10 ms·

What do great engineering managers need to know about compensation and equity?

123 points by wallflower 4y ago

3bproblem 4y ago
This is a solid post, and setting comp is both important and nuanced. One really important topic that isn't addressed here as part of Compensation Reviews is re-evaluation of equity grants – particularly at times like these when tech equities are falling rapidly. A scenario that I think we will unfortunately see a lot of: * Employees have equity grants worth $100k/year in equity, with the value based on a fundraise from last summer (not uncommon for senior engineers in tech) * Tech co valuations from last summer were white hot. 50x, 70x, 100x ARR * The market has cooled significantly with valuations at say 6x, 10x, 15x ARR * As a result, the "true" value of employee equity will be way lower than expected * With comp that far below market lots of people will quit Of course, there's the question of what to do as a manager. Topping up all employees or raising cash comp for all is more fair but also increases burn, which is _exactly_ what VCs or public markets don't want to see right now. Behind closed doors many companies will top-up high performers and tacitly encourage low performers to leave the company. I was also a bit surprised to see that this post didn't discuss how companies think about and create bands beyond percentiles (example of how many companies approach the creation of bands: https://www.aeqium.com/post/how-to-create-compensation-bands https://www.aeqium.com/post/how-to-create-compensation-bands). Using percentiles to determine pay can work, but is typically a lagging indicator, as these sorts of comp benchmarks are based off of surveys that only go out so often. This is especially true in times of considerable compensation volatility like right now –comp for roles like engineering, design, product management, data science have all increased dramatically in the last 3-4 quarters, but this growth will probably slow significantly or even reverse given the current tech market downturn. That's very unlikely to get captured by percentile-based assessments.
- scarface74 4y ago
  Well, since personally I value equity at any private company at $0, you could throw as much “equity” as you wanted and it wouldn’t help retain me.
  - jasonladuke0311 4y ago
    Parent is presumably referring to public companies. Many of us have a sizable chunk of our compensation coming from RSUs.
    - scarface74 4y ago
      How can you “presume” that when they explicitly said… > Employees have equity grants worth $100k/year in equity, with the value based on a fundraise from last summer? Yes I have RSUs from FAANG that are down 30% YTD. But when they vest in the next two months, at least I can sell them and diversify and use them for something. If it were a private company, not so much.
      - 3bproblem 4y ago
        This issue impacts both private and public companies, although indeed my comment did reference a private company scenario. However, you could just as easily replace that language with something like "with RSUs granted last summer" or similar. The issue is going to impact anyone who has a major equity grant set during prior_market_conditions who is now vesting that equity during current_very_different_market_conditions. Also as you called out the problem is largely worse for private companies.
        scarface74 4y ago
        It’s much much worse. At least with all of the BigTech companies (FAANG - Netflix + Microsoft), they have huge profit generating business and they can pivot to offering more cash (like Amazon did before the crash) or even more stock. No one believes that those five companies will have worthless stock during their vesting periods. Private non profitable companies are stuck in a catch-22. If they offer more cash they increase their burn rate. If they don’t, their best employees leave and they lessen their chances to ever go public. On top of that, how many VCs will just cut bait and let the business fail? What are the chances that they can get another round of funding and if so, it’s not a down round making it even worse for existing employees?
- cpitman 4y ago
  Would you suggest companies clawback equity when it over performs?
  - deleted 4y ago
    [deleted]
  - bin_bash 4y ago
    I see this argument a lot: companies shouldn’t offer more equity in a down market because employees wouldn’t be willing to give back equity if they were up significantly. It doesn’t matter if this situation is “fair” though. What matters to the company is people will quit if they’re making half of what they expected to make.
    - 3bproblem 4y ago
      This is exactly right. In some situations it's a matter of practicality not morality. Anyone compensated in equity in large part needs to be willing to accept some share price volatility, but at a certain point people are going to leave and the company has to be proactive about that.
- hrpnk 4y ago
