More good news for the Puget Sound area's economy: Competition for technology-sector workers is heating up.

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More good news for the Puget Sound area’s economy: Competition for technology-sector workers is heating up.

Average salaries for Washington technology workers surged 8 percent this year, the biggest increase in five years, according to a new survey by PayScale for the WSA (formerly the Washington Software Alliance), the state’s oldest technology trade association.

“Clearly the work force is mobile again and companies have to pay a premium to attract qualified talent,” said Fred Whittlesey, chief compensation officer at PayScale.

In recent years, tech salaries have barely kept pace with inflation while many companies froze hiring and trimmed employee benefits to compensate for sagging sales.

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But the 2005 survey is solid evidence that the sector is again thriving. The unexpected 8 percent jump more than doubled WSA’s forecast of a 3.8 percent increase.

“I’m hearing from headhunters that they can’t fill all the hiring requests they’re getting,” said WSA President Kathy Wilcox.

According to the survey, the median, pretax salary for entry-level employees jumped 9 percent, to $58,000. For middle-management positions, the increase was 8 percent.

Pay raises for senior management lagged. A senior software-development manager makes approximately $116,000, a 3 percent rise over last year’s level.

The average CEO salary in the 2005 survey is $175,000, up from the previous year’s $152,250.

The 74 companies — predominantly privately held — participating in the survey had a median of 40 employees and revenues of $5.6 million.

Another form of compensation tracked by the survey was use of stock options and restricted stock-purchase plans.

Despite a flat market for tech stocks and new accounting practices that require options to be expensed, two-thirds of companies surveyed reported setting aside an average 15 percent to 20 percent of their equity to attract and retain talent.

One reason for the continued popularity of stock plans is increased activity by private equity companies.

“The notion that cash is king and stock plans are dead is refuted by the data,” said Whittlesey. “Clearly there’s a lot of employees out there who think their firm can become the next Microsoft, even if they don’t go public.”

Companies are also beefing up benefits and bonuses.

Despite the soaring cost of health care, 95 percent reported providing near-total coverage for their employees at an average cost of $299 per month for each worker. When partial coverage for spouses and dependents is added, employers spent $10,000 a year per employee on health care.

“It’s a sign of the sector’s renewed dynamism that at a time when workers across the country are seeing health care and retirement benefits trimmed, technology companies are adding them,” said Wilcox.

According to Whittlesey, wages in the Puget Sound area lag behind those in Silicon Valley, but are otherwise in line with national averages.

“Geographic discrepancies have really started to normalize in recent years,” he said.

Founded in 1984, WSA comprises more than 1,000 member companies representing 50,000 software, Internet, telecommunications and technology employees in Washington.

This is its 15th annual salary survey, but the first time it was conducted by Seattle-based PayScale, which tracks benefits and compensation.

Josh Goodman: 206-464-3347 or