Dive Brief:
- IT solution providers are planning to cut back on top-level raises for employees this year, driven in part by a cooling IT labor market, ConnectWise's Service Leadership vendor benchmarking division found in its annual compensation report. The company analyzed compensation data for more than 60 service delivery, sales and management roles.
- Last year, 16% of IT services firm salary increases exceeded 6%, doubling what respondents anticipated at the beginning of 2025. MSP and VAR leaders expect only 8.1% of salary increases to be 6% or more in 2026.
- The most profitable firms analyzed by Service Leadership pay less than their peers, experience more employee churn, and rely on upskilling and variable pay to maintain staffing levels. “There is a widespread belief that more profitable IT Solution Providers pay their employees more,” Service Leadership said in the report. “The reality is we consistently find the opposite to be true.”
Dive Insight:
Fewer top-level raises means the labor market for managed service providers, value-added resellers and other IT solution providers has softened. The benchmarking firm said salaries steadily fell after wage inflation peaked in 2022.
“This suggests a third consecutive year of returning to historical norms for IT firms; a positive indicator of likely continued strong bottom-line profitability for many IT solution providers,” the report said.
The smaller the company, the more likely it was to shell out top-level raises. Firms with an annual revenue of between $1 million and $2 million gave top-level increases to more than 30% of employees on average.
Service Leadership said small firms are trying to hedge against manager attrition. Managers saw the most wage increases across the industry.
Size and private equity ownership translated to stingier raises.
According to Service Leadership, the most profitable MSPs aren’t reaching for their checkbooks to retain top talent. They’re content with losing those workers — 38.6% of top quartile MSPs lost more than 10% of their workforce in 2025 compared with 22.8% of bottom-half MSPs. PE-backed firms were by far the most churn-prone, with 54.6% losing more than 10% of their workforce in 2025.
“PE firms have organized their operations to accelerate hiring, training, and onboarding processes to address these trends,” the report said.
Data from Service Leadership also hints at how AI is reshaping headcount. More IT solution providers decreased headcount — 36.4% — than increased it — 43.5% — in 2025. It was a clear drop from 2024, when increases — 51.2% — were more common than decreases — 35.7%. The report suggested that firms may have started leaning on AI to backfill open roles rather than rehiring.