  re-pricing of options or an exchange [1] is indeed a very important aspect of compensation of private companies. While public companies value options based on publicly reported figures (and are restricted by NYSE/NASDAQ), private ones have to follow set rules in the 409a [2]. [1] https://www.shearman.com/perspectives/2020/03/revisiting-stock-option-repricing https://www.shearman.com/perspectives/2020/03/revisiting-sto... [2] https://www.loeb.com/en/insights/publications/2007/05/section-409a-and-stock-options https://www.loeb.com/en/insights/publications/2007/05/sectio...
ram_rar 4y ago
The simplest way to manage pay equity is to at least match current engs salary to new hires for the same level. It baffles me that companies are ready to pay new hires market rates, but not try to retain existing talent by giving them the same $$. This gives very little incentive to stay in the company for long time. Engs are most productive when they stay 2+ yrs in a team. We should incentivize folks to stay longer than that.
- xyzzy4747 4y ago
  Simple is not better. It’s better to spend less money from the company’s perspective and also keep information asymmetry about relative pay levels.
  - jessetemp 4y ago
    Sounds like a recipe for high turnover
    - projectazorian 4y ago
      Which is often fine with leadership. New employees tend to be more compliant and more malleable to the current leadership’s point of view.
      - wombat-man 4y ago
        I think the reality is that inertia is a big factor. Changing jobs is not a smooth easy process necessarily. I think companies are fine with a certain percent loss of employees in attrition and if it gets too high they'll start trying to fix it, but not before.
        RhodesianHunter 4y ago
        Which is a part of why most software is garbage.
      - kar5pt 4y ago
xyzzy4747 4y ago
Only compensate people a lot after you can tell they are contributing substantially. Otherwise it’s just throwing out money/equity. Also in general you should try to pay people the least amount that keeps them productive, engaged, and on the team. It also works well to hire very skilled people from other countries that pay lower. Speaking as a startup founder.
- jklm 4y ago
  To offer a different perspective, I was an early engineer at a startup with strong talent that followed this playbook. Things were fine until I realized upon interviewing for fun that I was massively underpaid (2-3x). I was pretty young at the time, and instead of talking with the founders about the gap, gradually grew resentful and left the company. I’m now on the on the other side of the table, and we pay everyone handsomely but keep the team lean while expecting everyone to operate at a very high level. Not every startup can or should do this, but I feel strongly this is a much better model for retaining talent while balancing cost to the company.
- andyQ 4y ago
  I can completely understand where you are coming from, but also speaking as a startup founder, i would propose another perspective, efficiency wage theory: “Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit.” https://www.investopedia.com/efficiency-wages-5206757 https://www.investopedia.com/efficiency-wages-5206757 While indeed the startup may be incentivized to “pay people the least amount” as long as they fulfill their tasks and keep them in your team; in the long run this amount would normalize to be market (even barely over market) prices. Otherwise you would be left behind and would have to keep spending capital in the overhead of hiring and training new people, which is less productive than having someone trained and motivated. Maybe you didn’t mean it in that way, but I would strongly recommend against playing chicken with the wages of your employees and testing how low you can go and still get applications. I believe doing this will fill positions with people that are not skilled enough to get a better paid job (or have high rotations), and usually that means that your company is going to move slower than your competition.
PragmaticPulp 4y ago
> Geo-balanced. Pay so that everyone receives the same amount, regardless of where they live. This means the company will pay very different amounts for each employee. For example, costs in one country in Europe can be twice what they are in another country. This completely caught me off guard the first time I encountered it. I knew employment taxes were higher in some locations, but I was blown away by how much higher it was in most of our European offices. It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices. The lower compensation reported by many European devs made a lot more sense after that experience.
- fy20 4y ago
  You also need to understand whether the taxes are paid by the company, the employee or both. In my country the company pays around 10% of the gross salary in taxes, and the employee pays 40%.
  - namdnay 4y ago
    The distinction between company and employee payroll taxes is completely artificial. The only thing that matters is that the company pays X and the employee gets Y
    - frozenport 4y ago
      Yeah so European employers talk of "gross" pay.
      - tilolebo 4y ago
        Net: what the employee gets on their bank account Gross: net + employee contributions Total payroll cost: gross + employer contributions
- jollybean 4y ago
  This geo-balancing approach described makes little sense. "It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices." This is not a very good frame of reference to take though ... they are getting paid $200K - what they give to their government is their business, not yours. If people are paying 'higher taxes' well hopefully they get some benefit from that. If not, well, it's their country to work with. If you consider that that European may be getting big retirement, more vacation, free Uni, free Healthcare, free Childcare etc. - well - then that's kind of 'part of their comp'. Also, Supply/Demand is a thing. True 'Geo Balancing' would imply paying the person what their market rate is, in that market - and - if you're based in a market with higher salaries you can actually pay bit more (i.e. this the 'Supply' part). I guess what I mean to say is ... the 'comp' should be what goes to the staffer + payroll taxes. In the US it's a small amount. In France, it's a lot. So you basically end up paying someone in a 'high payroll tax country' less - all other things being equal.
zuhayeer 4y ago
> This is complicated, because engineering titles are not equivalent across companies. A senior engineer at Company X does not equal senior engineer at Company Y. So these companies have detailed ways you can map your titles to theirs. Exactly why we created https://levels.fyi https://levels.fyi. While the site is mainly intended for job seekers, we've seen a lot of engineering managers use it as a tool to benchmark their offers and conduct compensation reviews. A lot of startups nowadays tend to offer multiple options when sending candidates offers. They'll create a slider that allows you to adjust base salary against equity proportional to a target total compensation value with a minimum base requirement (I know even large companies like TikTok do this). You can go base heavy, equity heavy or somewhere in between. It gives candidates the flexibility to choose what to optimize for which is pretty nice.
- pcthrowaway 4y ago
  Thanks for building one of the best resources I've seen for transparency into engineering compensation! One of the gripes I have as a Canadian is that it's never clear to me whether the salaries listed by Canadian residents are in USD or CAD. I assume USD since levels appears to normalize all other salary information globally into USD. But it seemed like this wasn't entirely clear at the point of submitting salary/offer details.
  - zuhayeer 4y ago
    We do show everything in USD by default, however on our location specific pages we have a currency toggle at the top to switch between CAD and USD: https://www.levels.fyi/Salaries/Software-Engineer/Canada/ https://www.levels.fyi/Salaries/Software-Engineer/Canada/ Definitely appreciate the feedback, we're working on better localization features as we speak!
dqpb 4y ago
> Engineers are fortunate to be an industry with high demand. We’re in high demand because we produce high value. Companies are fortunate that engineers exist.
- victor9000 4y ago
  Engineers can automate tasks that would otherwise require an entire department, but we're "lucky" to be in demand? Functional businesses profit immensely from hiring competent engineers, this is why we're in demand.
- jiveturkey 4y ago
  Yeah. This is like, "it was a miracle she survived the car crash!". No, it was the hard work of engineers.
seattle_spring 4y ago
None of this is in the control of the average engineering manager. Seriously, 0%.
- dilyevsky 4y ago
  This guide explicitly mentions it’s for “great” engineering managers, not average ones.
  - seattle_spring 4y ago
    I know you think that was a dig, but all your comment did was expose how little you know about engineering management. Unless you are trying to infer that there are 0 "great" eng managers in existence.
    - dilyevsky 4y ago
      Clearly average eng managers also dont read articles before posting bc this was covered in there nor have any sense of humor
- hrpnk 4y ago
  Agree. While it's great that the engineering manager understands engineering compensation and the nuances between different models, it's the HR departments that need to be educated on engineering compensation. Especially in organizations that include a high share of non-technical workers, the divide between engineering vs. non-engineering will be huge. Even standard benchmarking models compare companies based on the city & commute time instead of a whole region, country, continent.
- seneca 4y ago
  It depends on the size of the company, and how deeply HR has managed to force their influence. Most companies under maybe ~1000 (give or take a few hundred) people, the managers still have some influence. Even a few large companies that are careful manage to stave off the HR influence for a little while. But yes, outside of that managers have very little actual influence.
jiveturkey 4y ago
A little bit off on the equity section, and unnecessarily low contrast (why?!), but in general a good and pretty comprehensive primer. One bit of opinion that was injected, that I disagree with: > Cost of replacement. Compensation increases can be justified based on proving you could make more by going elsewhere. This perversely [emphasis mine] incentivizes people interviewing outside the company. Netflix is famous for this approach. Why is such incentivization perverse? It's really great for employees to know what their market value is. It stops you from doubting if you are worth more, it gives you the warm fuzzy that you are actually being paid fairly, and that your employer is essentially making a guarantee to pay you fairly. It also is great to be somewhere that is so confident of their ability to retain you, that they encourage this. I'd say this is the opposite of perverse. No comment on Netflix otherwise, but this approach to pay is extremely fair, extremely transparent, and so IMO extremely desirable. This approach does, however, require work on your part if you are to take advantage of it. It's not for everyone.
- tdumitrescu 4y ago
  Forgive me if I'm stating the obvious, but it's a perverse incentive from the company's point of view. By the time the employee has gotten to the stage of getting actual offers from other companies, they've already gone through all the friction of the job hunt; at that point, the path of least resistance is in fact for them to leave the current job, otherwise they have to go through the new process of getting a counter-offer from their employer, with all the risks that involves too.
  - jiveturkey 4y ago
    I don't find that perverse. Netflix is confident that they offer both top of scale pay, and top of scale satisfaction. And they want their employees to be happy. That kind of employee is maximally productive. They actively want to get rid of less than dedicated, top performers. Yes, if you are in a weak position as employer, not confident of your ability to retain employees, it is perverse. Or if as an employer, you don't judge quality of employee so much as long as you get SOME output from them. Your argument amounts to: unsatisfied employees shudder might leave, or even worse be encouraged to leave by this policy. I believe that Netflix actually desires that. Unsatisfied employees are not maximally productive employees. We can see this in their recently updated culture deck -- "if you don't like it here, don't let the door hit you on the way out." As well, the mere projection of such power (encouragement to seek outside offers) is enough to keep most employees satisfied that their employer is paying them, and every one around them, fairly. Without them having to act on it.
imron 4y ago
So we’re calling HR People Ops now?
- nullfield 4y ago
  They’re trying anything to make themselves look like they give a fuck versus what they actually do when push comes to shove
tjpnz 4y ago
That a good engineer can negotiate a 30+ percent raise at another company if they're not adequately compensated.
- JonChesterfield 4y ago
  This is probably true even if you scratch "good" and the "not adequately compensated". Everywhere seems to budget for hiring and retention separately and moving exposes that gap.
the_gipsy 4y ago
It is simply assumed that turnover is inevitable to a high degree, and not blamed on a single manager. However hiring is direct responsibility of the manager.
NKosmatos 4y ago
I wish my manager(s) would read this post and gave it some thought… for companies in SE Europe these things don’t even exist :-(
JonChesterfield 4y ago
Paying people "fairly" seems to mean "years of experience" multiplied by some factors based on the individual. This means a talented junior gets screwed and leaves, and the one year twenty times over crowd stay forever. I went through a pay review where I was apparently too far up the curve for my age and that wasn't fair, so I got less than my colleagues that round. That's a conversation you only get to have with an engineer once.
- jaderubick 4y ago
  I’m the author. I would never advocate for pay levels to be based on years of experience personally.
tomohawk 4y ago
The US Federal Government has had managed pay forever. The way it works is, no matter how good you are or how skilled you are, your pay is primarily driven by other factors, such as time in grade. Very rarely, a superstar performer will get accelerated promotion, but much more often, top performers will leave for greener pastures and give themselves a raise. Over time this means the people retained are the bottom tier to mediocre performers.

123 points by wallflower 4y ago

This is a solid post, and setting comp is both important and nuanced. One really important topic that isn't addressed here as part of Compensation Reviews is re-evaluation of equity grants – particularly at times like these when tech equities are falling rapidly. A scenario that I think we will unfortunately see a lot of: * Employees have equity grants worth $100k/year in equity, with the value based on a fundraise from last summer (not uncommon for senior engineers in tech) * Tech co valuations from last summer were white hot. 50x, 70x, 100x ARR * The market has cooled significantly with valuations at say 6x, 10x, 15x ARR * As a result, the "true" value of employee equity will be way lower than expected * With comp that far below market lots of people will quit Of course, there's the question of what to do as a manager. Topping up all employees or raising cash comp for all is more fair but also increases burn, which is _exactly_ what VCs or public markets don't want to see right now. Behind closed doors many companies will top-up high performers and tacitly encourage low performers to leave the company. I was also a bit surprised to see that this post didn't discuss how companies think about and create bands beyond percentiles (example of how many companies approach the creation of bands: https://www.aeqium.com/post/how-to-create-compensation-bands https://www.aeqium.com/post/how-to-create-compensation-bands). Using percentiles to determine pay can work, but is typically a lagging indicator, as these sorts of comp benchmarks are based off of surveys that only go out so often. This is especially true in times of considerable compensation volatility like right now –comp for roles like engineering, design, product management, data science have all increased dramatically in the last 3-4 quarters, but this growth will probably slow significantly or even reverse given the current tech market downturn. That's very unlikely to get captured by percentile-based assessments.

scarface74 4y ago
Well, since personally I value equity at any private company at $0, you could throw as much “equity” as you wanted and it wouldn’t help retain me.
- jasonladuke0311 4y ago
  Parent is presumably referring to public companies. Many of us have a sizable chunk of our compensation coming from RSUs.
  - scarface74 4y ago
    How can you “presume” that when they explicitly said… > Employees have equity grants worth $100k/year in equity, with the value based on a fundraise from last summer? Yes I have RSUs from FAANG that are down 30% YTD. But when they vest in the next two months, at least I can sell them and diversify and use them for something. If it were a private company, not so much.
    - 3bproblem 4y ago
      This issue impacts both private and public companies, although indeed my comment did reference a private company scenario. However, you could just as easily replace that language with something like "with RSUs granted last summer" or similar. The issue is going to impact anyone who has a major equity grant set during prior_market_conditions who is now vesting that equity during current_very_different_market_conditions. Also as you called out the problem is largely worse for private companies.
      - scarface74 4y ago
        It’s much much worse. At least with all of the BigTech companies (FAANG - Netflix + Microsoft), they have huge profit generating business and they can pivot to offering more cash (like Amazon did before the crash) or even more stock. No one believes that those five companies will have worthless stock during their vesting periods. Private non profitable companies are stuck in a catch-22. If they offer more cash they increase their burn rate. If they don’t, their best employees leave and they lessen their chances to ever go public. On top of that, how many VCs will just cut bait and let the business fail? What are the chances that they can get another round of funding and if so, it’s not a down round making it even worse for existing employees?
cpitman 4y ago
Would you suggest companies clawback equity when it over performs?
- deleted 4y ago
  [deleted]
- bin_bash 4y ago
  I see this argument a lot: companies shouldn’t offer more equity in a down market because employees wouldn’t be willing to give back equity if they were up significantly. It doesn’t matter if this situation is “fair” though. What matters to the company is people will quit if they’re making half of what they expected to make.
  - 3bproblem 4y ago
    This is exactly right. In some situations it's a matter of practicality not morality. Anyone compensated in equity in large part needs to be willing to accept some share price volatility, but at a certain point people are going to leave and the company has to be proactive about that.
hrpnk 4y ago
re-pricing of options or an exchange [1] is indeed a very important aspect of compensation of private companies. While public companies value options based on publicly reported figures (and are restricted by NYSE/NASDAQ), private ones have to follow set rules in the 409a [2]. [1] https://www.shearman.com/perspectives/2020/03/revisiting-stock-option-repricing https://www.shearman.com/perspectives/2020/03/revisiting-sto... [2] https://www.loeb.com/en/insights/publications/2007/05/section-409a-and-stock-options https://www.loeb.com/en/insights/publications/2007/05/sectio...

