Salary Formula: XXX (Exposed, Explored and Explained)
Everything you ever wanted to know about our fair and transparent compensation plan but were afraid to ask.
What do you think? Is it ok that the smooth talkers of the world earn more than their colleagues who don’t really have the gift of the gab for doing exactly the same thing? We think it’s not.
Having been inspired by Management 3.0 #Workout by Jurgen Appelo as well as several success stories of the companies who had introduced transparent salaries (hi Buffer!), we’ve decided that we want to take the money issue off the table and stop rewarding people’s negotiation skills. Instead, we’ve worked out a simple mathematical formula that minimizes subjectivity and consists of bias-free elements only. We wanted to introduce a fair, flexible and transparent system that keeps people motivated and reinforces their trust in the company.
We’ve been using the formula from 2016 on, which means that, naturally, it has undergone several changes. Last year, our non-managerial employees set up a working group and were the prime movers in introducing the most notable changes to the formula.
Sugar, Spice and Everything Nice
These were the ingredients chosen to create our Salary Formula. Too good to be true? Ok, then substituting the “Sugar,” “Spice,” and “Everything nice” with “Level,” “ELP Experience,” and “Tags” will do the trick.
Even though the Powerpuff Girls’ reference was supposed to act just as a ridiculous metaphor, there’s more to that comparison than I had initially thought. At the end of the day, don’t we fight against injustice with our Salary Formula? Exactly… just like good old Blossom, Bubbles and Buttercup ;)
Let’s come back down to earth, though. At least for a little while :) You can take a look at the latest version of our formula in all its glory below:
As you can see, it’s extremely simple and consists of only three elements. Let’s break them down so that you fully understand the way we calculate the salaries of our designers and developers.
Level Up
First things first, we’ve created our own base salaries for each level of experience, from Junior through Mid and Senior to Mentor and Architect. We determine your level over the recruitment process, juxtaposing your hard and soft skills with those of our current employees at a given level as well as with the requirements defined in our Career Path for each level. You can reach a higher one whenever it’s time for your “SF Update” meeting. Depending on your level of seniority, namely whether you’re Junior, Mid or Senior, these highly anticipated updates take place every 4, 6 or 8 months, respectively.
What’s more, in order to ensure that our base salaries are competitive, we keep track of remuneration offered by our direct competitors and save our findings every two months. Having collected the data from 12 months, we analyze it and check if it indicates that we should update the base.
Tag! You’re It
The second element of the formula comprises the tags that represent EL Passion’s culture and values. You can get up to five tags simultaneously for the following skills and extra activities:
- Business (e.g. having impact on the sales process);
- Improving ELP (e.g. giving internal presentations on technologies and best practices; improving company processes);
- ELP Fame (e.g. giving talks at external events; writing posts on our blog; notable contributions to popular open source repositories);
- Tech Excellence (e.g. being experienced in technologies that are unique in the company; having impact on changing our technology stack);
- English (C1 level of English as defined by the CEFR).
Depending on the impact you make on the company in the above-mentioned categories, you can either be awarded a Basic or Pro Tag, with the exception of the last tag, which you can only get if you’re a pro at English. Your base salary is then increased by either 1.5% or 3% for each Basic or Pro Tag, respectively, which means that if you tick all the right boxes, your salary can be even 15% higher!
If you want to get more deets on our tags, go read the Tags Descriptions, where they are fully explained.
ELP Experience
Last but not least, we reward you for the time you stay with us. The longer you stay, the bigger the bonus. It becomes even more evident once you hit your third and fifth work anniversary.
For the record, the fact that our system is transparent doesn’t necessarily mean that everybody knows everybody else’s salaries straightaway. If you decide to make your level and tags visible to your colleagues, you’ll be able to see theirs as well.
Before we wrap things up, you should probably take a look at our Salary Calculator and try it out with specific values. It doesn’t really get more transparent than this, does it? :)
There’s a Catch
Have you been wondering where’s the catch? You’re right, there is one. YES, we all had to make a commitment not to negotiate salaries ever again, and YES, we do sometimes lose a candidate or an employee to a higher offer, but the advantages that our Salary Formula brings definitely outweigh the disadvantages.
We’ve successfully managed to eliminate the bias that very often comes hand in hand with salary negotiation. What’s more, we’ve put an end to speculation as to other people’s salaries and established the same raise criteria for everybody. The process is iterative and reliable regardless of changing circumstances. You can predict your salary easily and you know when you can expect to get a raise straightaway.
We are not the only ones who see the advantages of introducing transparent salaries. Although, as I have already mentioned at the beginning of this post, we ourselves were inspired by others, a little bird told us that our own formula convinced a few more companies to follow suit!
What are your thoughts on our solution and pay transparency in general? Don’t be shy and drop a comment below!
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About the Author
Gracjan is a Community Manager at EL Passion. You can find him on LinkedIn.
