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Engineering: backend-engineering, frontend-engineering, data-engineering, ml-engineering, platform-engineering, qa-methodology Executive: go-to-market, legal-strategy, operational-design, org-design, product-strategy ml-engineering: added missing training-infrastructure.md reference qa-methodology: added test-data-management, performance-testing, security-testing references All frontmatter converted to agent-skills convention. Source: https://github.com/magnus919/hermes-profiles
5.8 KiB
5.8 KiB
Compensation Frameworks
Market Benchmarking
The Three Sources Approach
Cross-reference three sources to determine market pay:
| Source | Pros | Cons | Use for |
|---|---|---|---|
| Radford/Aon | Comprehensive tech data, global | Expensive, requires subscription | All tech roles |
| Levels.fyi / Glassdoor | Transparent, real-time | Self-reported, noisy | Benchmarking reality vs surveys |
| Payscale / Compensation.com | Broad coverage, good for non-tech | Less tech-specific | G&A, marketing, operations |
| Industry-specific (e.g., Culpepper) | Niche role coverage | Industry-specific only | Biotech, finance |
Market Positioning Strategy
| Position | Definition | When to use |
|---|---|---|
| P10 (lagging) | Below market median | Cost-constrained, non-core roles, non-competitive labor market |
| P50 (market) | At market median | Standard positioning for most roles |
| P75 (leading) | Above market median | Critical roles, hard-to-fill skills, competitive market |
| P90 (premium) | Top of market | Executive talent, scarcity-driven roles, strategic hires |
Geography Adjustments
Apply location-based multipliers to base pay:
| Location Tier | Multiplier (typical) | Examples |
|---|---|---|
| Tier 1 (Premium) | 1.0x (base) | San Francisco, NYC, London |
| Tier 2 (Major metro) | 0.85-0.95x | Seattle, Chicago, Berlin |
| Tier 3 (Secondary) | 0.75-0.85x | Austin, Denver, Dublin |
| Tier 4 (Remote/Rest) | 0.65-0.75x | Rural US, lower-cost regions |
Remote-first trend: Many companies are moving to location-independent pay or a single national band. Tradeoff: hiring efficiency vs compensation equity.
Equity Design
Equity Instruments
| Instrument | Description | Typical for |
|---|---|---|
| ISO (Incentive Stock Options) | Tax-advantaged options, $100K/yr limit per employee | Employees at VC-backed companies |
| NSO (Non-Qualified Stock Options) | Standard options, no limit | Employees, contractors, advisors |
| RSU (Restricted Stock Units) | Actual shares vest over time | Public companies, late-stage private |
| SAR (Stock Appreciation Rights) | Cash payout equal to share appreciation | Private companies wanting option-like economics without dilution |
| ESPP (Employee Stock Purchase Plan) | Discounted stock purchase (typically 15%) | Public companies |
Equity Grant Benchmarks
| Level | Grant range (% of pool) | Grant range ($ value, private tech) |
|---|---|---|
| Junior IC | 0.02-0.05% | $10K-$50K |
| Mid IC | 0.05-0.15% | $50K-$150K |
| Senior IC | 0.15-0.30% | $150K-$350K |
| Staff IC | 0.20-0.40% | $350K-$600K |
| Principal IC | 0.30-0.60% | $500K-$1M+ |
| Director | 0.25-0.40% | $400K-$800K |
| VP | 0.50-1.00% | $800K-$2M |
| C-Suite | 1.00-3.00% | $2M-$5M+ |
Ranges are at Series B stage. Earlier: higher percentages, lower valuations. Later: lower percentages, higher valuations.
Vesting Schedules
| Schedule | Standard | Alternative |
|---|---|---|
| Cliff (initial) | 1 year | None (rare; attracts risk of early departures) |
| Vesting (full) | 4 years | 3 years (faster liquidity for talent), 5 years (longer retention) |
| Vesting type | Monthly (standard) | Quarterly (simpler admin), Annual (very rare) |
| Acceleration | Single trigger (acquired: unvested accelerates) | Double trigger (acquired + terminated: unvested accelerates) |
Leveling & Career Banding
Comp Band Structure
| Level | Title (Engineering example) | Base band | Equity band | Total comp target |
|---|---|---|---|---|
| L3 | Junior Engineer | $80K-$120K | $10K-$30K/yr | $90K-$150K |
| L4 | Engineer | $100K-$150K | $30K-$60K/yr | $130K-$210K |
| L5 | Senior Engineer | $130K-$190K | $60K-$120K/yr | $190K-$310K |
| L6 | Staff Engineer | $160K-$230K | $120K-$200K/yr | $280K-$430K |
| L7 | Principal Engineer | $190K-$280K | $200K-$350K/yr | $390K-$630K |
Compensation Philosophy Principles
- Pay for performance, not tenure — Raises and bonuses correlate with impact, not time in seat
- Transparent bands — Employees know the range for their level, reducing negotiation advantage and bias
- Internal equity — Similar contribution receives similar comp regardless of negotiation skill or tenure
- Market-driven — Bands adjust with market, not by individual request
- Total comp mindset — Base + bonus + equity + benefits = total value. Communicate it that way.
Variable Pay & Incentives
| Type | Who | Structure | Payout |
|---|---|---|---|
| Annual bonus | All employees | % of base (10-20% IC, 20-50% exec) | Based on company + individual performance |
| Sales commission | Sales team | % of ARR/bookings (10-20% SMB, 5-10% enterprise) | Paid on closed deals |
| Spot bonus | Any | One-time cash award ($500-$5,000) | Immediate recognition |
| Retention bonus | Critical at-risk talent | Lump sum with clawback | At anniversary or milestone |
| Sign-on bonus | New hires | One-time cash + possible clawback | At start date |
Compensation Reviews
| Review type | Cadence | What changes |
|---|---|---|
| Merit increase | Annual | Base salary adjustment (3-5% typical, higher for high performers) |
| Promotion | As earned | Level change, base increase (10-20% typical), equity refresh |
| Equity refresh | Annual or on promotion | Additional equity grant (new vesting schedule) |
| Market correction | Ad hoc | Base adjustment when market moves significantly between reviews |
| Cost of living adjustment | Annual (if separate from merit) | Across-the-board % increase |