway]

I've often seen contract rates well and above salaries rates in London, more so than to make up for the potentially unstable nature of the work.

For the last 5 years or so I've been fully employed in devops roles, primarily containerization and deployment. I have been thinking a lot about turning to contracting, but have zero idea how I would start.

[ldn_throwaway]

Reading these threads, I can only assume that I am a terrible interviewee, or a bad developer. I have 1.5 years Rails / JS experience and currently earn £25k.

What do I have to do to get into the £35-40k bracket? I've had numerous interviews and a couple of offers, but none will move out of the £28-32k range.

[Symbiote]

That's low, it's what I earned straight out of university when I worked for a charity 8 years ago. (I thought of the charity work as a good donation to society and an opportunity to learn; it was but perhaps I stuck with it for too long.)

But I don't think it's that unusual for a new graduate position in a non-software company. Also, compare with any friends from university in science etc and you'll hopefully feel better about it.

At least make sure you're learning new things. Testing? CI? Agile? Configuration management? Cloud deployments? That's the things I pursued, but there are many possibilities. Hopefully you have done freedom to explore on work time. Identify what's needed most and looks good, get it done. If it doesn't get you a promotion at your current job, you'll at least be able to talk about it with confidence at the next interview.

[interned]

If ldn means London, you're severely underpaid. A 12mo internship in a London bank as a CS student pays in the 35-40k bracket. I don't know where you're applying but they're not touching market rates for anyone with experience.