FAANG (Facebook, Amazon, Apple, Netflix, and Google) and Tier 1 tech companies are known for paying high salaries 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? How can one earn these salaries?
If you are curious, we’ll answer all these questions and more in this article. Here’s what we’ll cover:
- Compensation Structure at FAANG Companies
- Software Engineer Salaries — FAANG vs. Other Companies
- FAANG and Tier-1 Salaries (by Company and Level)
- Which Are the Highest-paying Tech Companies?
- How Do FAANG Salaries Compare to the US National Average?
- Why Do FAANG Companies Pay High Salaries?
- How You Can Earn FAANG-Level Salaries
- FAQs on Software Engineering Salaries
Compensation Structure at FAANG Companies: Base Salary, Variable Pay, and Stocks
Before we get into the details, let’s understand the different salary components. The compensation structure at FAANG and Tier-1 companies usually include three 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 your performance and is typically determined by a manager based on a performance review. It is usually variable.
- 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.
Software Engineer Salaries — FAANG vs. Other Companies
The figure below shows a company-wise comparison of salaries for entry-level software engineers. Let’s look at the difference between FAANG companies like Google, Facebook, Apple, and Amazon vs. Tier-1 companies Oracle and Microsoft vs. Tier-2 companies Cisco and IBM. Compensation figures shown below include salary, stock, and bonus.
Source: Levels.fyi, 2021
As you can see, the salaries across FAANG and Tier-1 companies are on par with each other for entry-level positions, but those at Tier-2 companies are much lower. For example, the average total compensation at Oracle and Apple is $176,000 and $172,000, respectively — almost the same. But if you compare the salary at Google (Tier 1) with IBM (Tier 2), the difference is enormous — $188,000 vs. $98,000.
Although evident at entry-level positions, the pay gap between FAANG and non-FAANG companies really starts to show as we go up the ladder in terms of levels.
The following chart illustrates salaries at the Senior Software Engineer level at FAANG, Tier-1, and Tier-2 companies.
Source: Levels.fyi, 2021
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Here, we see that the average compensation for a Senior Software Engineer at Facebook ($380,000) is more than double that at Microsoft ($182,000).
At senior levels, we see that there’s a stark difference even between FAANG and Tier-1 companies like Microsoft and Oracle.
The difference in pay scale between FAANG and non-FAANG companies continues to widen with every level. For example, a Principal Engineer at Microsoft earns $500k (top of the band), whereas Google pays around $1.2 million — almost 140% more for the same level.
FAANG and Tier-1 Salaries (by Company and Level)
To put things in perspective, here are the average annual salaries of software engineers at different levels working at Google, Facebook, Apple, Amazon, and Microsoft.
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
Highest Salary for Software Engineers at FAANG Companies
Salaries at FAANG companies increase with increasing seniority or level. Read 10 Highest Paying Tech Jobs in FAANG Companies to learn more about the highest-paying job roles and companies for software engineers.
Also, read Highest-Paying Tech Jobs and Skills in 2022 to learn about the hottest domains in tech to earn lucrative salaries.
Which Are the Highest-paying Tech Companies?
Google and Facebook are two companies that pay the highest average salaries to software engineers in the US. There is only a minor difference between the two, even at senior levels.
However, non-FAANG companies pay higher salaries than FAANG companies for unique skill sets or specific tech 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 are not just comparable to but 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 also 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 salaries 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 higher than the 90th percentile of wages across the US.
Why Do FAANG Companies Pay High Salaries?
We’ve established that FAANG companies like Facebook, Apple, Amazon, and Google are the highest-paying companies for software engineers. But why do they pay such high salaries?
Here’s why:
History
Twenty years ago, there was a distinct difference between what big companies provided to software professionals and what smaller startups provided.
Big companies, like GE and Boeing, were known for providing employees with job stability. Most people joined these companies intending 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 quickly enough for 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 spent up to 50% of their salaries on mortgages. Financially, smaller companies offering faster career growth and chances of higher earning 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 could now innovate better and grow faster, making them as attractive as smaller companies. Faster growth and innovation led to better products and higher revenues, allowing large companies to keep pay scales competitive.
ESOPs That 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, the 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 four years. Leading 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 and Complexity
All FAANG and Tier-1 companies operate at a massive scale, catering to millions of users. Building, maintaining, and improving these systems requires the brightest minds in engineering. Hence, attracting the right talent level is 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 attract and hire 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
How You Can Earn FAANG-Level Salaries
The most obvious way to do this is to join a FAANG company. But getting into these coveted companies is not a small feat. Take Google, for example — the acceptance rate at Google is around 0.2%. To land an offer from a FAANG company, you need to:
- Stand out among a vast talent pool of software developers and get noticed by FAANG recruiters
- Crack the infamously difficult and highly competitive FAANG technical interviews
- Execute a successful salary negotiation
This is where Interview Kickstart can help software engineers like you. We offer comprehensive technical interview prep programs to help you become a better engineer and, consequently, nail the toughest tech interviews.
Our instructors are hiring managers and tech leads from FAANG and Tier-1 tech companies, who possess invaluable knowledge about the hiring processes at FAANG company and the challenges candidates face. Learning from them will help you get an edge over the competition.
Having trained over 9,000 software engineers, we know what it takes to land an offer from FAANG. To learn more, register for our FREE webinar.
FAQs on Software Engineering Salaries
Q. Can software engineers earn FAANG-level salaries at a non-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. To earn FAANG-level salaries at a Tier-2 company, you would need to work longer and get promoted to higher levels or have specialized skills that a particular company needs.
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.
Q. Do startups pay FAANG-level salaries?
Yes, a growing number of startups are now able to offer FAANG-level salaries. However, pursuing a career at a startup can have its pros and cons. Be sure to weigh your options before deciding. Read FAANG vs. Startups: Which Is Better for Software Engineers? and How to Get a 500K Job in Tech — Finding the Right Company for more insights.
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