COMPENSATION PHILOSOPHY 101
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COMPENSATION PHILOSOPHY 101 Create a compensation strategy that supports the growth of your business.
Transcript of COMPENSATION PHILOSOPHY 101
COMPENSATION PHILOSOPHY 101
Create a compensation strategy that supports the growth of your business.
2
STEP 1 Market analysis & benchmarking
Using fresh and relevant data from a reputable source, learn how you’re paying compared to similar companies in your industry
STEP 2 Compensation philosophy
Create a statement that formalizes how you plan to pay and reward your employees. This is based on information gathered in your market analysis, your company values, and financials.
STEP 3 Pay structure creation
Guided by your compensation philosophy, construct your pay structures.
STEP 4 Program design
Bring it all together to build your compensation program – everything from offer letters, to compensation packages, merit, cycles, burn analysis, and diversity, equity, and inclusion (DE&I).
INTRODUCTION Who doesn’t love the thrill of company building? It’s practically a prerequisite if you’re involved with a venture-backed company. But for something as essential to the success of your business and your employees as compensation, it’s crucial to have a plan. That plan is called a compensation philosophy – and you need one asap.
A compensation philosophy will help you get ahead of issues like pay equity, pay that doesn’t match your financials, and hiring and retaining top talent.
Stop treating compensation as an art. A compensation philosophy builds meaning from data to structure how you pay, so that your business, your candidates, and your employees can make the best business and career decisions.
Creating a compensation philosophy is the second step in a four-step process for designing a compensation program:
In this guide, you’ll learn how to develop a compensation philosophy that sets your company on a solid compensation foundation and replaces guesswork with clarity and confidence.
If you’re ahead of the game and already have one, you’ll learn how to evaluate your compensation philosophy to make sure it aligns with your mission and goals.
Need to back up and learn about Step 1? Download The High-Growth Guide to Compensation Benchmarking
TABLE OF CONTENTS If You Only Have 5 Minutes: Compensation Philosophy FAQ 4
What A Compensation Philosophy Is & Why It’s Essential For Your Business 7
The 4 Strategic Pillars Of A Compensation Philosophy 9
Best Practices 11
Examples: Compensation Philosophy Statements 15
Examples: How A Compensation Program Comes Together for Amazon, Coinbase, and Netflix 17
Compensation Philosophy Evaluation Checklist 21
Create a compensation strategy that supports the growth of your business.
SECTION 1:
5
What’s a compensation philosophy? I don’t really have time to ponder abstract theories.
A compensation philosophy is more than food for thought. It’s a concrete statement about how your company will pay and reward its employees. It’s a reflection of your organization’s values, market positioning, finances, and goals. And it’s the basis for your pay structures and overall compensation program.
Why do I need a compensation philosophy?
Without a compensation philosophy, you’re navigating pay decisions around guesses, intuition, and what you think everyone else is doing. You’re likely inefficient, overspending in some areas, and underspending in others. A strong compensation philosophy grounded in solid data will help you:
• Effectively manage your burn rate • Create pay packages that align with your finances • Build transparency and trust around your pay practices • Reach your diversity, equity, and inclusion (DE&I) goals
with intention, instead of playing catch-up • Create a more streamlined pay and reward process.
Where do I start?
Begin by analyzing the market with current data relevant to your company from a reputable source. In other words: Don’t Google your data set.
With this data, you’ll discover how the salaries you’re paying for certain roles compare to other companies in your industry with a similar stage of financing, also known as benchmarking.
Your compensation philosophy will explain how you’ll apply what you’ve learned from the market analysis and benchmarking to your business. It will answer questions like: Will you pay at or below market? What kind of performance or behavior will you reward?
If you only have the space between meetings to get up to speed on compensation philosophy, we’ve answered some key questions to get you started. Come back to the rest of this guide when you’re ready to learn more.
How long should my compensation philosophy be?
The length and the details you include are up to your organization, but in general there are two ways to craft it.
1. You can create a one or two-paragraph summary that’s a high-level view of your strategy. Think of this as more of a compensation philosophy statement. To see examples, go to page 17.