ram_rar 4y ago

The simplest way to manage pay equity is to at least match current engs salary to new hires for the same level. It baffles me that companies are ready to pay new hires market rates, but not try to retain existing talent by giving them the same $$. This gives very little incentive to stay in the company for long time. Engs are most productive when they stay 2+ yrs in a team. We should incentivize folks to stay longer than that.

xyzzy4747 4y ago
Simple is not better. It’s better to spend less money from the company’s perspective and also keep information asymmetry about relative pay levels.
- jessetemp 4y ago
  Sounds like a recipe for high turnover
  - projectazorian 4y ago
    Which is often fine with leadership. New employees tend to be more compliant and more malleable to the current leadership’s point of view.
    - wombat-man 4y ago
      I think the reality is that inertia is a big factor. Changing jobs is not a smooth easy process necessarily. I think companies are fine with a certain percent loss of employees in attrition and if it gets too high they'll start trying to fix it, but not before.
      - RhodesianHunter 4y ago
        Which is a part of why most software is garbage.
    - kar5pt 4y ago

xyzzy4747 4y ago

Only compensate people a lot after you can tell they are contributing substantially. Otherwise it’s just throwing out money/equity. Also in general you should try to pay people the least amount that keeps them productive, engaged, and on the team. It also works well to hire very skilled people from other countries that pay lower. Speaking as a startup founder.

jklm 4y ago
To offer a different perspective, I was an early engineer at a startup with strong talent that followed this playbook. Things were fine until I realized upon interviewing for fun that I was massively underpaid (2-3x). I was pretty young at the time, and instead of talking with the founders about the gap, gradually grew resentful and left the company. I’m now on the on the other side of the table, and we pay everyone handsomely but keep the team lean while expecting everyone to operate at a very high level. Not every startup can or should do this, but I feel strongly this is a much better model for retaining talent while balancing cost to the company.
andyQ 4y ago
I can completely understand where you are coming from, but also speaking as a startup founder, i would propose another perspective, efficiency wage theory: “Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit.” https://www.investopedia.com/efficiency-wages-5206757 https://www.investopedia.com/efficiency-wages-5206757 While indeed the startup may be incentivized to “pay people the least amount” as long as they fulfill their tasks and keep them in your team; in the long run this amount would normalize to be market (even barely over market) prices. Otherwise you would be left behind and would have to keep spending capital in the overhead of hiring and training new people, which is less productive than having someone trained and motivated. Maybe you didn’t mean it in that way, but I would strongly recommend against playing chicken with the wages of your employees and testing how low you can go and still get applications. I believe doing this will fill positions with people that are not skilled enough to get a better paid job (or have high rotations), and usually that means that your company is going to move slower than your competition.

PragmaticPulp 4y ago

> Geo-balanced. Pay so that everyone receives the same amount, regardless of where they live. This means the company will pay very different amounts for each employee. For example, costs in one country in Europe can be twice what they are in another country. This completely caught me off guard the first time I encountered it. I knew employment taxes were higher in some locations, but I was blown away by how much higher it was in most of our European offices. It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices. The lower compensation reported by many European devs made a lot more sense after that experience.

