Your pay is important. It’s usually something most people don’t understand — why are we paid what we’re paid? Ultimately, this lack of clarity can lead to confusion and negative feelings that affect our productivity and relationships with our employers. You may have encountered situations when you felt your pay was unfairly biased by your manager, recruiter, HR or company policies.
You may know or suspect instances in which your pay has been determined based on someone else’s preferences for background, or stereotypes about your gender, race, ethnicity, identity or abilities. It can even feel unfair based on your own confidence in your ability to negotiate.
What do we think is the right thing to do, and how do we aim to achieve it here at Plastiq? Paying employees fairly, equitably and competitively is what’s right. Being transparent about our philosophy and practices is the commitment we’ve made to achieve this goal.
In designing our compensation philosophy, the Plastiq leadership team agreed that fair pay and transparency would be our guiding principles. Then it was all about the data.
The first step was to understand everyone’s work: their job function, the scale and scope of their work, and their day-to-day responsibilities. This led us to being able to identify if someone was working in accounting or financial forecasting, software development or product management, recruiting or people operations, contributing as a recent graduate/new person to the workforce, a seasoned individual contributor, a senior team lead, an experienced people manager or a more strategic cross-functional vice president.
Next we invested in access to market data from a credible resource — one that we know is used by other companies we respect — with comparable market, industry and size to Plastiq. Because companies have to participate in the benchmark survey to be able to purchase and access the survey data, we knew we were getting accurate, verified information we could trust. This ensures a few things: no subjective self-reported data, accurate alignment in assessing the scale and scope of all the roles, as well as mutual interest by the user base to make sure the data reporting and retrieval was reliable. For Plastiq, the most relevant data centered around what other companies in San Francisco and Boston pay their talent. We also cared about paying as well or better than other tech companies — in particular fintech companies — that were not yet publicly traded.
These distinctions are important for any business when planning pay. To use another small business as an example — let’s say a food truck looking to hire cashiers and cooks — one might evaluate how much to pay its employees using several factors. For example, there may be a difference in pay for food trucks operating out of Austin versus Seattle; the type of food truck (savory or sweet) may influence the level of skill required to prepare or serve the food; margins may be vastly different, meaning the business may be able to employ many or only a few. If you were planning to staff and pay a large-scale, lower-margin cupcake food truck in Austin, would it make sense for you to base your employees’ pay on a two-person sushi truck operation that required skilled sushi chefs in Seattle? Probably not. You’d want to benchmark against a business — preferably multiple businesses — like yours, in your market, with similar staffing and operational needs, to feel confident you’re using the right data.
There is always a way to understand the market data for a company’s particular situation and what their competitors pay for talent. On the flip side, if you’re trying to figure out what you should be paid and what’s fair, there is market data available to help guide you. You could start by asking other people you know that do the same type of work as you what pay they’ve seen around. You could even (and should), ask your manager, recruiter or HR team for the data.
For us at Plastiq, knowing we were committed to fair pay and to formalizing that into a transparent philosophy, the next piece was to decide how competitively we wanted to pay versus the market rates. We considered three possibilities:
Option 1: Pay in the lower quartile on base salaries and offer variable annual performance compensation (bonus programs) for individual and company performance.
Option 2: Pay at the median on salaries — and consider offering a bonus or potentially no bonus.
Option 3: Pay in the upper quartile on salaries, eschewing a bonus program, believing that if we hired amazing people, set clear priorities and expectations, and gave regular feedback we would not need to hold back a portion of our employees’ pay as an incentive to do great work.
We chose Option 3. We needed to ensure our base salaries were high enough to compete for talent in San Francisco and Boston, so we looked at data specific to these markets.
That’s when I took the numbers and built Plastiq’s pay plan. As an example, the data showed us that in San Francisco we should pay:
- A recruiter: $95,000.
- A senior recruiter: $125,000.
- A recruiting manager: $160,000.
Because we use a data-driven approach, no one coming on board needs to negotiate their own salary or is paid differently than what the market dictates. Everyone doing that job gets paid the same salary at Plastiq. This transparency eliminates any anxiety or stress employees may have if they think their colleagues performing the same job may make thousands of dollars more than them simply because of their negotiation skills.
If we were to apply this approach to our food truck example, the location and years of experience may be the most indicative of the market. So for instance, a food truck using a fair pay model based on data in Seattle may pay:
- An entry cashier: $12.50/hour.
- A three to five years of experience cashier and team truck lead: $15.00/hour.
- A seasoned cook and truck manager: $20.00/hour.
If the operators of the food truck business don’t negotiate pay individually, they may avoid disruptions in service and productivity and eliminate the kind of personnel issues that occur when employees have discussions about pay (which they inevitably do!) and discover they’re paid inconsistently or unfairly.
When Plastiq implemented the approach of paying everyone doing the same job at the same pay based on market data, we received overwhelmingly positive feedback from employees, as well as candidates who appreciate a data-driven, transparent approach. Our recruiters are able to set expectations about pay early in the interview process, and our offers are rarely declined due to compensation. Not having to negotiate or base pay on biases from managers, recruiters, HR or the company sets a tone of ease from the get-go.
Yes, it takes deep analysis and lots of hard work to establish and maintain a fair pay model. Several factors are critical to pull it off successfully:
- We have to put the effort into understanding everyone at the company’s roles, the expected work for each position and benchmarking them to market.
- We have to be willing to let someone walk away for higher pay elsewhere for whatever reason.
- We have to effectively partner with our managers on how to set goals and expectations, as well as give feedback. Not everyone ends up being successful or the right hire. Those are tough decisions and conversations. However, we’ve made a conscious decision to pay high on the scale for top performance, and it’s our responsibility as a company and as managers to help employees live up to that potential.
At Plastiq, we’ve seen this hard work pay off with an engaged, productive staff who appreciate knowing they are paid fairly. Making sure we get the fair pay model right is key. It’s not easy, as it is an undertaking that requires research, time and resources. But when you do get it right and it is implemented across the board, it provides a value that is felt not only in our culture at Plastiq, but each day in our employees’ commitment to their work.