11 Things to Consider Before Creating a Set System for Salaries

ManagerQ: Do you have a set system for compensation/salaries? Why or why not?

A: Use compensation systems. “As you hire a professional HR Manager or a VP of Human Resources, they will help you think through your compensation philosophies. It’s important as a company scales to have a clear guidelines (80th percentile, 90th percentile), to benchmark yourself to competitors and make adjustments. Don’t wait until someone hands in a resignation to find out that you’ve been paying below market rate.” Matt Mickiewicz, Hired

Have a system in place. “We don’t currently have a set compensation system for folks at different levels at our company. That’s caused a lot of grief in negotiations, as I have had to make decisions on the fly without solid footing. More importantly, it can hurt morale as compensation numbers get shared — and they’re always shared. Communicate how your compensation plan works and give your team clear milestones to grow.” Aaron Schwartz, Modify Watches

Stay flexible to retain talent. “Set salaries are outdated due to the changing employment environment. In a world where employees came to the office and performed specific tasks, it fits. With the changing workforce, set salaries are no longer appropriate. Find talent and compensate him or her slightly above market rates.” Matthew Moisan, Moisan Legal, P.C.

Know that one size doesn’t fit all. “I don’t have a set system for compensation/salaries; everyone’s different and has different needs. Large companies typically have certain criteria for salaries: years of experience, the department they’re in, the list goes on. I care more about the employee’s life situation. An employee that has children may need more tangible income, but it may be better to offer a young go-getter educational stipends.” Jojo Hedaya, Unroll.me

Tier salaries per title. “Earlier in the year we implemented a structure that showcased what set salaries were assigned per title. Every title has three tiers, and if an employee wishes to make more money in salary alone, he or she needs to move to the next title which has more responsibility and leadership aspects. This format keeps compensation chatter at a minimum.” Beck Bamberger, BAM Communications

Define a timeline for promotions. “Having defined promotion timelines is very important as that reduces confusion as to when someone is up for a raise or promotion review. Otherwise each employee will be unsure when to discuss promotions, and introverted employees will get the short end of the stick.” Randy Rayess, VenturePact

Level the playing fields. “I make sure to have a set system for commission structures for all employees. This eliminates internal turmoil between employees. In addition, it is easier for my sales employees to compare themselves to each other, pushing them to compete.” Jayna Cooke, EVENTup

Tie compensation to performance. “Regardless of the position an employee has at your company, the compensation should be tied, in part, to the employee’s efforts, whether through commission on sales, premiums tied to productivity or bonuses for initiatives taken beyond job description responsibilities. Offering goal-based compensation gives employees the desire and the courage to exceed both your expectations and their own.” Vanessa Nornberg, Metal Mafia

It depends on the company stage. “It definitely depends on the stage of a company, but for startups I don’t think you should. In early stages, this is a place where you can see an employee’s motivation and in fact determine culture fit. If they’re willing to forego higher salaries for stock because that’s what you as the founder are doing, that means they’re sticking around through the lows.” Neel Murthy, Swapbox

Create one system with multiple models. “We have multiple compensation models that we use. We never liked trying to fit everyone into the same compensation model. Nor do we support making it up as we go. By having multiple models, we provide ourselves with the flexibility to create the optimal arrangement for each person, while also ensuring we don’t make silly mistakes by trying something new every time we hire.” Adam Roozen, Echidna, Inc.

Don’t focus on it early on. “One of the advantages early-stage businesses have is that they can be more creative with compensation. Certain employees may be more motivated by equity or bonuses while others want the security of a higher base salary. By staying flexible, you’ll attract a wider pool of quality candidates. Additionally, the goals of the business can change frequently, and compensation should reflect those changes.” Sathvik Tantry, FormSwift

(Source: TCA)