Raise your hand if you’ve ever listed an unpaid internship on your resume. However unglamorous, sometimes it’s an inevitable foot-in-the-door, pay-your-dues, first step in our career trajectory. We learned practical skills and whether we’re on the right track for a solid career fit. And we learned to pay close attention to the compensation in our future job searches.
CEOs of tech startups are paying close attention to compensation, too! One of the most common questions I get asked is, how do I structure my compensation package? It’s obviously going to take more than a compelling vision to recruit your Dream Team. On the other hand, you’re not going to be able to offer your employees the same benefits that they expect at an enterprise level company. So, what’s the ideal compensation package?
In my experience, candidates know what they’re getting into when they interview with a startup. 85-90% are willing to take a pay cut. That being said, it’s important to do your research to understand how much of a pay cut they’re okay with, before you start the hiring process.
1. It helps you to have a realistic expectation about what kind of talent you can afford to hire.
Are you looking for a super senior candidate with many years of experience? Great! So is every other company out there. The candidates know what they’re worth, and they’re comparing your benefits with their other offers. Things have changed drastically in the tech world. You need to know if your compensation package is competitive before this conversation comes up in the interview process.
You can offset a lower starting salary with bonuses/commissions, stock options, unlimited paid time off, vacation days, travel allowances, work from home options, medical and dental insurance, etc.
Many factors determine compensation, such as the local standard of living and state tax rates. A tech worker living in Silicon Valley needs a higher salary than someone who can work from their home in Wyoming. Obviously.
If there’s a mismatch, then you can increase your budget for the position you’re hiring for. If you’re not able to do this, then you can reset what you’re looking for in a candidate. Someone with less experience may fit your budget, and be an excellent fit for your company, too. They may be more willing to try new things because they haven’t spent years doing it a certain way in a mature company. You’ll need intellectual flexibility in a startup stage
2. If you go into the interview without a well-researched compensation package, you’re going to waste everyone’s time and energy.
Why would you take the time to interview candidates that you know you can’t afford to hire? They’re not going to be magically wooed by your vision if they can’t live on the salary you offer. It imposes on the candidate and your recruiter. It wastes your time because it’s going to take you longer to fill your role.
In the meanwhile, other team members are doing the tasks of this role while the position is being filled. This takes time away from the jobs they’re being paid to do and burns them out.
3. Thoughtful research communicates that you care about candidate experience.
The interview process is one of the first real glimpses a candidate gets into your company. If the discussion about compensation is interactive and honest, you’re modeling your culture. It’s appealing to the candidate. Who doesn’t want to work in an environment where thoughtful questions are asked, and responses are heard and incorporated into the solution?
Let the candidate know up front what you’re able to offer. And ask them what they need to move forward if you extend an offer to them. This information is part of your research. What are their expectations? What would it look like for them to accept an offer from you? Do they have a target salary in mind? If you’re only able to offer a certain amount, is this something they can do? Are there other pieces of the package that can compensate for a lower salary?
These conversations save time for everyone involved, and this demonstrates that you respect the candidate’s time and the time of your team members. It’s a good look.
4. Research ensures team parity- you’re making sure that the team is being paid equally.
This is huge! For team members at the same level, they should be earning about the same amount.
It’s a relatively straightforward process when you start hiring for a tech startup. Pay gaps become harder to catch as organizations experience employee turnover, reorganizations, changes in job duties, and subjective bias.
When employees have different compensation packages, it’s a matter of time before it’s going to come up and negatively affect your company culture. The absence of fairness is demotivating and impacts an employee’s capacity to trust other team members.
Team parity reflects a healthy, inclusive corporate culture. Equitable pay is the number one thing employers can do to build trust.
Questions about how to research your compensation packages? Reach out- I’d love to connect.
