FAANG (Facebook, Amazon, Apple, Netflix, Google) and Tier 1 tech companies are known for the high salaries they pay to software engineers.
But exactly how high are salaries at these companies?
How much do tech salaries vary across levels and companies? How do they compare against the US national average? Why do FAANG companies pay so much? And finally, how can one earn these salaries?
If you are curious about any of the above questions, we’ve got you covered. We’ll answer all these questions and specifics such as - :
- Salaries - FAANG companies vs. non-FAANG companies
- The highest-paying FAANG company
- How do salaries at FAANG companies compare to the US national average?
- Compensation structures (i.e. base salary, variable pay, and stocks) at FAANG companies
- Can software engineers earn as much at a non-FAANG company as they doat a FAANG company?
- Why FAANG companies pay high salaries
- Salaries at various levels at FAANG companies
- How to earn FAANG-level salaries
Although FAANG is an acronym for 5 of the most dominant tech firms in the world viz. Facebook, Amazon, Apple, Netflix and Google, for the purpose of this article, FAANG will be used to refer to all Tier 1 tech companies such as Microsoft, Uber, LinkedIn, Tesla,Airbnb, etc.
Salaries - FAANG vs. others
Below is a company-wise comparison of entry-level compensations. This includes top Tier 1 companies viz. Google, Facebook, Oracle, Apple, Amazon and leading Tier 2 companies viz. Cisco and IBM. Compensation figures shown below include salary, stock, and bonus amounts.
Source: Levels.fyi, 2021
The above illustration reveals that, for entry-level positions, salaries are closely matched across Tier 1 companies but differ starkly between Tier 1 and Tier 2 companies. For e.g. based on the above illustration, salaries at Oracle and Apple are closely matched at $176,000 and $172,000 respectively but salaries at Google (Tier 1) and IBM (Tier 2) vary widely at $188,000 and $98,000 respectively for similar positions.
Although evident at entry-level positions, the pay gap between FAANG companies and non-FAANG companies really starts to show as we go up the ladder in terms of levels.
The below chart illustrates salaries at the level of ‘Senior Software Engineer’ at Tier 1 and 2 companies viz. Facebook, Google, Amazon, Apple, Microsoft, Oracle, Cisco, and IBM.
Source: Levels.fyi, 2021
Here, we see that the average compensation for a Senior Software Engineer at Facebook at $380,000 is at least 50% higher than at Microsoft at $182,000..
Interestingly, when compared, Figure 1 and Figure 2 reveal salaries at the level of Senior Software Engineer compare more favorably than at entry-levels at IBM.
The difference in pay scales between FAANG and non-FAANG companies continues to widen at every consecutive level. For e.g. a Principal Engineer at Microsoft earns $500k (top of band), whereas Google pays around $1.2 million - 140% more for the same level.
Companies that pay the highest salaries
Google and Facebook are the two companies that pay the highest average salaries.There is only a minor difference between the two even at senior levels.
However, non-FAANG companies are known to pay higher salaries than FAANG companies for skill sets in certain areas or for specific technological expertise
For example, Microsoft, currently investing heavily in gaming, will likely pay much higher salaries for game developers than other companies. Similarly, salaries offered by Oracle to engineers with Cloud Computing skills is not just comparable to but is sometimes higher than salaries offered by Google and Facebook for similar skills.
Not all companies work on the same technology. Hence, compensation also depends on the kind of talent a company needs and how competitive it wants to be.
Databricks and Lyft are known to offer salaries that compete with the FAANG companies.
How do FAANG salaries compare to the US national average?
As per the US Bureau of Labor Statistics, the mean annual wage for Software Developers and Software Quality Assurance Analysts and Testers in 2019 was $111,620. The wages for the 90th percentile were $164,590.
These figures represent average salaries across all levels.
At $181,000 and $188,000, Google and Facebook, respectively, offer entry-level salaries that are higher than the 90th percentile of wages across the US. .
Base salary, variable pay, and stocks - Components of the FAANG compensation structure
Compensation structures of all tier 1 companies comprise 3 main components.
- Base (or salary): This is a fixed component, paid irrespective of an engineer’s or the company’s performance
- Bonus: This is linked to an engineer's performance and is, typically, determined by a manager based on a performance review. It is usually variable in nature.
- Stocks (or equity): These are Restricted Stock Units (RSUs) issued to employees. Once vested (based on a company-defined vesting schedule), these can be freely traded.
Can software engineers earn as much at a non- FAANG company as at a FAANG company?
Some companies like Microsoft and Oracle do offer salaries comparable to that of FAANG companies at junior levels, however, at senior levels, the difference becomes more prominent. .
In order to earn as much at a Tier 2 company as at a FAANG company, one would need to work for longer tenures and get promoted to much higher levels.
