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Recruitment rates find dotcom bust forgotten

Three quarters of candidates are joining web 2.0 start-ups are sacrificing up to a third of pay for shares, an increase of 65 per cent on two years ago.

By Miya Knights, 14 Nov 2007 at 15:22

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More than 75 per cent of IT candidates joining web 2.0-based dotcom start-ups are sacrificing up to a third of their pay for shares, suggesting the memories of the dotcom boom and bust have been forgotten.

The figures, released this week by UK IT staffing company ReThink Recruitment also reveal the numbers of prospective IT employees seeing shares as an incentive in lieu of pay to join these new companies has jumped from just 10 per cent two years ago.

The percentage now is close to the level during the peak of the first dotcom boom as shares and options in startups are also being used to lure contractors into becoming permanent employees.

This also bucks the trend in the rest of the IT industry of more and more employees leaving their jobs to go freelance, ReThink said, especially as major acquisitions of web 2.0 companies, such as MySpace and YouTube by News International and Google respectively, has made shares in start-ups much more saleable to candidates.

The recruiter said it has placed contractors with dotcom start-ups, who have taken pay cuts of about a third in order to become permanent employees who will gain equity on a takeover or flotation.

In a recent, typical scenario, it said a contractor working for a start-up on £72,000 a year accepted a permanent position at the same company for £50,000 per annum, plus options worth over £20,000.

ReThink's Nathan Callaghan said: "Web start-ups have always offered equity as a way of securing talent, but it was a currency that lost most of its value after the dotcom crash."

He added that start-ups now have the pick of the top talent once again, as the only area where IT workers are leaving contracting to go permanent. "IT companies now regularly reorganise and restructure their workforces, so candidates don't really see start-ups as that much more risky than blue chips," Callaghan said.

The company said that the latest web technologies are most valuable to prospective candidates looking to break into this sector of the IT industry.

"Recruitment of candidates skilled in these areas is a real headache right now," added Callaghan. "Start-ups don't want their talent to walk out the door at the end of a contract, so equity is one way they can lock skills in long term."