fy20 4y ago
You also need to understand whether the taxes are paid by the company, the employee or both. In my country the company pays around 10% of the gross salary in taxes, and the employee pays 40%.
- namdnay 4y ago
  The distinction between company and employee payroll taxes is completely artificial. The only thing that matters is that the company pays X and the employee gets Y
  - frozenport 4y ago
    Yeah so European employers talk of "gross" pay.
    - tilolebo 4y ago
      Net: what the employee gets on their bank account Gross: net + employee contributions Total payroll cost: gross + employer contributions
jollybean 4y ago
This geo-balancing approach described makes little sense. "It was a lot cheaper to hire a $200K/year engineer in our American offices than to pay someone the equivalent compensation in any of our European offices." This is not a very good frame of reference to take though ... they are getting paid $200K - what they give to their government is their business, not yours. If people are paying 'higher taxes' well hopefully they get some benefit from that. If not, well, it's their country to work with. If you consider that that European may be getting big retirement, more vacation, free Uni, free Healthcare, free Childcare etc. - well - then that's kind of 'part of their comp'. Also, Supply/Demand is a thing. True 'Geo Balancing' would imply paying the person what their market rate is, in that market - and - if you're based in a market with higher salaries you can actually pay bit more (i.e. this the 'Supply' part). I guess what I mean to say is ... the 'comp' should be what goes to the staffer + payroll taxes. In the US it's a small amount. In France, it's a lot. So you basically end up paying someone in a 'high payroll tax country' less - all other things being equal.

zuhayeer 4y ago

> This is complicated, because engineering titles are not equivalent across companies. A senior engineer at Company X does not equal senior engineer at Company Y. So these companies have detailed ways you can map your titles to theirs. Exactly why we created https://levels.fyi https://levels.fyi. While the site is mainly intended for job seekers, we've seen a lot of engineering managers use it as a tool to benchmark their offers and conduct compensation reviews. A lot of startups nowadays tend to offer multiple options when sending candidates offers. They'll create a slider that allows you to adjust base salary against equity proportional to a target total compensation value with a minimum base requirement (I know even large companies like TikTok do this). You can go base heavy, equity heavy or somewhere in between. It gives candidates the flexibility to choose what to optimize for which is pretty nice.

pcthrowaway 4y ago
Thanks for building one of the best resources I've seen for transparency into engineering compensation! One of the gripes I have as a Canadian is that it's never clear to me whether the salaries listed by Canadian residents are in USD or CAD. I assume USD since levels appears to normalize all other salary information globally into USD. But it seemed like this wasn't entirely clear at the point of submitting salary/offer details.
- zuhayeer 4y ago
  We do show everything in USD by default, however on our location specific pages we have a currency toggle at the top to switch between CAD and USD: https://www.levels.fyi/Salaries/Software-Engineer/Canada/ https://www.levels.fyi/Salaries/Software-Engineer/Canada/ Definitely appreciate the feedback, we're working on better localization features as we speak!

dqpb 4y ago

> Engineers are fortunate to be an industry with high demand. We’re in high demand because we produce high value. Companies are fortunate that engineers exist.

victor9000 4y ago
Engineers can automate tasks that would otherwise require an entire department, but we're "lucky" to be in demand? Functional businesses profit immensely from hiring competent engineers, this is why we're in demand.
jiveturkey 4y ago
Yeah. This is like, "it was a miracle she survived the car crash!". No, it was the hard work of engineers.

seattle_spring 4y ago

None of this is in the control of the average engineering manager. Seriously, 0%.

dilyevsky 4y ago
This guide explicitly mentions it’s for “great” engineering managers, not average ones.
- seattle_spring 4y ago
  I know you think that was a dig, but all your comment did was expose how little you know about engineering management. Unless you are trying to infer that there are 0 "great" eng managers in existence.
  - dilyevsky 4y ago
    Clearly average eng managers also dont read articles before posting bc this was covered in there nor have any sense of humor
hrpnk 4y ago
Agree. While it's great that the engineering manager understands engineering compensation and the nuances between different models, it's the HR departments that need to be educated on engineering compensation. Especially in organizations that include a high share of non-technical workers, the divide between engineering vs. non-engineering will be huge. Even standard benchmarking models compare companies based on the city & commute time instead of a whole region, country, continent.
seneca 4y ago
It depends on the size of the company, and how deeply HR has managed to force their influence. Most companies under maybe ~1000 (give or take a few hundred) people, the managers still have some influence. Even a few large companies that are careful manage to stave off the HR influence for a little while. But yes, outside of that managers have very little actual influence.

