Over the last decade the information technology industry in our country has vastly expanded. We are now home to some of the biggest R&D centers in Europe for the semiconductor industry (ASML & NXP), medical equipment (Philips), smart lighting (Signify) and cloud computing (Microsoft, Amazon). Also we have a good few technical universities and a lot of passionate, young IT professionals that are highly skilled and highly educated, but how come the compensation hasn’t kept up with this increase in knowledge and skill?

I have seen a good chunk of people moving away to Sillicon Valley, the Bay Area, London and even Berlin because compensation is much more competitive over there. Of course we have to take cost of living into account, but even then Amsterdam certainly hasn’t gotten any cheaper over the past few years compared to its international counterparts. And this all has to do with how compensation for espcially Engineering positions is handled here.

Lots of software developer and other IT engineering related positions would currently (in 2022) make around $100k-120k a year for a mid-level position and $180k-250k for a senior level position in the comperative US markets and about £90k-130k in London. Fact is that in the Netherlands it is extremely hard to make comparable figures as an engineer because in Dutch compensation models management functions are always compensated better than engineers. In other words your manager always has to earn more than you, and so goes for your manager’s manager and vice versa.

While in fact your manager’s position most likely requires less skill, and can be more easily replaced than an experienced Software Engineer working on a large-scale microservice application in a complex cloud infrastructure. So according to supply and demand this shouldn’t be happening. There is a huge labor shortage in skilled engineering personell throughout the IT sector. In fact the IT sector has the largest shortage of any sector currently in the country.

This compensation scheme leads to lower salaries for engineering positions. Typical figures for a mid-level engineer would be €40-60k gross per year and €60k-90k for a senior developer or architect position. This should have been going up massively in the last few years, but it hasn’t. But there are exceptions to this rule, and this is how you can become one!

#1 Become a value-centre, not a cost-centre

Most software engineering jobs in the Netherlands are considered a cost-center. This means that your job doesn’t directly make the company you’re working for any money. In fact you will most likely work on a tool or internal software that is neccesary for the business the company does but in the eyes of the shareholders only costs money. This is a bad place to be in. Because working in a cost-centre will most likely mean the companies management or shareholders will demand cost reduction in order to increase profits and since labor is the highest cost in an engineering department, reducing labor costs and thus compensation is the easiest way to archieve this goal.

You are far better off working in a value-center, a position where you are actually making money for the company. A good example of this here would be to go work in consultancy. Consultancy firms sell knowledge “by the hour” and thus you will be making them lots of money for selling you. Working for a good agency will also mean more compensation will flow to you as you are the main source of income for the company. Another good position would be to go work for a company whose core business is software development and that sells or manages a software platform or application. Then again you will find yourself in a value-centre, where your work will immediately make te company more money. These companies tend to have better compensation because more money is invested into the engineering departments.

#2 Work for Big-Tech

The second option must suit your taste, but when it does it is a great option. Because of the knowledge climate and highly skilled workforce a lot of big technology companies have opened up R&D or Engineering centers in the Netherlands, mainly around the Amsterdam and Eindhoven area. Companies like Amazon, Uber and Booking.com even have their main overseas engineering centers located here. These companies have carried over there US compensation schemes in order to get the best talent out of the market. This means that these engineering positions are quite challenging and expectations are high but will give you the option to make €100k-150k on a yearly basis in a mid-level to senior engineering position compared to other traditional companies.

#3 Midlance or Freelance

The third option you have has more to do with the system around income tax that we have here. Cost of employment for employers here is quite steep with around a 30% premium added to your salary. This means that for most companies rather than paying a €100k-150k salary it is cheaper and more convenient for a company to hire a contractor or freelance software developer for roughly the same amount. Going freelance will make it a lot easier to achieve €100k+ gross turnover (this is only about €55 an hour), and there are quite a few tax benefits for freelancers as well.

Midlance on the other hand is quite a new form of employment that is rapidly gaining popularity. It combines the value benefits of being a freelancer with the social security benefits of a permanent position and it is also the form of employment I have chosen for, three years ago.

Basically it is most comparable to a consultancy company but instead of a fixed salary you get paid a percentage of your gross turnover, in my case 70%. This means that if you work more, you’ll earn more and if you are doing a more complex job your hourly rate will be much higher (up to €150 an hour) and thus your income will be as well. This also means than in my company around 80% of engineers are compensated better than their managers and some even receive better compensation than the CEO or CTO of the company. Also this form of employment inspires personal growth because it increases your possibilities of becoming financially independent. Which is a huge deal at the moment and it actually puts you in charge of your own income without being thrown into the deep end of freelancing immediately.

So don’t be fooled by your manager when you ask for your next pay-rise and keep these three tips in mind when looking for your next engineering position. Because nine times out of ten it will mean having to change jobs. Because being stuck in a cost-center will most likely not lead to big steps in your career, financially.

Also don’t let your qualities be played down. You are a highly skilled, communicative engineer that works in an ever more complex IT landscape. You are doing a job that requires a lot of skill and talent and you are doing stuff not just anybody can do. So you should be compensated accordingly! Know that you are wanted and just ask for that €100k figure, companies that truly understand the value of a great engineer will happily match that ask, in today’s market. Don’t be afraid, you are worth it!