2. You can also create a longer, more detailed view that includes specifics about your market positioning and the pay percentiles you’re targeting.
Once my compensation philosophy is written, what do I do with it?
A compensation philosophy statement can be shared for transparency with employees in places like your company’s intranet, FAQs, decks, and HR materials. And you can mention key points in your discussions with job candidates.
Longer, detailed compensation philosophies are best shared only with executives, human resources, and other compensation decision-makers. That will keep you from being boxed in to specific targets if your company changes in any way.
So once my compensation philosophy is written and shared, are we done?
Not necessarily. Your compensation philosophy might evolve as your company does. Re-evaluate it to determine if it still reflects the state of your organization whenever there are changes such as shifts to hybrid or remote work, transitions in executive leadership, or significant growth or expansion.
Create a compensation strategy that supports the growth of your business.
WHAT A COMPENSATION PHILOSOPHY IS & WHY IT’S ESSENTIAL FOR YOUR BUSINESS
SECTION 2:
8
With a compensation philosophy, you have a solid and consistent structure for your compensation practices so your organization can:
• Hire – and retain – rockstar employees by communicating clear reasons behind compensation. Often, a candidate’s or employee’s satisfaction around pay is not just about the value of the package, but trust that an employer is paying fairly. Your compensation philosophy demonstrates transparency and will help build a healthy relationship with employees.
• Align pay to your company’s finances. Will you pay at or above market? Will you offer more equity than cash? Creating a compensation philosophy will help you answer these questions, so you can manage your burn rate effectively, get ahead of attrition, and avoid over-dilution.
• Spotlight behaviors you want to drive and reward. The kind of performance you celebrate with incentives, bonuses, and promotions impacts your company’s culture. Will it be competitive or collaborative? Your compensation philosophy can help set the tone impacting overall performance and job satisfaction.
• Make pay equity and DE&I part of the process, not just an intention. Instead of reacting or racing to catch up, you can build an equitable and diverse workforce deliberately. And a well- defined strategy will help pinpoint the cause of any existing inequities, so you can correct them.
• Ease of administration for your HR and compensation team. A compensation philosophy takes the art out of these teams’ jobs, replacing it with data and clarity. Determining pay packages will be easier, and awkward conversations can be avoided because HR and compensation teams can explain their decisions with confidence.
A compensation philosophy is a formal statement that explains how your company plans to pay and reward its employees based on your company’s culture, values, and financials. It’s the “why” behind your pay structure and is the basis for all pay-related decisions.
Create a compensation strategy that supports the growth of your business.
THE 4 STRATEGIC PILLARS OF A COMPENSATION PHILOSOPHY
SECTION 3:
Market position
Decide how you’ll target the market and at what percentiles you’ll pay for different roles. This is about finding a balance between attracting top talent and your finances.
Pay mix
How will you pay in terms of cash, equity, and variable incentives like bonuses and commissions? If you have less cash on hand, you may decide to offer more equity. If you’re a later stage company, you may have a heavier focus on cash.
Segmentation
Will you have a single pay strategy for your entire company or will it vary by group? If you’re segmenting by group, it’s important to have a rationale for this decision.
Geo strategy
Determine how you’ll pay employees in different locations. Also, have a plan for how you’ll pay employees who move to another region, state, or country.
Ready to start creating a compensation philosophy for your organization? Consider the following key areas that your compensation philosophy will define:
M arket p
SECTION 4:
BEST PRACTICES
Be clear and consistent.
Your compensation philosophy should help you answer a variety of questions throughout an employee’s life cycle. For instance, if any employee wants to move to another region or state, how will it affect their pay? You need to be able to explain this clearly and easily – especially if it leads to a reduction in pay.
Lead with data not feelings.
Compensation can be emotional because it’s tied to the health and quality of the lives of your employees and their families. Although you want to be empathetic, take a step back when you find yourself making decisions based on emotions. Gather data points and determine if they validate your feelings or if they reveal something else.
