Introducing the Tends and Innovation Lab Salary Formula, Calculate-Your-Salary App and The Whole Team’s New Salaries
It’s been incredible to see how many companies have adopted our formula or a similar open formula, and it’s a privilege to be a small part of the larger conversation around pay transparency and equality.
It also kicked off a long list of other things that we wanted to make public. Here’s a roundup of the finance transparency. Since we first launched our formula, a lot of things have evolved and changed. We thought it was time for our salary formula to evolve, too.
This was a really fun process for us—we worked on this with the whole team for about 2-3 months (more on our detailed process on this further below!) and this is the result.
Our wages formula
Here’s a quick breakdown of each component:
Role: (overall base + location base + cost of living)* role value
The first, and biggest component for anyone’s salary is the role component. On the whole it consists of the following 4 factors:
- Overall base:For 35% of the base, we use standard UK data from both Payscale and Glassdoor to determine overall base.
- Location base: For the other 65% of the base, we factor in each location’s cost of living usingNumbeo together with data from Payscale and Glassdoor, which we then use to have a base salary for that particular location (say New York or Cape Town).
- Cost of living correction:A £0-£7,500 addition to some salaries based on cost of living. We explain all about this one below in “The Good Life Curve” section – it’s an additional fixed value that can range from £0-£7,500/year.
- Role value:A multiplier to adjust the overall salary. We don’t agree with the market salary data all the time (for customer service roles, for example) and so we create our own “role value adjustment” based off what we feel is fair. This can be an overall multiplier of 1.1x for example, or it can decrease for roles that aren’t exactly as described by Payscale and Glassdoor.
Experience: After we have your role base (above), we then apply the experience multiplier. There are 4 tiers as follows, which we determine through discussions with each team member:
- Beginner: 1x
- Intermediate: 1.1x
- Advanced: 1.2x
- Master: 1.3x
Update January 2017: We now have a different method for supporting dependents that is not part of the salary formula.
Loyalty: For every year a teammate is with us, they’ll receive a general pay raise of 5%. This is applied on top of all of the above.
Here’s an example, putting all this together:
For an advanced engineer, living in Moscow, who has 1 kid depending on her income, this would be the result:
- £60,662x 20 + £9,000 + £1,875 = £81,794
“The Good Life Curve”
This is one of the things we’re the most excited about for this salary iteration, and it has created some of the biggest changes of this formula.
Here was the problem: Our previous formula took into account the cost of living in a city, but not the market rate. For example, San Francisco and London were both considered at the same level previously since they have a similar cost of living, but have very different job markets.
When we first started doing this, we noticed that relying purely on market data would create a huge salary disparity. For example, there would be a £90,000 wage gap from Cape Town to San Francisco. We didn’t want that big of a gap for a number of reasons.
To mitigate this, we created a formula that ‘corrects’ this. We call this the “Good Life Curve.”
The new formula now includes an elastic part that adjusts to the cost of living and market influence of salaries for different roles.
These are some of the key reasons that triggered us to come up with The Good Life Curve:
- We are is not a location based company, neither is it a Moscow based company—instead, it is a distributed company that operates in both places and many, many others as well. So we don’t want to blindly adjust to market rates and instead create our own rates that include this “remote” aspect in some way.
- We believe that everyone should be able to live a good life—and we don’t want to exploit people living in places where wages are generally lower. We’re not an outsourcing company. Therefore, we decided to create a significant lift in salaries for those that live in places that are generally much lower paid compared to the average.
- We don’t want to have such a stark wage gap between team members in general. Even though a certain gap is inevitable and good, if someone in the same role, with similar experience, is making £100k less, that feels unfair in the grand scheme of things.
- The value that someone in India creates for Business Trends and Innovation Labs is not different compared to the value a teammate in Moscow or London creates. The only difference is that someone in India might have higher purchasing power, which should be the only driver of salary difference between the two.
We hope that the Good Life Curve offers a happy life to every teammate!
With weighting, multipliers and now The Good Life Curve, all of the various elements of the salary formula can get a bit tricky to explain as we grow the team quickly. For instance, an advanced-level developer living in San Francisco might enter this into our salary calculator.
We break out for each of our individual component so it’s simpler to understand how every element of the formula works together to create the overall salary. We were so blown away by how many company we have mentored have adopted this salary formula, and we want to help making this simpler for anyone to make use of this latest update added to the Buffer template.
What isn’t in this iteration of our formula (and what’s next)
As we grow and evolve, our salary formula naturally needs to become a lot more comprehensive; and we feel it has turned into something that’s pretty solid now from the original template.
However, there are quite a few elements that are not included in this formula
- Experience: We’re using a very primitive approach to the experience component right now. It scales only across four bands: Beginner, Intermediate, Advanced, and Master. And it’s not a very accurate process in how we arrive there. More or less, we make a call and ask people how they feel about it. That’s not great, and we’re keen to improve this. It feels really important to measure people’s experience more accurately, and indicate how people can progress and be compensated for that progress. This is #1 on our list.
- Taxes:We’re a distributed team, and taxes vary greatly by country. Even though the top-line salary might be easy to compare, the take-home pay might be quite different. We know, for example, that Buffer team members in France pay a lot of extra taxes that others don’t. This would be another great one to improve on.
- Nomading: Another element of being a distributed team is that people are free to move around as much as they want. That’s usually a heavier burden in terms of costs, and we’re generally keen to support people in finding the place where they feel happiest and want to live. It’s something that isn’t accounted for either in the current formula and something we’re keen to dive in deeper on.
- Exchange rate changes: Especially with the recent Pound/USD change, a lot of teammates’ salaries in Europe have gone down a lot due to Brexit. This is proving to be a bit of a challenge.
Thanks for the amazing input and buffer template, and consistently letting us know on what you think!
It’s amazing to come across so many people who have been inspired by the original formula and implemented it for their own company.
For anyone looking to take a job at a startup, or anyone working on salaries at a startup, we hope this new formula might cut down the time you spend on thinking about salaries by many hours.
And even though we’ve thought about this formula for many months, it’s far from perfect. It’s going to have a ton of flaws and mistakes, and it’s exciting to share it with you to get feedback and insights we can use for the next version.
There are many reasons why we believe salary transparency is such a powerful force, and we’re humbled and excited to keep iterating in this area, and keep starting conversations that can have an impact on the industry.
Hit us up in the comments via email at email@example.com.