We report results from a Culpepper Pay Trends Survey on compensation strategies for hot technical skills. We highlight how companies deliver pay premiums and methods used to identify hot skills.

Key findings:

• Employers deliver skill premiums most often by incorporating them into an employee's base salary.

• Companies typically review tech skills annually to determine when technical skills cool and others heat up.

• Feedback from technical managers and recruiters is the most common means used to determine hot skills.

• Java, .Net, and Oracle top the list of programming skills considered hot by companies today.

• Companies consider Cisco certifications to be some of the most highly desirable.

Compensation for Hot Skills
The use of skill premiums varies by company size, with smaller companies more likely to pay additional compensation to employees with hot skills.

Companies deliver skill premiums in different ways, with most incorporating premiums into an employee's base salary (Figure 1). Premium amounts range from 5% to 18% of base pay.

Although incorporating skill premiums into an employee's base salary may be the least difficult way to deliver premiums, problems result from this approach. Providing premiums within base pay compounds the costs of regular salary increases, incentive pay outs (if determined as a percent of base salary) and other benefit costs (e.g., 401k contributions, disability premiums). When the hot skill cools down, rescinding the premium requires a base salary cut, a difficult action to communicate to an employee without affecting morale and productivity.

Paying skill premiums as a separate salary supplement or cash bonus avoids these problems. Additionally, this practice allows for variation in the payment of premiums as technical skills cool and others heat up. Signing bonuses, used by nearly half of companies, avoid the problems associated with providing premiums in base pay.

Skill Assessment Frequency
Figure 2 displays time frames used by companies to assess when skills cool and when others heat up. Fifty-four percent of companies review hot skills on an annual basis. Sixteen percent review hot skills as the need arises, while 14 percent review them semi-annually.

Identifying Hot Skills
A majority of companies rely on feedback from technical managers and recruiters to identify which skills are hot (Figure 3). Nearly half of companies take into account information from technical publications and input from executives.

Current Hot Skills
Programming skills top the list considered hot by companies today. Java is the most often desired skill, followed by .Net and Oracle. Networking skills, particularly those relating to systems security, also rank high among current hot skills.

In addition to programming and networking skills, certain certifications are also considered hot. Companies most often pay premiums for the following certifications:

• Cisco Certified Internetwork Expert (CCIE)
• Cisco Certified Network Associate (CCNA)
• Cisco Certified Network Professional (CCNP)

Summary
Incorporating premiums for hot skills into an employee's base salary is the most common practice, with signing bonuses also widely used. Most companies assess hot skills annually.

Many participants noted an increasing concern over the compensation for employees with hot technical skills. In order to attract and retain top technical talent, an evaluation of hot skills and compensation strategies for employees with these skills is crucial.