Compensation is an important issue in any business. In a company like Buffer, where our salaries has been transparent since 2013, the compensation is a transparent internal discussion where the entire buffer team can share ideas and feedback.
Much has changed in our pay formula over the last few years. We took a very simple formula and made it more precise for the labor market, and recently we have focused on improving our formula so that it can be a real benchmark for the distant world.
In this post, we share an overview of our compensation philosophy and a simple explanation of the pay formula. Transparency is an incredibly powerful tool, and we hope that sharing the approach to compensation can help others who are currently moving in this space.
How we think about compensation
Our approach to compensation has evolved over the years and our pay formulas have taken different forms, but some key pillars of our overall compensation philosophy have not changed.
Ultimately, we see compensation and benefits as a set of tools that give teammates the opportunity to get to the buffer with everything we can to share the same generosity in serving our customers. We want every single interaction with customers to be a pleasant experience. By ensuring that our team members are satisfied and involved in their work, we can build solutions and tools that support clients to succeed in both their personal and professional lives.
These basic principles guide all decisions about our team’s benefits and allowances:
TransparencyA: We publicly share our approach and all salaries to build trust, hold accountable and be an industry resource.
Simplicity: Our goal is to maintain an easy-to-understand formula that allows everyone to easily see how we arrive at an individual salary.
Justice: We ensure that people with the same role and responsibilities who have the same level of experience are paid fairly.
Generosity: We pay more than the market to attract the necessary team, develop as individuals and avoid negotiating exceptions and inequalities.
Our salary formula
The base salary for each buffer is derived from our salary formula. The formula-based approach minimizes biased benefit decisions. It has been a valuable tool in ensuring our awareness of the gender pay gap, as our pay formula is based on objective market factors that are applied consistently across the team. Read our latest payroll analysis for more information on equal pay in Buffer.
Our formula is your role x cost of living = your salary.
How we determine role compensation
We compare each role based on the data Radford, platform which collects benefits and benefits from companies participating in global surveys twice a year. The role benchmark is based on the software industry and the 50th percentile of San Francisco market data. We chose San Francisco as part of our generosity principle because it is a competitive job market.
How we implement the cost of living
After comparing our position and level of experience, we multiply the cost of living by a factor that objectively considers one of the four geographic regions compared to the San Francisco Cost of Living and Real Estate Price Index.
High cost of living
100% of the San Francisco market = multiply by 1.
Examples: San Francisco, CA and New York, NY
Interim cost of living
90% of the San Francisco market, multiplied by 0.90
Examples: Singapore and Sydney, Australia
Average cost of living
85% of the San Francisco market, multiplied by 0.85
Examples: Boulder, CO and Madrid, Spain
Low cost of living
75% of the San Francisco market, multiplied by 0.75
Examples: Bangalore, India and Wroclaw, Poland
These multipliers of cost of living take into account global teamwork, while reducing traditional benefit approaches.
To see how this formula works, see our salary sheet with transparent salaries for the entire Buffer Team.
The future of our pay formula
Over the last few years, we have aimed to further simplify our formula and eliminate the cost of living as part of the formula. In practice, this would mean losing low, medium and medium bands to pay everyone in San Francisco the same level of market wages.
This shift would result in an increase in operating expenses of $ 1.2 million, based on the team today (March 2021). While this change remains a consideration, we have deliberately set ourselves the goal of doing it gradually, not all at once. Investing in your team is important, although we need to consider trade-offs, and this season for Buffer we believe that expanding the size of the team is more in line with meeting customer needs.
In the meantime, we are also seeing market changes that will certainly affect global compensation. As more companies use telecommuting, access to talent is no longer dependent on local talent pooling. You do not have to live in Silicon Valley or New York to work for a business in these areas. You don’t have to have a headquarters in these cities to reach the top talent! Although we have never studied only the local market to compare our wages, we realize that the cost of living is likely to become increasingly irrelevant as we move toward supporting a global workforce.
What do you think of our approach to compensation? What are the ways you want pay to be more transparent within or outside your organization? Join the discussion with the buffer community here on Twitter.
Do you want to work in a team with transparent salaries? Check out our current jobs here.