A Growing Company's Guide to Compensation Benchmarking
A practical framework for comparing role, market, and company inputs when reviewing pay as your team grows.
Use role, market, budget, and internal information to document compensation assumptions. This overview is not a legal or compensation determination; validate important decisions with qualified advisers.
Why compensation benchmarking matters
Compensation decisions interact with hiring, retention, internal consistency, and budgets. The effects of a particular pay decision vary; use the organization's own data and obtain qualified advice for legal or specialized compensation questions.
Changes to pay ranges can affect internal relationships and future budgeting. Model scenarios using company-specific information rather than assuming that a universal pay target prevents those effects.
The primary data sources
Potential inputs include public labor-market data, published surveys, and job postings. Assess each source's date, population, geography, methodology, and limits before applying it to a role:
- Bureau of Labor Statistics Occupational Employment Statistics: Government labor data can provide occupation and geography context. It may not represent startup-specific pay, equity, or a particular hiring market.
- Published compensation surveys and public labor-market data: Survey coverage and methodology vary by provider. Review the sample, date, role definitions, and population before using survey results as a comparison.
- Levels.fyi and Glassdoor: Crowdsourced reports may offer directional context, but collection methods and participant populations can differ. Do not treat them as a representative survey without evidence.
- Competitors' job postings: Public job postings may provide examples of disclosed ranges. Posting requirements and permitted practices vary by location and change over time; verify current rules with qualified sources.
How to set a pay philosophy
Before setting individual salaries, define your pay philosophy: where do you want to position relative to the market? Common approaches are targeting the 50th percentile (market median), the 75th percentile (above market to attract stronger candidates), or a cash-light plus equity model (below market cash with meaningful equity upside).
Documenting how decisions are made can help leaders explain their inputs. It does not establish that a pay practice complies with law; have qualified counsel review pay-equity questions.
Equity compensation basics
Equity may be one part of a startup's compensation approach, but its role and form vary by company and employee. Option type, eligibility, valuation, vesting, tax treatment, and approvals require advice from qualified legal and tax professionals.
Grant size and terms depend on the company's capitalization, stage, role, and current market inputs. Avoid relying on generic percentage ranges as recommendations; use current, appropriately scoped data and specialist advice.
Document equity decisions through the company's approved process and governing documents, with qualified counsel and tax advisers involved.
Pay transparency and equal pay
Equal-pay and pay-transparency requirements depend on jurisdiction, employer, and circumstances. Review current official guidance and consult qualified employment counsel before relying on a general summary.
Some jurisdictions require pay-range disclosures in specified circumstances. The scope, covered roles, and timing can change; verify current requirements where the employer and candidates are located.