implementing a data-driven approach to guarantee fair, equitable and transparent employee pay

Your compensation is a significant matter. Often, individuals lack a clear understanding of the factors determining their earnings – why are we compensated as we are? This ambiguity can frequently result in uncertainty and unfavorable sentiments that impact both performance and workplace relationships. You might have experienced instances where you believed your pay was unjustly influenced by your manager, a recruiter, Human Resources, or established company policies.

You may be aware of, or suspect, situations where compensation decisions were based on preferences regarding background, or on preconceived notions about gender, race, ethnicity, identity, or capabilities. It can also feel inequitable due to your own confidence, or lack thereof, in your negotiation abilities.

What constitutes the appropriate course of action, and how do we strive to achieve it at Plastiq? Paying our team members fairly, equitably, and at a competitive rate is our priority. We are committed to transparency regarding our principles and methods to realize this objective.

When developing our compensation philosophy, the Plastiq leadership team determined that fairness and transparency would be the foundational elements. The next step involved a thorough examination of the available data.

Initially, we focused on understanding the nature of each role within the organization: the job function, the breadth and depth of the work, and the typical daily responsibilities. This allowed us to identify positions such as accounting or financial forecasting, software development or product management, recruiting or people operations, and to differentiate between those starting their careers, experienced individual contributors, senior team leaders, seasoned managers, or strategic, cross-functional vice presidents.

We then invested in access to market data from a reputable source – one utilized by other companies we admire – with comparable market presence, industry, and size to Plastiq. Because participation in the benchmark survey is required to purchase and access the data, we were confident in the accuracy and reliability of the information. This guarantees several key aspects: the absence of subjective, self-reported data, precise alignment in evaluating the scope of each role, and a shared interest among users to ensure dependable data reporting and retrieval. For Plastiq, the most pertinent data related to compensation for talent in San Francisco and Boston. We also aimed to offer compensation equal to or exceeding that of other technology companies – particularly those in the fintech sector – that were not yet publicly traded.

These considerations are crucial for any business when determining pay levels. Consider a small business, such as a food truck seeking to hire cashiers and cooks. Several factors would influence compensation decisions. For example, pay rates might differ between trucks operating in Austin versus Seattle; the type of cuisine (savory or sweet) could impact the skill level required; and varying profit margins could dictate the number of employees the business can afford. If you were planning the staffing and compensation for a large-scale, low-margin cupcake food truck in Austin, would it be logical to base employee pay on a small, two-person sushi truck operation requiring skilled chefs in Seattle? Likely not. You would want to benchmark against businesses – ideally multiple – similar to yours, in your market, with comparable staffing and operational needs, to ensure you are using appropriate data.

There is always a method to analyze market data relevant to a company’s specific situation and the compensation of its competitors. Conversely, if you are seeking to understand your own worth and what constitutes fair pay, market data is available to provide guidance. You could begin by consulting with colleagues in similar roles to learn about their compensation experiences. You could also – and should – request data from your manager, recruiter, or HR department.

At Plastiq, with our commitment to fair pay and a transparent philosophy, the next step was to determine our competitive stance relative to market rates. We evaluated three options:

Option 1: Offer base salaries in the lower quartile and supplement with variable annual performance compensation (bonus programs) based on individual and company performance.

Option 2: Pay at the median salary level – and potentially offer a bonus, or forgo bonus programs altogether.

Option 3: Pay in the upper quartile for base salaries, eliminating bonus programs, based on the belief that attracting exceptional talent, establishing clear priorities and expectations, and providing regular feedback would be sufficient to motivate high-quality work.

We selected Option 3. We needed to ensure our base salaries were competitive enough to attract talent in San Francisco and Boston, so we focused on data specific to these markets.

That’s when I analyzed the numbers and developed Plastiq’s pay plan. For instance, the data indicated that in San Francisco we should pay:

• A recruiter: $95,000.
• A senior recruiter: $125,000.
• A recruiting manager: $160,000.

Because we employ a data-driven approach, individuals joining the company do not need to negotiate their salary, and all employees in the same role receive the same compensation. This transparency alleviates any anxiety or stress employees might experience if they suspect colleagues performing the same job may earn significantly more due to their negotiation skills.

Applying this approach to our food truck example, location and experience level might be the most indicative factors. Therefore, a food truck utilizing a fair pay model based on data in Seattle might pay:

• An entry-level cashier: $12.50/hour.
• A cashier with three to five years of experience and team lead responsibilities: $15.00/hour.
• A seasoned cook and truck manager: $20.00/hour.

If the food truck operators avoid individual pay negotiations, they may minimize disruptions to service and productivity and prevent the personnel issues that arise when employees discuss pay (as they inevitably will) and discover inconsistencies or perceived unfairness.

When Plastiq implemented this approach of paying all employees in the same role the same salary based on market data, we received overwhelmingly positive feedback from both current employees and candidates who appreciated our data-driven, transparent methodology. Our recruiters can establish clear pay expectations early in the interview process, and offers are rarely declined due to compensation concerns. Eliminating the need for negotiation and removing biases from managers, recruiters, HR, or the company fosters a sense of ease from the outset.

Undoubtedly, establishing and maintaining a fair pay model requires in-depth analysis and significant effort. Several factors are critical for successful implementation:

• We must invest in thoroughly understanding the roles of all employees within the company, the expected work for each position, and benchmarking them against market standards.
• We must be prepared to accept that someone may choose to pursue higher pay elsewhere for any reason.
• We must effectively collaborate with our managers on setting goals and expectations, as well as providing constructive feedback. Not every employee will succeed or be the right fit. These are challenging decisions. However, we have consciously chosen to offer high compensation for top performance, and it is our responsibility as a company and as managers to support employees in reaching their full potential.

At Plastiq, this dedication has resulted in an engaged, productive workforce that values knowing they are compensated fairly. Ensuring we get the fair pay model right is paramount. It is not easy, as it is an undertaking that demands research, time, and resources. But when implemented effectively across the board, it delivers a value that is felt not only in our culture at Plastiq, but in our employees’ daily commitment to their work.