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Our team is our biggest competitive advantage, and we believe in a fair and transparent approach to our compensation philosophy. We want our team to understand the reasoning behind their salary, methodologies used in building our comp strategy and how they can expect increases.
In short, we believe employees should know the what and the why behind their compensation.
For the purposes of this article, compensation refers to cash compensation, or base salary.
COMPANY builds our cash compensation structure by targeting a percentile of market data composed of similarly situated companies. The benchmarking process begins internally by reviewing job descriptions for every role and every level at COMPANY and our career levels for expectations of each of those roles. Then, we identify a data set of similarly situated companies for market comparisons. Similarly situated companies are typically in the same industry, with a comparable amount of employees or revenue.
Once the job descriptions are defined and the market is identified, we then partner with (COMP DATA TOOL) benchmarking tools to compare our roles with the database of our market. Each role is then evaluated against the pay bands and calibrated with the data set as needed. This allows us to see various percentiles, and provide a data driven approach to setting targets.
COMPANY considers a variety of factors when looking at competitive pay practices. While health benefits, 401(k), equity and perks are key tenets of rewards, base salary is the biggest factor when creating competitive packages. At COMPANY, we target the XXth percentile for our target salary. Using the XXth percentile as a target midpoint, we then build salary bands around each target. This allows employees to grow professionally and financially through our career levels.
Each role is benchmarked to our market data, and the midpoint is set at the XXth percentile of the market. When we build salary bands, we do a spread from the midpoint to determine the overall band. As bands are created, we use compa-ratios to describe where an individual sits relative to midpoint.
Compa-ratio is calculated by dividing a salary by the midpoint or target. When we hire new roles, we target the midpoint, giving a compa-ratio of 1. As folx progress through the bands, their compa-ratio will become higher, and as they are promoted into a new level, their compa-ratio will drop down as the role will have a new salary band with a higher midpoint. The compa-ratio range we target is .08-1.2, with most individuals falling between .9-1.1. Broad ranges allow for financial compensation to compliment professional growth, and provide flexibility to differentiate based on contributions and performance.
COMPANY reviews compensation formally twice per year in line with talent review cycles. This evaluation is to review all compensation for performance based increases and market adjustments as needed. While compensation is reviewed twice per year, this should not set the expectation of 6-month increases; a typical COMPANY employee should expect a compensation increase every 6-12 months. When evaluating compensation for, we use compa-ratios to help guide decisions and ensure fair pay practices.
Market Based Increases The market we benchmark ourselves to changes due to cost of living increases, competition, and growth and economic factors. We have a responsibility to ensure we are comparing ourselves to up to date market information, and will review our bands at the end of each fiscal year. As the market adjusts, we will continue to target the XXth percentile, and will adjust bands as necessary. As bands adjust, this will drop compa-ratios and therefore some individuals may qualify for a market based increase to maintain the same compa-ratio. As market conditions don’t change drastically year over year, employees should not expect this to be a regular or recurring increase. Market increases will be recommended by People Ops and approved by the Executive team, then communicated to individuals awarded a market increase.
Performance Based Increases As COMPANY implements salary bands, we have the opportunity to reward individuals in line with their growth in a role. As employees start their career they may find advancement more quickly in lower levels of their career path. As their career grows, roles become more complex and strategic and take longer to master. Our compensation bands are built to support this as they become larger at higher levels. Performance based increases happen as there is notable progress through a role. employees should expect to see these increases in line with performance. Performance based increases are awarded to an individual no more than once per year, but is not guaranteed on any cadence.
Equitable Practices Based Increase As COMPANY reviews compensation data, we will always include data cuts that use a demographic lens. This helps us ensure our pay practices are equitable, and gives us time to truly review and correct any potential issues.
COMPANY is committed to providing education on compensation practices, our philosophies, and how we determine pay. We also will ensure individuals know their compa-ratio as well as the salary bands for each role across the company.
We understand the value of compensation transparency and use it to hold ourselves accountable for equitable pay practices. However, we respect the privacy of our peers and feel a responsibility to allow our colleagues to make their own choice in sharing salary information. Every six months, immediately following performance review cycles, we will identify and correct any unjustifiable pay gaps, and report out pay equity to the company.
As we grow and continue to provide education on compensation practices, we will continuously evaluate the proper level of transparency.
Individuals will move throughout the salary bands for their level as they master skills. As your grow your professional prowess, you’ll likely experience corresponding salary increases. Most employees will experience compensation increases with-in their level before being promoted. To help illustrate that idea: