How We Decide What To Pay Our Team: Our Salary Formula and Compensation Philosophy
In this post, we share an overview of our compensation philosophy and a simple explanation of our salary formula.
Compensation is an important topic at any company. At a company like Buffer, where our salaries have been transparent since 2013, compensation is a transparent internal discussion where the whole Buffer team can share thoughts and feedback.
A lot has changed in our salary formula over the past few years. We took a very simple formula and made it more accurate to the labor market, and most recently, we’ve been focused on improving our formula to make it a true benchmark for a remote-first world.
In this post, we’ll share an overview of our compensation philosophy and a simple explanation of our salary formula. Transparency is an incredibly powerful tool, and we hope that sharing our approach to compensation can help others who are currently navigating this space.
How we think about compensation
Our approach to compensation has evolved over the years, and our salary formulas have taken various forms, but a few fundamental pillars of our overall compensation philosophy haven’t changed.
Ultimately, we view compensation and benefits as the set of tools that empower our teammates to bring their best to Buffer so that we can share that same generosity in service of our customers. We want every single customer interaction to be a delightful experience. By ensuring our team members are fulfilled and engaged with their work, we can build the solutions and tools that support our customers to achieve success and fulfillment in their personal and work lives.
These key principles guide all the decisions we make about our team’s compensation and benefits:
Transparency: We openly share our approach and all salaries to create trust, hold ourselves accountable, and serve as a resource for the industry.
Simplicity: We aim to maintain an easy-to-understand formula that allows anyone to easily see how we arrive at any individual salary.
Fairness: We ensure that those with the same role and responsibilities who are at the same experience level are paid equitably.
Generosity: We pay above market to attract the team we need, thrive as individuals, and avoid exceptions and inequity resulting from negotiation.
Our salary formula
Every base salary at Buffer is derived from our salary formula. The formulaic approach minimizes biased decisions about compensation. This has been a valuable tool to ensure our awareness of any gender wage gap since our salary formula is rooted in objective market factors applied consistently across the team. Read our latest pay analysis for more insights into equal pay at Buffer.
Our formula is your role x cost of living = your salary.
How we determine role compensation
We benchmark each role to data from Radford, a platform that gathers compensation and benefits data from companies participating in global surveys twice per year. The role benchmark is based on the software industry and the 50th percentile of San Francisco market data. We selected San Francisco as a part of our principle of generosity as it is a competitive labor market.
How we apply cost of living
After we’ve benchmarked for position and experience level, we multiply by a cost of living factor that objectively considers one of four geographical areas in comparison to San Francisco’s cost of living and property price index.
High cost of living
100% of the San Francisco market = multiply by 1.
Examples: San Francisco, CA & New York, NY
Intermediate cost of living
90% of the San Francisco market, multiply by 0.90
Examples: Singapore & Sydney, Australia
Average cost of living
85% of the San Francisco market, multiply by 0.85
Examples: Boulder, CO & Madrid, Spain
Low cost of living
75% of the San Francisco market, multiple by 0.75
Examples: Bangalore, India & Wroclaw, Poland
These cost of living multipliers take into account being a global team while closing the gap found in traditional compensation approaches.
To see this formula in action, check out our salaries page with the whole Buffer team’s transparent salaries.
The future of our salary formula
For the past few years, we’ve had the goal to further simplify our formula and do away with the cost of living consideration as a component of the formula. In practice, this would mean we’d eliminate the low, average, and intermediate bands to pay everyone at the same level of San Francisco market salaries.
The result of this shift would be a $1.2 Million increase in operating expenses based on the team we have today (March 2021). While this change remains a consideration, we’ve deliberately set a goal to do this incrementally rather than all at once. Investing in our team is important, though we must weigh trade-offs, and in this season for Buffer, we believe that expanding our team size is more in line with serving our customer’s needs.
Meanwhile, we’re also seeing market shifts that are bound to impact global compensation. With more companies embracing remote work, access to talent is no longer dependent on the local talent pool. You don’t need to live in Silicon Valley or New York City to work for companies headquartered in those areas. You also don’t need to headquarter in those cities to access top talent! While we’ve never looked only at local market to benchmark our salaries, we recognize that cost of living will likely become more and more irrelevant as part of the movement towards supporting a global workforce.
What do you think of our approach to compensation? What are some ways you’d like to see pay become more transparent within or outside of your organization? Join the discussion with the Buffer community on Twitter here.
Want to work on a team that has transparent salaries? Check out our current job openings here.