Build data-driven compensation structures that attract talent without overpaying. Covers base salary bands, equity/bonus frameworks, geographic differentials, and total rewards packaging.
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Build data-driven compensation structures that attract talent without overpaying. Covers base salary bands, equity/bonus frameworks, geographic differentials, and total rewards packaging.
When asked to build a compensation plan, follow this framework:
Define job levels and salary bands:
| Level | Title Pattern | Base Range (US) | Equity % | Bonus Target |
|---|---|---|---|---|
| L1 | Associate / Junior | $45K-$70K | 0-0.01% | 0-5% |
| L2 | Mid-level | $70K-$110K | 0.01-0.05% | 5-10% |
| L3 | Senior | $110K-$160K | 0.05-0.15% | 10-15% |
| L4 | Staff / Lead | $150K-$210K | 0.1-0.3% | 15-20% |
| L5 | Principal / Director | $190K-$280K | 0.2-0.5% | 20-30% |
| L6 | VP / C-level | $250K-$400K+ | 0.5-2%+ | 30-50%+ |
Apply cost-of-labor multipliers (not cost-of-living):
| Tier | Markets | Multiplier |
|---|---|---|
| Tier 1 | SF Bay, NYC, London | 1.0x (baseline) |
| Tier 2 | Seattle, Boston, LA, Chicago | 0.90-0.95x |
| Tier 3 | Austin, Denver, Manchester, Berlin | 0.80-0.85x |
| Tier 4 | Remote US/UK secondary markets | 0.70-0.80x |
| Tier 5 | Eastern Europe, LATAM, SEA | 0.40-0.60x |
Break down total rewards:
Cash Compensation
Equity Compensation
Benefits & Perks (typically 20-35% on top of base)
Run these checks quarterly:
| Month | Action |
|---|---|
| Jan | Market data refresh (Levels.fyi, Glassdoor, Radford, Mercer) |
| Feb | Manager calibration sessions |
| Mar | Budget allocation (typically 3-5% of payroll for merit increases) |
| Apr | Communicate adjustments, effective date |
| Jul | Mid-year equity refresh grants |
| Oct | Prepare next year's comp budget proposal |
Before extending any offer:
| Factor | Weight | Score (1-5) |
|---|---|---|
| Below market rate (>10% under) | 25% | |
| Time since last raise (>18 months) | 20% | |
| Flight risk signals (LinkedIn active, disengaged) | 20% | |
| Critical role / hard to replace | 20% | |
| Tenure > 3 years with no promotion | 15% |
Score > 3.5 = immediate retention conversation needed Score 2.5-3.5 = include in next review cycle, prioritize Score < 2.5 = monitor quarterly
For revenue roles, design OTE (On-Target Earnings):
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