How we created a technical compensation plan from scratch

In this article we explain how we have defined the retribution for technical people at lang.ai, since we followed a different strategy for other profiles

Designing a fair, comprehensive and objective compensation plan is probably one of the biggest challenges in defining a team operations & culture strategy. The compensation plan is especially complicated because of the impact it has both in the employees and in the company. On one hand, it defines the salary of the team as well as how and when they will earn it. On the other hand, it will determine the salary offers for new employees, the turnover within the company as well as the cash flow of the company (which is critical for a startup).

The first thing we did to build a fair compensation plan was to research the market. In the case of technical careers, the market is very dynamic and the company must be updated to be competitive. We read articles, researched the compensation strategy of other startups, looked for alternative sources to know the salary bands for technical people… (keep in mind that not all the relevant information is on Internet since most of the companies do not publish their HR strategy).

But despite all the information publicly available, there were many questions still unsolved:

The main challenge was that there were no right or wrong decisions, but appropriate decisions for your company and your team. Different teams may require different strategies, even the same team in different stages of the company.

Therefore, we decided that in order to draw conclusions, a good way was to gather feedback from our team. We prepared a survey with 20 questions regarding compensation preferences and sent them to all employees:

In other companies like Séntisis I’ve helped to set up a semi-annual performance system linked to a variable salary and it worked out well. However, we saw that it was becoming difficult to establish semi-annual personal goals in a seed stage company with a core in technical research. The feedback from the team confirmed that we should remove the fixed salary plus variable salary system. In the end, our technical team had the same commitment to achieve their goals without having a variable compensation. In a small company, commitment and technical work is not going to be better because of the variable salary.

My personal learning was that, before setting up a performance review system, you should ask yourself what you really want to achieve with it. You might find out that it doesn’t fit your needs. Lastly, keep in mind that if you decide to define a performance review plan, it requires time and organization. It has to be well structured, the metrics and goals well defined and scheduled dates for performance evaluation, among others.

We realized that in an early-stage company like Lang.ai it was going to be very difficult to define fair specific technical goals.

The company reserved a pool of stocks to distribute within the initial team. In this way, we were all actively part of the project and we saw that this was also the perception most of the team had.

The stocks were divided based on position and responsibility since this was the fairest criteria considered by the whole team.

The company has also reserved an extra amount of stocks for those employees who were essential to start the project. We know that Lang.ai wouldn’t have been possible without the contribution and commitment of some people that are still in the company.

Since not all employees have the same preferences and circumstances, we offered all employees the possibility to choose from two options:

So finally the compensation model was set in an increase of the fixed salary and stocks instead of a variable salary.

Also, from time to time, the company may reach an extraordinary goal. In such case, there may be some money allocated for the team as an extra benefit. The decision on how to spend the allocated money quarterly (for activities, cash bonus, material…) will be decided by a group representing the founders and the employees (one employee for each of the teams).

We have incorporated a policy of open salary bands. From our point of view it means something positive for the company and the team for several reasons, for example:

This confirmed us that our economic conditions were well defined. We had been calculating the salaries based on a base salary established according to the profile and a multiplier for knowledge, experience and training.

These are the bands that we have defined for current and future profiles:

Taking into account the salary bands defined, we’ve designed also a common salary review system based on the following:

Once the compensation plan was defined, we had a session with the entire team to explain it, resolve their doubts and, of course, be open to suggestions since it is important that all employees feel comfortable with the system we had defined.

We also shared all the documentation explaining our compensation plan in detail so that all the information is always available for current and future employees.

And lastly, we decided to make this information public so maybe it can help other startups defining their compensation model 🚀

Check the other articles in our Building Lang.ai publication. We write about Machine Learning, Software Development, and our Company Culture.

How we created a technical compensation plan from scratch

Research & References of How we created a technical compensation plan from scratch|A&C Accounting And Tax Services
Source