Beware of exceptions.
Maybe there’s a case where you weren’t able to secure a candidate at a certain salary, so you assume all of your compensation packages aren’t competitive. That’s not necessarily true. Anything that’s related to compensation applies to 80-90% of your organization. The other 10% will be an exception, so make decisions with that framework in mind.
Reevaluate when necessary.
When there’s a major change or milestone in your organization, review your compensation philosophy to make sure it still supports your business. These changes include transitions to hybrid or remote work, shifts in executive leadership, or opening your first office outside the United States.
You could also reevaluate it if you’re having trouble competing in the market or if you sense something about your compensation philosophy just isn’t right. No matter the reason, remember, data should support any changes you make.
Create a compensation strategy that supports the growth of your business.
SECTION 5:
14
1. Short and to the point
Summarize your key decisions in one to two paragraphs to create a compensation philosophy statement. This format can be shared broadly and provides transparency about what the company values in terms of pay.
Post it on your company’s intranet or include it in FAQs and HR materials. You can also mention key points during conversations with prospective employees.
2. Get detailed
Your compensation philosophy can be a longer document with specifics about market position, pay targets, pay mix, segmentation, and geo strategy.
This version is best shared only with executives, human resources, and compensation decision-makers. Although you want to be transparent about your overall strategy, you don’t want to be too specific when sharing your targets and goals because this can paint you into a corner if your strategy or finances change. If you say you’re paying in the 75th percentile and then change it, people will feel shortchanged.
The length, format and level of detail you include in your compensation philosophy are up to your company, but there are two general ways to do it.
Create a compensation strategy that supports the growth of your business.
SECTION 6:
Equity is your most powerful compensation.
The problems we are trying to solve are complex, but if we solve them, the value will be enormous. Equity allows everyone on the team to share in this value, which is why we emphasize equity over cash.
Rewarding excellence.
We reward employees who deliver value. Outsized results from you will result in outsized compensation.
Pay for performance is about what you do AND how you get it done.
Our top individual contributors make a huge impact while putting our customers first. Our best people managers lead impactful and healthy teams. Our compensation programs are focused on delivering more rewards to those who are high performers or enable high performance AND great teammates.
Recognition should be equitable and meaningful.
In a world of apathy and indifference caring is an act of rebellion. We care about the cause, the art, the details, and one another. We strive to provide personally meaningful recognition and support to all contributors.
Create a compensation strategy that supports the growth of your business.
SECTION 7:
EXAMPLES: HOW A COMPENSATION PROGRAM COMES TOGETHER FOR AMAZON, COINBASE, AND NETFLIX
18
Philosophy
• Innovate and invest for the long-term by relentlessly focusing on the customer experience and leveraging technology
• Attract and retain highly talented employees who act like owners and think about the company holistically
• No difference between employees and executives
Market Positioning / Pay Mix
Above market median; heavy equity, low salary (capped), no bonuses outside of new hire sign-on
Programs
• Longer than normal vesting schedules (5-6 years) with back-weighted amounts
• Rigorous performance review processes to ensure there are no overpayments in “mega grants”
• Equity Grants on a differentiated and episodic (i.e., not annual) basis to those who have demonstrated value-creating performance and have the potential to contribute to the future long-term success of the company
Here’s how compensation philosophy, pay mix, and programs connect for three of the nation’s leading companies.
19
Philosophy
• Equal pay for equal work • Ensure that we attract and retain top talent from top companies we regularly
compete with for talent
Market Positioning / Pay Mix
• Target Total Cash model for base salaries. Coinbase pays what other companies pay for base + bonus, but all in base.
• Everyone receives equity
Programs
• Peer Group change: from 85 companies to the 18 top technology and financial services companies we regularly compete with for talent
• No base salary negotiations during the hiring or promotion process. Every role and level has a set pay target.
• Pay transparency: shares employee range and the level above • Regular Market reviews to ensure that pay targets are at market rates
20
Philosophy
• To help us attract and retain stunning colleagues, we pay employees at the top of their personal market.
