Bridging the Skills Gap: Salary Benchmarking in Africa’s Burgeoning Tech Space

four African colleagues discussing salary benchmarking at a table

Earlier this year, the ongoing global skills gap took center stage at the 2024 World Economic Forum Annual Meeting in Davos, Switzerland. In today’s swiftly changing business environment, the demand for skilled talent has reached a tipping point, especially in the technology sector. At the same, a persistent shortage of skills presents a considerable obstacle for companies aiming to fill pivotal roles. 

Amid mass tech layoffs and mounting financial pressures, organizations are increasingly resorting to global recruitment strategies to secure the talent they need. Africa, with its rapidly expanding remote talent pools, has emerged as a promising destination for companies looking to bridge this gap. Multinational technology companies from around the world, including Microsoft and Amazon, are finding that the continent offers a wealth of untapped potential

However, navigating the complexities of international hiring presents its own set of challenges.  Determining the right salaries for international hires is not just about offering competitive remuneration but also aligning packages and processes with market standards – while maintaining cost-effectiveness.

In this blog post, we delve into the top considerations for salary benchmarking in the context of hiring tech talent in Africa. Additionally, we examine how Employer of Record (EOR) hiring, combined with end-to-end recruitment solutions, can empower companies to tap into Africa’s burgeoning tech talent pools more effectively.

Why is salary benchmarking important?

As price tags for talent continue to rise in traditional tech hubs like Silicon Valley and London, companies are realizing that relying solely on a centralized local talent pool is no longer financially sustainable. 

This shifting sentiment is evident in the actions of U.S. tech giants such as Google, Meta, Microsoft, Amazon and Salesforce, which laid off 6% to 13% of their workforce in 2023. These measures may erode Silicon Valley’s longstanding monopoly on tech talent.

In light of these developments, Africa has emerged as a beacon of opportunity with a growing cohort of cost-effective skilled professionals across various key roles in the technology sector, including the following: 

Software Engineers AI/ML Engineers Data Scientists
Cybersecurity Engineers Full-Stack Developers  Cloud Solutions Architects

However, determining suitable salaries for international hires in Africa presents a significant challenge. It’s not merely about offering competitive remuneration but also aligning total compensation packages with market standards while staying within budget constraints. This is where salary benchmarking becomes a guiding light for recruitment decisions.

Salary benchmarking provides organizations with a systematic and data-driven approach to comparing compensation packages against industry norms and local market rates. By conducting thorough benchmarking exercises, companies can gain valuable insights into prevailing salary trends – allowing them to calibrate their remuneration offerings effectively. 

Moreover, benchmarking enables organizations to make informed decisions about compensation, ensuring that they strike the right balance between attracting top talent and maintaining financial sustainability.

screenshot of Salary Benchmarking Informs Hiring Decisions

How is benchmarking done?

Benchmarking is the process of evaluating an organization’s practices, performance and compensation against industry peers or market standards. In the context of talent acquisition, benchmarking involves comparing salary, benefits and other compensation components for specific roles against data from similar companies in the same industry or geographical location.

Here are the key steps for benchmarking:

  • Define Benchmark Positions: Determine which positions within the organization require benchmarking. Focus on roles critical to the organization’s success, such as software engineers, data scientists and cybersecurity specialists.
  • Select Comparison Metrics: Decide which metrics to benchmark, such as base salary, bonuses, stock options and benefits. Consider factors like experience level, education and geographic location when comparing compensation packages.
  • Analyze Data and Establish Benchmarks: Analyze the benchmarking data to identify trends and establish benchmarks for each position. This may involve calculating average salaries, median compensation or percentile ranges based on the selected metrics.
  • Adjust for Local Market Conditions: Take into account local market conditions and cost-of-living differences when benchmarking salaries for international hires, such as those in African countries. Factors like currency exchange rates, inflation rates and supply-demand dynamics can influence compensation levels.
  • Regularly Review and Update Benchmarks: Compensation trends evolve over time, so it’s essential to regularly review and update benchmark data to ensure competitiveness and compliance with local regulations.

The following is an excerpt from a salary benchmarking report we recently completed on behalf of a multinational client looking to hire tech talent in several key markets of Africa:

Software Engineer AI/ML Engineer Data Scientist Cybersecurity Engineer Full-Stack Developer Cloud Solutions Architect
US $130,000 $130,000 $125,000 $105,000 $145,000 $130,000
UK $152,000 $152,000 $133,000 $114,000 $100,000 $139,000
Germany $114,000 $135,000 $135,000 $108,000 $98,000 $103,000
Nigeria $42,000 $41,000 $44,000 $48,000 $41,000 $43,000
Kenya $58,000 $53,000 $76,000 $59,000 $50,000 $54,000
South Africa $66,000 $59,000 $55,000 $79,000 $73,000 $71,000
Egypt $47,000 $47,000 $48,000 $43,000 $40,000 $40,000
Morocco $46,000 $49,000 $50,000 $51,000 $43,000 $50,000
Ghana $48,000 $46,000 $44,000 $42,000 $44,000 $44,000

The provided ‘benchmark’ figures serve as a reference point for annual salaries/compensation in USD, derived from local market research and recent hiring information sourced from GoGlobal. These data points are aggregated from professionals with 4-6 years of experience.