However, at the same level, with the same experience, it would not be the norm to earn as much at a non-FAANG company as at a FAANG company.
Why do FAANG companies pay high salaries?
20 years ago, there was a distinct difference between what big companies provided to software professionals and what smaller start-ups provided.
Big companies, like GE and Boeing were known for providing employees with job stability. Most people joined these companies with the intention to work there until retirement, despite the bureaucracy and slower pace of innovation.
Smaller companies offered fast-paced innovation, quick career growth, and the possibility of creating wealth, quick enough for an early retirement. The downside, though, was that there wasn’t as much job security given that the survival of these companies themselves was uncertain. Startups were always risky propositions.
In the US, buying a house grew difficult, even as an employee of a large company. Most homeowners expended up to 50% of their salaries on mortgages.
Financially, smaller companies offering faster career growth and chances of higher earnings, became increasingly attractive
As a result, big companies began losing top talent to smaller companies. To level the playing field, large companies were pressured to grow faster than the market by their boards and deliver disproportionate returns. However, this wasn’t possible without the right talent.
To remain competitive and draw talent, large companies offered higher salaries. This proved successful and is a tactic employed even today.
With the right talent, large companies were now able to innovate better and grow faster, making them as attractive as smaller companies. Faster growth and innovation led to better products and higher revenues which allowed large companies to keep pay scales competitive.
ESOPs which multiply quickly in value
Tech startups offered ESOPs (Employee Stock Options) to drive ownership among employees. This acted as a huge draw for top tech talent.
However, valuations of tech companies grew quickly, making the equity component of one’s salary a fast-growing asset..
Top tech stocks averaged a 20% CAGR over the last decade effectively doubling the equity component of one’s compensation in under 4 years.
Top tech companies are also listed publicly, making these stocks liquid.
The high growth and liquidity potential of the equity component of salaries offered by top tech companies, make compensations offered by FAANG companies much higher than that of a startup or Tier 2 company.
- Scale & Complexity
All FAANG and Tier 1 companies operate at massive scale, catering to hundreds of millions of users.
To build, maintain and improve these systems requires the brightest minds in engineering. Hence, attracting the right level of talent is absolutely essential to the survival, and growth of FAANG companies. One way FAANG companies do this is by offering very high compensations.
- Preventing competition
If Google, Facebook and other top tech and FAANG companies did not attract the best talent, they would most likely find themselves competing against them. A lot of skilled engineers opt to launch their own venture or build their own products which could potentially capture sizable market shares.
In this case, FAANG companies will eventually pay to acquire or crush such competition. One way to avoid this is to hire / draw skilled engineers as employees.
Some excellent examples of FAANG companies paying top dollar to acquire small companies are:
- Facebook acquiring Instagram for $1 billion and Whatsapp for $19 billion
- Google acquiring Doubleclick for $3 billion
FAANG Salaries by Company and Level
- Google’s Software Engineering Salaries Across Levels
- L3 - $188,000
- L4 - $264,000
- L5 - $353,000
- L6 - $480,000
- L7 - $693,000
- L8 - $1,190,000
- Facebook’s Software Engineering Salaries Across Levels
- E3 - $180,000
- E4 - $261,000
- E5 - $380,000
- E6 - $597,000
- E7 - $868,000
- E8 - $1,350,000
- Amazon’s Software Engineering Salaries Across Levels
- SDE I - $163,000
- SDE II - $224,000
- SDE III - $327,000
- Principal SDE - $656,000
- Apple’s Software Engineering Salaries Across Levels
- ICT2 - $172,000
- ICT3 - $216,000
- ICT4 - $316,000
- ICT5 - $441,000
- Microsoft’s Software Engineering Salaries Across Levels
- SDE Level 59 - $160,000
- SDE II Level 61 - $175,000
- Senior SDE Level 63 - $216,000
- Principal SDE Level 65 - $288,000
How can you earn FAANG-level salaries?
The most obvious way to do this is to join a FAANG company. To do this one has to:
- Standout among a large talent pool of software developers and get noticed by FAANG recruiters
- Clear the infamously difficult and highly competitive FAANG technical interviews. (Google’s acceptance rate is around 0.2%)
- Execute a successful salary negotiation
This is what we at Interview Kickstart help software engineers with. We have a comprehensive, end-to-end technical interview prep program which helps you successfully clear these interviews by making you a better engineer. The program is conducted by current and former hiring managers at FAANG and Tier 1 companies, with invaluable knowledge about the hiring processes at FAANG company and the challenges candidates face.
There are no shortcuts to success. One needs With the right effort, guidance and support, chances of success are multifold.
To learn more about the program, register for an informational webinar hosted by our co-founder.