• Each employee chooses each year how much of their compensation they want in salary versus stock options. You choose how much risk and upside you want.
Market Positioning / Pay Mix
• Target Total Cash model for base salaries. • Pay at the top of the compensation range. • Everyone receives equity - fully vested 10 year grants.
Programs
• We calibrate to market once a year. • We do not think of these as “raises” and there is no raise pool to divide up.
The market for talent is what it is. • Choice empowers employees to be rewarded in ways meaningful to them. • Pay transparency: shares employee range and the level above • Regular Market reviews to ensure that pay targets are at market rates
Create a compensation strategy that supports the growth of your business.
SECTION 8:
Does it reflect the values and mission of our company?
Do the behaviors it rewards align with our company’s mission and values?
How might it affect the company culture?
Is every decision backed by fresh, reputable data?
Does it align with our current financials as well as our goals?
Does it cover how to structure new offers post-financing?
Does it have a clear strategy for pay equity and DE&I?
Does it address how we handle hybrid or remote work?
Can I use it to confidently answer common pay questions from employees and job candidates?
Once you’ve written your compensation philosophy, ask yourself the following questions to determine whether it’s ready to share or if there’s more information you need to gather:
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ABOUT OPEN COMP OpenComp helps modern employers and employees confidently make the best business and career decisions. With compensation intelligence, they make data-driven decisions, bring clarity to the entire employee experience, and enhance accountability and governance.
The Compensation Intelligence Platform by OpenComp offers the only reliable compensation data, benchmarks, and insights for high-growth employers and employees, from seed to pre-IPO. With our active community of compensation experts, dedicated customer success managers, and a unicorn-tested Services team, our customers are creating radical change in the world.
To learn more go to OpenComp.com or email [email protected].
If You Only Have 5 Minutes: Compensation Philosophy FAQ
What A Compensation Philosophy Is & Why It’s Essential For Your Business
The 4 Strategic Pillars Of A Compensation Philosophy
Best Practices
Examples: Compensation Philosophy Statements
Examples: How A Compensation Program Comes Together for Amazon, Coinbase, and Netflix
Compensation Philosophy Evaluation Checklist
Create a compensation strategy that supports the growth of your business.
2
STEP 1 Market analysis & benchmarking
Using fresh and relevant data from a reputable source, learn how you’re paying compared to similar companies in your industry
STEP 2 Compensation philosophy
Create a statement that formalizes how you plan to pay and reward your employees. This is based on information gathered in your market analysis, your company values, and financials.
STEP 3 Pay structure creation
Guided by your compensation philosophy, construct your pay structures.
STEP 4 Program design
Bring it all together to build your compensation program – everything from offer letters, to compensation packages, merit, cycles, burn analysis, and diversity, equity, and inclusion (DE&I).
INTRODUCTION Who doesn’t love the thrill of company building? It’s practically a prerequisite if you’re involved with a venture-backed company. But for something as essential to the success of your business and your employees as compensation, it’s crucial to have a plan. That plan is called a compensation philosophy – and you need one asap.
A compensation philosophy will help you get ahead of issues like pay equity, pay that doesn’t match your financials, and hiring and retaining top talent.
Stop treating compensation as an art. A compensation philosophy builds meaning from data to structure how you pay, so that your business, your candidates, and your employees can make the best business and career decisions.
Creating a compensation philosophy is the second step in a four-step process for designing a compensation program:
In this guide, you’ll learn how to develop a compensation philosophy that sets your company on a solid compensation foundation and replaces guesswork with clarity and confidence.
If you’re ahead of the game and already have one, you’ll learn how to evaluate your compensation philosophy to make sure it aligns with your mission and goals.
Need to back up and learn about Step 1? Download The High-Growth Guide to Compensation Benchmarking
TABLE OF CONTENTS If You Only Have 5 Minutes: Compensation Philosophy FAQ 4
What A Compensation Philosophy Is & Why It’s Essential For Your Business 7
The 4 Strategic Pillars Of A Compensation Philosophy 9
Best Practices 11
Examples: Compensation Philosophy Statements 15
Examples: How A Compensation Program Comes Together for Amazon, Coinbase, and Netflix 17
Compensation Philosophy Evaluation Checklist 21
Create a compensation strategy that supports the growth of your business.
