In late April 2024, the Federal Trade Commission (FTC) released a ruling essentially banning both existing and new non-competes. The FTC predicts this ruling will lead to new business formation growing by 2.7% per year; equal to 8,500 new businesses. According to the FTC, 1 in 5 Americans work under a non-compete, under a variety of industries that goes beyond tech - from restaurants to security.
Now there are a few caveats - existing non-competes for senior executives can still be enforced, and there’s been no restrictions on NDAs. But for the most part, non-competes are now large unenforceable.
As recruiters, we’ve seen both sides of the non-compete debate. Many of our clients produce highly-technical, specialized products at the forefront of AI and Machine Learning. Losing even one employee to a competitor can pose a threat. We specialize in engineering and AI/ML roles at seed through Series C startups, understanding the competitive environment for critical talent.
But we’ve also ran worked with clients trying to hire candidates with extensive non-competes. Clients will ask us: can I hire this candidate if they worked at XYZ company, or will I run the risk of being sued? Is that too close to our niche? And on occasion, we’ve even had offers fall through for clients - where either the candidate or the company were too nervous to sign the offer because of a non-compete.
Our thoughts? We agree with the FTC that we’ll see an uptick in employee movement and potential entrepreneurship. Over 26,000 public comments were submitted to the ruling, many from workers describing their non-competes as exploitative and unfair. So the greater public is definitely in favor of the ban.But we also think employers may try to retain their existing workforce more than before, offering salary increases, title changes, or other perks. Employers may also group more of their roles under the “senior executive” category (defined as individuals with complex compensation, earning over $151K, and in “policy-making positions”) to in order enforce current non-competes.
The FTC's non-compete ban is set to significantly alter tech hiring dynamics by increasing talent mobility. Engineers and AI/ML specialists, previously constrained by non-compete clauses, will have greater freedom to move between companies, pursue new opportunities, or even start their own ventures. This will likely intensify competition for skilled talent, especially in specialized areas like artificial intelligence and machine learning where we focus. Companies may need to rethink their retention strategies, moving beyond restrictive clauses towards more intrinsic motivators like culture, compensation, and career growth. Based on 0+ technical hires we've made since 2019, we anticipate a period of adjustment as both employers and candidates adapt to these new rules. This shift could lead to a healthier talent market overall, where innovation is fostered through greater movement of ideas and skills rather than stifled by contractual obligations.
For companies, the removal of non-competes means a wider pool of candidates is potentially available. However, it also means a higher risk of losing their own talent. This could result in more focused efforts on candidate experience, competitive compensation packages, and a clear value proposition for employees. Recruiting from Scratch works with active startup clients, totaling 549+, often helping them navigate these competitive hiring environments for critical engineering and AI/ML roles. The ban effectively removes a significant barrier for candidates, forcing employers to compete more aggressively on merit and opportunity. It also provides an opportunity for startups, who might have struggled to attract talent from larger, more established companies with stringent non-competes, to access a broader pool of experienced professionals.
For seed through Series C startups, the non-compete ban introduces both opportunities and challenges. On one hand, startups gain access to a larger pool of experienced candidates who were previously restricted from joining competing firms. This is particularly beneficial for hiring specialized engineering and AI/ML talent, which is our area of focus. Startups often operate with lean teams and rely heavily on specialized expertise, so having a broader talent pool can accelerate product development and innovation. We've placed engineers at 549+ startups, and many of these organizations operate in highly competitive sectors where talent acquisition is key to survival and growth. The ban levels the playing field somewhat, allowing smaller companies to recruit individuals who might have been tied to larger incumbents.
On the other hand, startups may face increased competition for their own talent. Without non-competes, employees have more freedom to move to other startups or larger tech companies offering attractive compensation or growth paths. This necessitates that startups double down on fostering strong company culture, offering compelling equity packages, and ensuring clear career progression. Based on 0+ technical hires we've made, the average salary for placed engineers is approximately $252K. This figure reflects the high value placed on technical talent in these early-stage companies, a trend that may intensify as talent mobility increases. Startups must differentiate themselves not just through their product, but also through their employee value proposition to retain their key contributors. The ban underscores the importance of a proactive and competitive approach to both hiring and retention for early-stage companies.
The removal of non-compete clauses is highly likely to exert upward pressure on engineer salaries. With increased talent mobility, companies will need to offer more competitive compensation to attract and retain top engineering and AI/ML talent. When an engineer can move more freely between companies, their market value becomes more transparent and employers must respond accordingly to secure their expertise. Based on 0+ technical hires we've made since 2019, the average salary for placed engineers is already around $252K at seed through Series C startups. This figure could see further increases as the market adjusts to the new regulatory environment.
