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Israeli start-up salaries: Silicon Wadi nears Silicon Valley

יולי 24, 2008. Globes: Batya Feldman

A survey obtained by "Globes" reveals that the local high-tech industry pays very well - maybe too well, for investors.

The prevailing view, both internationally and in Israel, is that high-tech employees earn a fortune. This view is usually accompanied by negative sentiment as well, since the employees in question are usually fairly young, and starting their professional careers with a handsome salary that would take people, in other fields years, to earn. This perception is actually not entirely removed from sreality. "Globes" has obtained a copy of a survey commissioned by leading institution in Israel's high-tech sector.

The survey looked at 350 companies and provides a rare glimpse into the size of the salaries and bonuses that start-ups are paying. The figures known so far on the high-tech industry do not relate to start-ups alone, and when employment and placement agencies publish salary tables, they generally include those of local and foreign R&D centers, as well as large Israeli companies and local offices of international companies.

The survey, whose author and commissioning company both asked that their identities not be disclosed, reveals that a CEO of a start-up with up to 50 employees earns NIS 60,000 a month, while his colleague who manages a company with up to 100 employees can earn NIS 100,000 a month. A R&D team leader will earn, on average, a gross salary of NIS 30,000 a month, an algorithm engineer can earn NIS 20,000, a senior project manager can earn NIS 30,000, while a systems architect earns NIS 33,000, on average, a month.

The levels of pay for staff and management at start-ups is a closely-guarded secret and all those concerned have an interest in ensuring it remains that way. Managers of young companies, and even the more mature ones, know that if the secret gets out, their bargaining power will be reduced since candidates will know what the average salary is for the job they're applying for.

Investors in companies like these have a similar interest for the same reasons, and employees sometimes wish to be thought of as high fliers raking in huge salaries every month. It is less endearing to be thought of as a modern slave who works his fingers to the bone and has to make do with a modest salary at the end of every month.

Disgruntled Americans

The most important finding of all to emerge from the survey is that salary levels at Israeli start-ups are fast catching up with those in Silicon Valley, and the blame for this lies squarely with the faltering dollar. A gross salary of NIS 40,000 month, which was once worth $96,000-107,000 a year on the basis of an exchange rate of NIS 4.5-5/$, has now risens to $140,000-145,000 a year. The dollar has rallied slightly over recent days, but unless some courageous action is taken, this finding will have a decisive effect on the local industry.

The calculation is simple: If an entry-level software engineer can earn $70,000-80,000 a year, and his Israeli counterpart earns NIS 25,000-30,000 a month, which comes to $90,000 - 100,000 a year at the current exchange rate, US investors will start asking whether it is worth their while operating in Israel. Furthermore, the total salary costs of employees in Israel are higher than those in the US.

The survey also reveals that while levels of pay for junior staff in Silicon Valley are on a par with those in Israel, the gap at the executive level still exists, and CEOs, senior sales and marketing managers in the US still earn far more than their Israeli counterparts.

Salary costs at start-ups are important, since they account, on average, for 70% of a company budget. These are high both in Israel and in Silicon Valley, but they are singularly important, since choosing a quality team, especially the initial team which sets up the company and builds its base, will affect the company's fortunes throughout its life.

The figures also reveal that salaries at life science companies are lower than those at IT and telecommunications companies. Additionally, the salary range for staff in the various companies in the technology sector are not large in some fields, and generally range from NIS 20,000 a month for an algorithm engineer to NIS 37,000 a month for a systems architect or R&D manager.

Taxing time

All these figures, it should be remembered, represent gross salaries, so most of them will be liable to tax of 45%,(depending on the salary level) and at least NIS 2,000 a month for a company car that many people are convinced they're getting for free. After deducting other taxes - such as national insurance, executive insurance, and pension contributions - the sum employees are left with is a lot more modest. What's more, it should be remembered that employees at start-ups, large and small alike, may get good salaries, but they have to work hard for them.

Large and publicly-traded companies - not those in the high-tech sector - usually adopt a "corporate enterprise culture," which, to put it in simpler language, means that most people go home at 6:00 pm. In start-ups, on the other hand, mainly, but not only in R&D and testing departments, employees often work more than 13 hours a day and that does not include the grueling trips they are required to make abroad. Moreover, the employment contracts for employees nearly always stipulate that the salary is global and that there is no extra pay for overtime.

Bonuses

There is also some good news, especially for managers. The survey shows that companies pay bonuses, which are usually performance-related. A CEO of a start-up with up to 100 employees can take home an extra NIS 80,000 a year, if the company's performance meets targets. A CEO of a younger company will receive a bonus of NIS 40,000, on average, a year, for meeting the targets.

The large bonuses at start-ups usually go to the sales team, for whom they are inherent component of their salaries. A sales manager at a large start-up can earn up to NIS 160,000 a year for good results, while his colleague at a smaller start-up can earn up to NIS 143,000. Marketing managers at large companies can earn up to NIS 35,000 extra in bonuses a year, and NIS 8,000 at smaller companies. This might not sound like much, but it is nonetheless nice to get.

Average monthly managerial salaries in technology start-ups:

  • Development team leader: NIS 30,000
  • Senior development team leader: NIS 35,000
  • Development manager: NIS 36,500
  • Senior software team leader: NIS 30,000
  • Senior software engineer: NIS 27,000
  • DSP engineer: NIS 25,000
  • Algorithm engineer: NIS 20,000

Average executive salaries in start-ups with up to 50 employees/up to 100 employees:

  • CEO: NIS 60,000/NIS 100,000
  • COO: NIS 48,000/NIS 57,000
  • Business division manager: not applicable/NIS 50,000
  • R&D manager: NIS 45,000/NIS 50,000
  • VP technology: NIS 45,000/NIS 47,000
  • Business development manager: NIS 41,000/NIS 50,000
  • CFO: NIS 36,000/NIS 45,000

Average salaries in life sciences start-ups:

  • Biologist: NIS 10,000
  • Bioinformatician: NIS 13,500
  • Clinical study coordinator: NIS 18,500
  • Medical manager: NIS 38,000
  • Research expert: NIS 29,000

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