SECTION 1:
5
What’s a compensation philosophy? I don’t really have time to ponder abstract theories.
A compensation philosophy is more than food for thought. It’s a concrete statement about how your company will pay and reward its employees. It’s a reflection of your organization’s values, market positioning, finances, and goals. And it’s the basis for your pay structures and overall compensation program.
Why do I need a compensation philosophy?
Without a compensation philosophy, you’re navigating pay decisions around guesses, intuition, and what you think everyone else is doing. You’re likely inefficient, overspending in some areas, and underspending in others. A strong compensation philosophy grounded in solid data will help you:
• Effectively manage your burn rate • Create pay packages that align with your finances • Build transparency and trust around your pay practices • Reach your diversity, equity, and inclusion (DE&I) goals
with intention, instead of playing catch-up • Create a more streamlined pay and reward process.
Where do I start?
Begin by analyzing the market with current data relevant to your company from a reputable source. In other words: Don’t Google your data set.
With this data, you’ll discover how the salaries you’re paying for certain roles compare to other companies in your industry with a similar stage of financing, also known as benchmarking.
Your compensation philosophy will explain how you’ll apply what you’ve learned from the market analysis and benchmarking to your business. It will answer questions like: Will you pay at or below market? What kind of performance or behavior will you reward?
If you only have the space between meetings to get up to speed on compensation philosophy, we’ve answered some key questions to get you started. Come back to the rest of this guide when you’re ready to learn more.
How long should my compensation philosophy be?
The length and the details you include are up to your organization, but in general there are two ways to craft it.
1. You can create a one or two-paragraph summary that’s a high-level view of your strategy. Think of this as more of a compensation philosophy statement. To see examples, go to page 17.
2. You can also create a longer, more detailed view that includes specifics about your market positioning and the pay percentiles you’re targeting.
Once my compensation philosophy is written, what do I do with it?
A compensation philosophy statement can be shared for transparency with employees in places like your company’s intranet, FAQs, decks, and HR materials. And you can mention key points in your discussions with job candidates.
Longer, detailed compensation philosophies are best shared only with executives, human resources, and other compensation decision-makers. That will keep you from being boxed in to specific targets if your company changes in any way.
So once my compensation philosophy is written and shared, are we done?
Not necessarily. Your compensation philosophy might evolve as your company does. Re-evaluate it to determine if it still reflects the state of your organization whenever there are changes such as shifts to hybrid or remote work, transitions in executive leadership, or significant growth or expansion.
Create a compensation strategy that supports the growth of your business.
WHAT A COMPENSATION PHILOSOPHY IS & WHY IT’S ESSENTIAL FOR YOUR BUSINESS
SECTION 2:
8
With a compensation philosophy, you have a solid and consistent structure for your compensation practices so your organization can:
• Hire – and retain – rockstar employees by communicating clear reasons behind compensation. Often, a candidate’s or employee’s satisfaction around pay is not just about the value of the package, but trust that an employer is paying fairly. Your compensation philosophy demonstrates transparency and will help build a healthy relationship with employees.
• Align pay to your company’s finances. Will you pay at or above market? Will you offer more equity than cash? Creating a compensation philosophy will help you answer these questions, so you can manage your burn rate effectively, get ahead of attrition, and avoid over-dilution.
• Spotlight behaviors you want to drive and reward. The kind of performance you celebrate with incentives, bonuses, and promotions impacts your company’s culture. Will it be competitive or collaborative? Your compensation philosophy can help set the tone impacting overall performance and job satisfaction.
• Make pay equity and DE&I part of the process, not just an intention. Instead of reacting or racing to catch up, you can build an equitable and diverse workforce deliberately. And a well- defined strategy will help pinpoint the cause of any existing inequities, so you can correct them.