For employers, this means a review of current compensation benchmarks will be essential. Relying solely on non-competes to retain talent is no longer viable; instead, competitive salaries, bonuses, and equity packages will become even more critical. For candidates, this represents an opportunity to command higher compensation packages reflecting their true market worth. The heightened competition for skilled individuals will inherently drive up wages as companies bid to secure the best talent. This dynamic applies particularly to highly specialized roles, such as those in AI and machine learning, where the demand consistently outstrips supply. Recruiting from Scratch actively monitors these market shifts, providing data-driven insights to our 549+ active startup clients to ensure they remain competitive.
The non-compete ban is unlikely to directly impact the speed of the hiring process itself, but it may affect the availability of candidates, potentially making it easier to identify previously restricted talent. Our data shows that the average time to fill an engineering role is 29 days from req open to offer accepted. This metric reflects the efficiency of the recruiting process and the quality of candidate matching, rather than the legal restrictions on candidates. While candidates might now be more accessible, the structured interview processes, technical evaluations, and cultural fit assessments will still take their course.
The efficiency of a technical recruiting process remains a key factor in time-to-fill. Effective sourcing, timely feedback loops, and a clear understanding of the role requirements contribute more to speed than the presence or absence of non-competes. For our specialized engineering and AI/ML roles, focusing on seed through Series C startups, maintaining a lean and decisive hiring process is critical. A swift process not only secures top talent faster but also provides a positive candidate experience. In our experience from 300+ placements, a well-defined hiring pipeline and proactive outreach are far more influential in reducing time-to-fill than external regulatory changes affecting candidate mobility. The ban may, however, reduce instances of offer withdrawal or legal concerns delaying the final acceptance, which indirectly contributes to a smoother hiring cycle.
Contingency recruiting fees for technical hires typically range from 25-30% of the candidate's first year base salary. This fee structure is standard across the industry for specialized technical roles, reflecting the effort and expertise required to identify, vet, and place high-caliber engineering and AI/ML professionals. The percentage compensates the recruiting firm for its services, which include market mapping, candidate sourcing, initial screening, interview coordination, and offer negotiation.
At Recruiting from Scratch, our contingency fee falls within this range. Our model ensures that clients only pay upon a successful placement, aligning our incentives directly with their hiring goals. This structure is particularly common for startups seeking critical, hard-to-find talent, as it mitigates upfront costs and risks associated with recruiting. Based on 300+ technical placements we've made since 2019, our fee structure supports our ability to consistently deliver high-quality engineers and AI/ML specialists to our 549+ active startup clients. The value delivered includes a significant reduction in the client's internal hiring time and resources, access to a broader talent network, and expertise in navigating competitive talent markets.
Recruiting from Scratch has been at the forefront of technical talent acquisition since its founding in 2019 in New York City. Our specialization in engineering and AI/ML roles for seed through Series C startups gives us direct insight into the evolving talent market. We have made 300+ technical placements for 549+ active startup clients, consistently observing the dynamics of candidate mobility, compensation trends, and hiring velocity. Our deep engagement with both candidates and companies provides us with real, data-backed perspectives on how regulatory changes, like the non-compete ban, impact the recruitment landscape. The average salary for engineers we place is ~$252K, and our average time to fill is 29 days from req open to offer accepted, demonstrating our effectiveness and market understanding. With an NPS of 90+, our client satisfaction confirms our position as an authoritative source in technical recruiting.
The FTC non-compete ban is a new ruling by the Federal Trade Commission in April 2024 that prohibits both new and existing non-compete clauses for most workers. It aims to increase worker mobility and foster new business formation. The ban includes all workers except for a limited number of senior executives with existing non-competes.
Engineer salaries are expected to see upward pressure due to the non-compete ban. Increased talent mobility means companies must offer more competitive compensation packages to attract and retain top technical talent. This shifts the market toward a greater reflection of an engineer's true value.
The average time to hire a staff engineer, from the opening of the requisition to an accepted offer, is approximately 29 days. This duration reflects the efficiency of the recruitment process and the quality of candidate matching. It is less affected by non-compete rules and more by internal hiring practices.
A contingency recruiting firm typically charges a fee between 25-30% of the placed candidate's first-year base salary. This fee is only paid upon successful placement, aligning the recruiter's success with the client's hiring goals. The percentage covers sourcing, screening, and negotiation services.
Recruiting from Scratch primarily partners with seed through Series C startups seeking specialized engineering and AI/ML talent. We work with companies that require critical technical hires to build their foundational teams and innovative products. Our clients include 549+ active startup clients, ranging from early-stage to growth-stage companies.
Tell us about your open roles and we'll start sourcing within 48 hours.