Top considerations for salary benchmarking

The following are key factors for effective salary benchmarking:

  1. Market Research: Conduct comprehensive research to understand the prevailing salary ranges for specific roles in target regions within Africa. Factors such as local demand, cost of living and skill scarcity should be taken into account.
  2. Local Regulations: Adhere to local labor laws and regulations to ensure compliance with legal standards such as minimum wage, benefits and overtime. Failure to comply can lead to legal complications and financial risks.
  3. Talent Attraction and Retention: Craft competitive salary offerings to attract top talent and foster retention in a competitive job market. Align compensation packages with or exceed market averages to position your company as an employer of choice.
  4. Budgetary Considerations: Strike a balance between offering competitive salaries and maintaining financial sustainability. Salary benchmarking provides insights into salary ranges, enabling companies to create attractive yet sustainable compensation packages.
  5. Recruitment Efficiency: Streamline the candidate selection process by offering well-structured and competitive compensation packages. This reduces recruitment challenges and enhances efficiency in hiring.

A tandem approach to tapping into Africa’s tech talent

Navigating the complexities of expanding teams across borders is a daunting task, particularly when entering African markets with their unique regulatory environments and cultural dynamics. From deciphering local labor laws to ensuring accurate payroll management, the challenges are multifaceted and require careful consideration to mitigate risks effectively.

Employing workers in Africa demands a deep understanding of the region’s employment regulations, covering aspects such as contracts, working hours, leave policies and termination procedures. Non-compliance not only jeopardizes legal standing but also poses a threat to the company’s reputation.

Additionally, managing payroll, taxation and benefits in Africa introduces further complexities. Errors in these areas can result in penalties and legal complications, undermining the stability and trustworthiness of the business operations.

Cultural diversity adds another layer of complexity, underscoring the importance of sensitivity to local norms and values to foster a harmonious work environment and prevent potential conflicts.

To address these formidable challenges, an emerging solution is garnering attention among international companies seeking to tap into Africa’s burgeoning tech talent: the strategic combination of professional recruitment with EOR hiring, exemplified by GoGlobal’s Recruit & Hire solution.

Screenshot of Recruiting Page

The following are some of the key advantages companies gain when adopting this tandem approach:

  • Comprehensive Compliance: EOR providers ensure adherence to local labor laws and regulations, mitigating legal risks and safeguarding the company’s reputation.
  • Efficient Payroll and Benefits Management: EOR solutions streamline payroll, taxation, and benefits administration, minimizing errors and associated risks.
  • Access to Local Expertise: EOR partners possess deep knowledge of the local job market, enabling effective recruitment and benchmarking of compensation packages.
  • Risk Mitigation: By managing employment regulations and cultural nuances, EOR providers mitigate HR and corporate risks. Their services also foster a positive work environment, allowing workers to handle HR matters in their first language. 
  • Flexibility and Scalability: The EOR model offers flexibility in establishing a presence in Africa without the burden of setting up legal entities or managing local HR processes independently.

Win the race for tech talent

Estimates from Korn Ferry suggest the global talent shortage will exceed 85 million people by 2030, representing unrealized annual revenues of approximately $8.5 trillion. To avoid such staggering losses in the race for tech talent, companies must adopt a nimble and cost-effective recruitment and hiring strategy.

By integrating global recruitment capabilities with an EOR solution, companies unlock an end-to-end hiring solution that enables them to secure top professionals in up-and-coming talent pools across Africa.

With GoGlobal, the process from identifying the right candidate to onboarding can be expedited to a matter of days. However, the impact extends beyond mere efficiency. Our local representatives provide ongoing support to new hires in their native language and time zone, equipped with in-depth knowledge of local culture and workplace regulations. 

With GoGlobal by their side, companies can operate compliantly and seamlessly – and devote their undivided attention to core business activities that drive profitability in today’s competitive global marketplace. 

Check out our guidebook “The Future of Recruitment is Global: Your Guide to Accessing Top Talent From Anywhere in the World” or contact us to learn more about how our one-of-a-kind, unique-to-the-market Recruit & Hire solution can help you access new talent pools in Africa and around the world.