• Ease of administration for your HR and compensation team. A compensation philosophy takes the art out of these teams’ jobs, replacing it with data and clarity. Determining pay packages will be easier, and awkward conversations can be avoided because HR and compensation teams can explain their decisions with confidence.
A compensation philosophy is a formal statement that explains how your company plans to pay and reward its employees based on your company’s culture, values, and financials. It’s the “why” behind your pay structure and is the basis for all pay-related decisions.
Create a compensation strategy that supports the growth of your business.
THE 4 STRATEGIC PILLARS OF A COMPENSATION PHILOSOPHY
SECTION 3:
Market position
Decide how you’ll target the market and at what percentiles you’ll pay for different roles. This is about finding a balance between attracting top talent and your finances.
Pay mix
How will you pay in terms of cash, equity, and variable incentives like bonuses and commissions? If you have less cash on hand, you may decide to offer more equity. If you’re a later stage company, you may have a heavier focus on cash.
Segmentation
Will you have a single pay strategy for your entire company or will it vary by group? If you’re segmenting by group, it’s important to have a rationale for this decision.
Geo strategy
Determine how you’ll pay employees in different locations. Also, have a plan for how you’ll pay employees who move to another region, state, or country.
Ready to start creating a compensation philosophy for your organization? Consider the following key areas that your compensation philosophy will define:
M arket p
SECTION 4:
BEST PRACTICES
Be clear and consistent.
Your compensation philosophy should help you answer a variety of questions throughout an employee’s life cycle. For instance, if any employee wants to move to another region or state, how will it affect their pay? You need to be able to explain this clearly and easily – especially if it leads to a reduction in pay.
Lead with data not feelings.
Compensation can be emotional because it’s tied to the health and quality of the lives of your employees and their families. Although you want to be empathetic, take a step back when you find yourself making decisions based on emotions. Gather data points and determine if they validate your feelings or if they reveal something else.
Beware of exceptions.
Maybe there’s a case where you weren’t able to secure a candidate at a certain salary, so you assume all of your compensation packages aren’t competitive. That’s not necessarily true. Anything that’s related to compensation applies to 80-90% of your organization. The other 10% will be an exception, so make decisions with that framework in mind.
Reevaluate when necessary.
When there’s a major change or milestone in your organization, review your compensation philosophy to make sure it still supports your business. These changes include transitions to hybrid or remote work, shifts in executive leadership, or opening your first office outside the United States.
You could also reevaluate it if you’re having trouble competing in the market or if you sense something about your compensation philosophy just isn’t right. No matter the reason, remember, data should support any changes you make.
Create a compensation strategy that supports the growth of your business.
SECTION 5:
14
1. Short and to the point
Summarize your key decisions in one to two paragraphs to create a compensation philosophy statement. This format can be shared broadly and provides transparency about what the company values in terms of pay.
Post it on your company’s intranet or include it in FAQs and HR materials. You can also mention key points during conversations with prospective employees.
2. Get detailed
Your compensation philosophy can be a longer document with specifics about market position, pay targets, pay mix, segmentation, and geo strategy.
This version is best shared only with executives, human resources, and compensation decision-makers. Although you want to be transparent about your overall strategy, you don’t want to be too specific when sharing your targets and goals because this can paint you into a corner if your strategy or finances change. If you say you’re paying in the 75th percentile and then change it, people will feel shortchanged.
The length, format and level of detail you include in your compensation philosophy are up to your company, but there are two general ways to do it.
Create a compensation strategy that supports the growth of your business.
SECTION 6:
Equity is your most powerful compensation.
The problems we are trying to solve are complex, but if we solve them, the value will be enormous. Equity allows everyone on the team to share in this value, which is why we emphasize equity over cash.
Rewarding excellence.
We reward employees who deliver value. Outsized results from you will result in outsized compensation.
Pay for performance is about what you do AND how you get it done.
Our top individual contributors make a huge impact while putting our customers first. Our best people managers lead impactful and healthy teams. Our compensation programs are focused on delivering more rewards to those who are high performers or enable high performance AND great teammates.