jiveturkey 4y ago

A little bit off on the equity section, and unnecessarily low contrast (why?!), but in general a good and pretty comprehensive primer. One bit of opinion that was injected, that I disagree with: > Cost of replacement. Compensation increases can be justified based on proving you could make more by going elsewhere. This perversely [emphasis mine] incentivizes people interviewing outside the company. Netflix is famous for this approach. Why is such incentivization perverse? It's really great for employees to know what their market value is. It stops you from doubting if you are worth more, it gives you the warm fuzzy that you are actually being paid fairly, and that your employer is essentially making a guarantee to pay you fairly. It also is great to be somewhere that is so confident of their ability to retain you, that they encourage this. I'd say this is the opposite of perverse. No comment on Netflix otherwise, but this approach to pay is extremely fair, extremely transparent, and so IMO extremely desirable. This approach does, however, require work on your part if you are to take advantage of it. It's not for everyone.

tdumitrescu 4y ago
Forgive me if I'm stating the obvious, but it's a perverse incentive from the company's point of view. By the time the employee has gotten to the stage of getting actual offers from other companies, they've already gone through all the friction of the job hunt; at that point, the path of least resistance is in fact for them to leave the current job, otherwise they have to go through the new process of getting a counter-offer from their employer, with all the risks that involves too.
- jiveturkey 4y ago
  I don't find that perverse. Netflix is confident that they offer both top of scale pay, and top of scale satisfaction. And they want their employees to be happy. That kind of employee is maximally productive. They actively want to get rid of less than dedicated, top performers. Yes, if you are in a weak position as employer, not confident of your ability to retain employees, it is perverse. Or if as an employer, you don't judge quality of employee so much as long as you get SOME output from them. Your argument amounts to: unsatisfied employees shudder might leave, or even worse be encouraged to leave by this policy. I believe that Netflix actually desires that. Unsatisfied employees are not maximally productive employees. We can see this in their recently updated culture deck -- "if you don't like it here, don't let the door hit you on the way out." As well, the mere projection of such power (encouragement to seek outside offers) is enough to keep most employees satisfied that their employer is paying them, and every one around them, fairly. Without them having to act on it.

imron 4y ago

So we’re calling HR People Ops now?

nullfield 4y ago
They’re trying anything to make themselves look like they give a fuck versus what they actually do when push comes to shove

tjpnz 4y ago

That a good engineer can negotiate a 30+ percent raise at another company if they're not adequately compensated.

JonChesterfield 4y ago
This is probably true even if you scratch "good" and the "not adequately compensated". Everywhere seems to budget for hiring and retention separately and moving exposes that gap.

the_gipsy 4y ago

It is simply assumed that turnover is inevitable to a high degree, and not blamed on a single manager. However hiring is direct responsibility of the manager.

NKosmatos 4y ago

I wish my manager(s) would read this post and gave it some thought… for companies in SE Europe these things don’t even exist :-(

JonChesterfield 4y ago

Paying people "fairly" seems to mean "years of experience" multiplied by some factors based on the individual. This means a talented junior gets screwed and leaves, and the one year twenty times over crowd stay forever. I went through a pay review where I was apparently too far up the curve for my age and that wasn't fair, so I got less than my colleagues that round. That's a conversation you only get to have with an engineer once.

jaderubick 4y ago
I’m the author. I would never advocate for pay levels to be based on years of experience personally.

tomohawk 4y ago

The US Federal Government has had managed pay forever. The way it works is, no matter how good you are or how skilled you are, your pay is primarily driven by other factors, such as time in grade. Very rarely, a superstar performer will get accelerated promotion, but much more often, top performers will leave for greener pastures and give themselves a raise. Over time this means the people retained are the bottom tier to mediocre performers.