Three key challenges for the IT industry in Serbia today
The IT industry in Serbia is facing numerous challenges that threaten the growth and stability of companies, which significantly differ from those of the past. Non-competitive salaries and benefits, high living costs, and increased competition in the labour market were the key challenges companies faced this year.
Additionally, the reduced number of projects globally, coupled with challenges such as economic instability and inflation, geopolitical risks, and uncertainties, further complicates the situation, creating a need for adaptation and innovation in project and resource management approaches.
Recently, layoffs in the IT sector have become a significant issue, with 61% of companies reporting employee departures. Between last year and this year, 27% of companies in Serbia reported that layoffs accounted for up to 5% of their total workforce, while 34% recorded layoffs exceeding 5%. Conversely, 39% of companies reported no significant layoffs, indicating that certain organisations have managed to retain their employees. These findings are from a recent survey conducted by the Serbian IT Association (SITA), which included over 60 IT companies.
According to the survey results, a critical issue IT companies faced in 2023–2024 was retaining talent. This was due to non-competitive salaries and benefits, cited by 31% of companies, high living costs caused by inflation, noted by 27% of respondents, and increased competition in the labour market, highlighted by 15% of the surveyed companies. The survey also revealed that, in addition to large companies with over 200 employees, a significant proportion of respondents were from small firms—47% of them with up to 50 employees. Furthermore, 37% of the companies surveyed provide outsourcing services. Interestingly, many of these companies apply a hybrid business model, simultaneously developing their own products alongside outsourcing. This hybrid approach allows companies to diversify their income streams, increase market flexibility, and reduce the risks associated with relying solely on outsourcing clients in the long run.
Higher inflation, lower wages
Inflation in recent years has affected many industries, and the IT sector is no exception. This has escalated into a crisis lasting for some time, reducing job opportunities and halting wage growth. Given the ongoing impact of inflation on business operations, 38% of companies have noted the need to optimise and reduce their workforce.
This has also raised concerns about employee wages, which are stagnating and creating retention challenges. The SITA survey shows that 30% of companies face difficulties in retaining talent due to salary pressures. This year, 34% of companies increased employee wages by 5–10%. On the other hand, 3% were forced to reduce salaries due to new circumstances, while 30% reported wage growth of 10–20%. These increases primarily applied to companies with over 200 employees, which have not reduced wages over the past year.
The survey highlighted that, in addition to large companies with over 200 employees, a significant portion of respondents came from small firms, with 47% having up to 50 employees. Furthermore, 37% of the companies participating in the survey provide outsourcing services. A noteworthy finding is that a large number of these companies adopt a hybrid business model, developing their own products alongside outsourcing. This hybrid approach enables companies to diversify their revenue sources, enhance market flexibility, and mitigate risks associated with reliance solely on outsourcing clients over time.
Inflation has significantly impacted operations in many industries, and the IT sector has not been immune. This has resulted in a prolonged crisis, reducing jobs and stagnating wages. Considering the effects that inflation continues to have on business, 38% of companies have observed the need for optimisation and workforce reduction.
This has also raised the issue of employee wages, which are stagnating and presenting challenges in employee retention. The SITA survey indicates that 30% of companies face challenges in retaining talent due to salary pressures. This year, 34% of companies increased salaries by 5–10%, while 3% were forced to reduce wages due to new circumstances, and 30% recorded salary growth of 10–20%. These trends were observed mainly in companies with over 200 employees, which have not reduced wages in the past year.
These challenges highlight the need to redefine hiring strategies and approaches to working conditions to ensure stability and appeal for top professionals.
Migration
In recent months, much has been said about Serbian IT professionals moving abroad. The reasons remain the same as in previous years: better working conditions and higher salaries offered by wealthier countries. Research by the Serbian IT Association indicates that 19% of companies report an increase in employees considering leaving Serbia. On the other hand, 26% of companies do not observe this trend, and the good news is that 55% of surveyed firms see no indications that their employees intend to leave the country. These findings suggest that, despite challenges, many companies are successfully retaining their professionals in Serbia.
Marko Vučetić, director of the Serbian IT Association, told NIN that to prevent employees from leaving for opportunities abroad, many companies are turning to concrete measures to retain their workforce.
“Increasing workplace flexibility, including remote work and hybrid models, is becoming a standard practice, offering employees a better balance between their professional and personal lives. Additionally, companies are investing in salary increases and additional benefits to remain competitive in the labour market. These measures not only help reduce employee turnover but also contribute to greater satisfaction and loyalty among staff,” explained Vučetić.
Although internal migration programs exist, a relatively small number of employees take advantage of the opportunity to relocate outside Serbia. Of the 200 companies surveyed, 26% (primarily those with more than 200 employees) currently have an established internal migration program that allows employees to relocate between different business locations. The majority, 69%, do not have such a program, while 5% plan to introduce one in the future.
Among the key destinations employees are most interested in relocating to are countries like Germany, the United States, and Switzerland, traditionally popular for their high salaries and quality of life. However, the results also show increased interest in regional countries, such as Slovenia, which offer proximity, a similar culture, and increasingly favourable business opportunities. These destinations attract talent with various benefits, from economic stability to professional development opportunities, according to the SITA research.
Necessary subsidies
Commenting on the research findings, Marko Vučetić noted that while the results are not ideal, they do indicate an improving situation compared to previous periods. He highlighted that, globally, there have been significantly fewer layoffs in the last two months, which is a positive indicator for the domestic market. In September, there were 3,941 layoffs globally, in October 3,659, in November around 5,900, and so far in December, 654.
“This is favourable data for us because we host many foreign corporations here. Global trends inevitably impact our market, sooner or later. It usually happens more slowly, but the fewer layoffs there are globally, the fewer there will likely be locally,” he emphasised.
However, for further development, Vučetić stressed the necessity of subsidies, as cited by around 30% of companies in the survey.
“To sustain growth and development in the IT sector, tax incentives for companies are crucial because we are gradually becoming a more expensive market than Romania, Poland, and Bulgaria—countries in our region that are part of the European Union. At the Association level, as many as 90% of members cite tax reliefs, subsidies, and similar measures as their primary goals. These are proving essential for the growth and development of companies operating in our country. Serbia must act decisively to prevent corporations from relocating their operations to other European countries,” Vučetić concluded.
Source Link