Recognition should be equitable and meaningful.
In a world of apathy and indifference caring is an act of rebellion. We care about the cause, the art, the details, and one another. We strive to provide personally meaningful recognition and support to all contributors.
Create a compensation strategy that supports the growth of your business.
SECTION 7:
EXAMPLES: HOW A COMPENSATION PROGRAM COMES TOGETHER FOR AMAZON, COINBASE, AND NETFLIX
18
Philosophy
• Innovate and invest for the long-term by relentlessly focusing on the customer experience and leveraging technology
• Attract and retain highly talented employees who act like owners and think about the company holistically
• No difference between employees and executives
Market Positioning / Pay Mix
Above market median; heavy equity, low salary (capped), no bonuses outside of new hire sign-on
Programs
• Longer than normal vesting schedules (5-6 years) with back-weighted amounts
• Rigorous performance review processes to ensure there are no overpayments in “mega grants”
• Equity Grants on a differentiated and episodic (i.e., not annual) basis to those who have demonstrated value-creating performance and have the potential to contribute to the future long-term success of the company
Here’s how compensation philosophy, pay mix, and programs connect for three of the nation’s leading companies.
19
Philosophy
• Equal pay for equal work • Ensure that we attract and retain top talent from top companies we regularly
compete with for talent
Market Positioning / Pay Mix
• Target Total Cash model for base salaries. Coinbase pays what other companies pay for base + bonus, but all in base.
• Everyone receives equity
Programs
• Peer Group change: from 85 companies to the 18 top technology and financial services companies we regularly compete with for talent
• No base salary negotiations during the hiring or promotion process. Every role and level has a set pay target.
• Pay transparency: shares employee range and the level above • Regular Market reviews to ensure that pay targets are at market rates
20
Philosophy
• To help us attract and retain stunning colleagues, we pay employees at the top of their personal market.
• Each employee chooses each year how much of their compensation they want in salary versus stock options. You choose how much risk and upside you want.
Market Positioning / Pay Mix
• Target Total Cash model for base salaries. • Pay at the top of the compensation range. • Everyone receives equity - fully vested 10 year grants.
Programs
• We calibrate to market once a year. • We do not think of these as “raises” and there is no raise pool to divide up.
The market for talent is what it is. • Choice empowers employees to be rewarded in ways meaningful to them. • Pay transparency: shares employee range and the level above • Regular Market reviews to ensure that pay targets are at market rates
Create a compensation strategy that supports the growth of your business.
SECTION 8:
Does it reflect the values and mission of our company?
Do the behaviors it rewards align with our company’s mission and values?
How might it affect the company culture?
Is every decision backed by fresh, reputable data?
Does it align with our current financials as well as our goals?
Does it cover how to structure new offers post-financing?
Does it have a clear strategy for pay equity and DE&I?
Does it address how we handle hybrid or remote work?
Can I use it to confidently answer common pay questions from employees and job candidates?
Once you’ve written your compensation philosophy, ask yourself the following questions to determine whether it’s ready to share or if there’s more information you need to gather:
23
ABOUT OPEN COMP OpenComp helps modern employers and employees confidently make the best business and career decisions. With compensation intelligence, they make data-driven decisions, bring clarity to the entire employee experience, and enhance accountability and governance.
The Compensation Intelligence Platform by OpenComp offers the only reliable compensation data, benchmarks, and insights for high-growth employers and employees, from seed to pre-IPO. With our active community of compensation experts, dedicated customer success managers, and a unicorn-tested Services team, our customers are creating radical change in the world.
To learn more go to OpenComp.com or email [email protected].
If You Only Have 5 Minutes: Compensation Philosophy FAQ
What A Compensation Philosophy Is & Why It’s Essential For Your Business
The 4 Strategic Pillars Of A Compensation Philosophy
Best Practices
Examples: Compensation Philosophy Statements
Examples: How A Compensation Program Comes Together for Amazon, Coinbase, and Netflix
Compensation Philosophy Evaluation Checklist
