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