In Guatemala City software development firms pay a developer’s salary, then additional expenses of 30% related to employing that person. This “loaded” wage includes a number of mandatory and common expenses. Here is how one firm that is representative of the trend in Guatemala breaks it down:
Behind the Data
From July-October, Nearshore Americas examined wages of software firms in Mexico, Guatemala and Costa Rica. Establishing exactly what programmers and others are getting paid was an important element of the study, but so too was a number of other factors, including the overall expense of a worker.
In Guatemala’s case, while 30% may at first blush sound high, the overall expense level of workers there is among the lowest of the markets studied. Guatemala effectively works on a pay cycle of 14 periods—that is, pay for each calendar month plus one month’s bonus and a 14th pay cycle that amounts to a Christmas bonus, or “aguinaldo.” While 14 pay periods is rather unique, 13 pay periods is fairly common in Latin America.
Guatemala also stands out because several firms there calculate the overall expense of a worker using a fixed percentage, which is applied across all jobs regardless of experience level, in effect a multiplier. This eases cost projections, and anecdotally, knowledge of the practice may defuse a potential source of friction between employees. On the downside, the approach may also keep firms from luring over top talent in order to fill a vacancy.
It’s not a practice exclusive to Guatemala, firms in Monterrey and, to a lesser extent, Guadalajara also used a fixed percentage to calculate the overall cost of workers.
Elsewhere, firms tended to pay more in overall worker expenses, resulting in a higher percentage added to the worker’s wage. In some cases, the overall expense of a worker amounts to more than 55% of the worker’s wage.
Guatemala’s overall cost structure works generally well in terms of letting workers know what they can expect in terms of bonuses, and as a direct means to keep control of costs. In markets where firms set defined costs for programmers, or else use a ratio that increases as wages rise, the overall cost of employing workers is much higher, despite the fact that the wages, especially for junior-level front end and back developers, are generally in line with Guatemala’s wages.
Part of this is market dynamics. Costs run higher in Costa Rica than in Guatemala, for instance. But part of it also appears to be that some software firms do not strictly control overall costs, minding only the wage and the work.