Buffer, as a company, closes the last week of the year every year, and historically, as an engineering team, we’d do a code freeze for the week before we’re closed so nothing broke heading into the holidays. (Pretty smart of us.)
This year, we did
Buffer has been in business for 13 years now, and we’ve had transparent salaries for 10 of those. This means that for over a decade, all Buffer salaries have been publicly viewable, and we’ve shared our approach to salaries and the formula we based them upon openly.
We’ve maintained transparent salaries through significant market (and world) changes and through ups and downs in our performance as a business. I’m proud of the fact that we never took away that transparency, internally or externally.
That said, over the years, our salary formula has been stretched and needed to adapt to new scenarios. At times, we have fallen short of our true level of commitment to transparency.
What we’re sharing today is the result of applying our lessons learned from running a company with transparent salaries for a decade. The Open Salary System we’re sharing is a project we took on last year to re-imagine how we approach salaries, resolve the issues we identified over time, and set ourselves up for another decade of salary transparency.
But before I get into the changes we made in evolving from a salary formula to a salary system, let me answer a question that may come to mind: why be transparent with salaries at all?
Why salaries are transparent at Buffer
Compensation is a very important and sensitive element of work. Compensation is directly connected with life overall, in supporting peoples’ livelihoods and their dreams. It is also intertwined with fairness and equity, as the choices a company makes around compensation will be a key component of how they value people and whether there are differences in how they treat people. With transparency, any kind of favoritism is surfaced and visible. We believe that it is vital that team members have full information about how and why we make the decisions we do around compensation.
We have chosen to create a system where conversations around compensation can happen in the open. Rather than concerns around salaries being kept to private conversations, we strive to operate with practices and a culture where we can be involved in those discussions. We can move those conversations towards fairness and merit in our approaches, and if we determine a valid issue is identified, we can make a change that benefits everyone impacted. External transparency enables prospective candidates of Buffer to deeply understand our unique Salary System. This means that people can enter our hiring process aware of very specific details of how we work. Leaning fully into external transparency in this way holds us to an even higher standard as we open ourselves up to public scrutiny on our approach to salaries.
All of this leads to greater trust. We believe that trust is the foundation of great teamwork, and we’ve learned from over a decade of experience that transparency breeds trust.
We serve creators, entrepreneurs, and small businesses who often lack time, knowledge, or resources to do something to the high standard they might strive for. When it comes to compensation, sharing the entirety of our salary methodology can provide an invaluable resource to speed up the implementation of solid practices for these businesses.
Reflecting on a decade of transparent salaries
Committing to salary transparency and growing with strong values
When we started down this road, we first made salaries transparent internally. This was grounded in our overall commitment to transparency as a company. There were a variety of workflows and rituals that we chose to make transparent, such as our metrics and finances, internal and external communication, and our efforts toward self-improvement (another of our values).
When we took a step further and published our salaries for anyone to see, it came with some discomfort. Many of us had fears over what could go wrong if we did it… would competitors have an easier time poaching our teammates? Would we feel awkward with our peers? We spent a long time talking through these fears as a group and then ultimately challenged ourselves to fully uphold our value to Default to Transparency.
After all of those discussions, it turned out that the response we got was overwhelmingly positive, beyond anything we could have imagined. Importantly, we also received a lot of useful feedback on the salary formula and the data itself. That was when we realized the impact of sharing externally, and how this can serve us in holding ourselves to the high standard we are striving for.
Ever since then, we have repeatedly been reminded that if we are clear on our values and completely committed to living them genuinely, great things happen. This alignment is the foundation for so much of what makes us feel special and allows us to carve our own path as a company and a team. The people who are drawn to join us are clear on their own personal values, and in fact new teammates often share that they feel like they’ve found their professional home.
Growing as a company over a decade
It’s worth reflecting on some of the key differences in Buffer as a company today compared to a decade ago when we first established transparent salaries:
Buffer in 2013:
- We were a team of 17 people
- We had 8 different roles
- The average salary at Buffer was $100,812
- We had an Annual Revenue Run Rate (ARR) of $2.2M
- Our average revenue per team member was $129,411
Buffer today:
- We are a team of 75 people
- We have 30 different roles
- The average salary at Buffer is $151,113
- We have an Annual Revenue Run Rate (ARR) of $18M
- Our average revenue per team member is $240,000
As we’ve grown over the years, we’ve seen our approach to salaries be stretched and tested in different ways. Of course, as the number of people and roles on the team increase, we need to make amendments to our salary approach to achieve our goal of maintaining transparency and fairness. We made a number of iterations over the years to our salary formula, but until now, we haven’t made a fundamental change to the overall approach to salaries. That’s what we’re sharing today.
Our journey of salary approaches
We’ve had a number of iterations of our salary formula over the years. We initially made a significant change to our salary formula roughly every two years.
In 2015, we made our first significant iteration of the salary formula. We evolved our calculation for base salary so that beyond just a different number for each role, we incorporated market benchmarks, too. We did this while attempting to avoid significant disparity in pay between locations; by lifting salaries higher proportionally for those in lower cost of living locations. We called this the Good Life Curve. This is also where we introduced some flexibility into the formula to enable us to deviate from market benchmarks where we had a different belief in the value of the role. For example, we placed a higher importance on customer service, so we lifted those salaries by 10 percent.
Our next iteration of the salary formula came in 2017, and this is where we first introduced the concept of a Buffer Benchmark. This is an element we’ve adapted and taken to a new level of clarity and simplicity in our Salary System. The Buffer Benchmark was our way of creating our own competitive base salaries for each role, incorporating both market data and our own adjustments in a more sophisticated way than previously. This is when we became clear that market data should be a starting point for determining our salaries, and we should maintain a level of flexibility in how we use it rather than taking market data and using it directly for salaries. 2017 was also the point in time when we started to arrive at the need for a guiding strategy or set of principles for our salary approach. Those principles were Simple and Accessible, Do the Right Thing, Adaptable, and Competitive. These are fairly aligned with the Compensation Principles we later set down, which guided our work on the new Salary System.
In 2018, we made another important update to our salary formula. The most significant upgrade was migrating to a commercial and more robust market data source — Radford. This was a big step for us compared to the market data we were previously utilizing. Radford had endless roles and a decent sample size of salary data across most roles and levels. This gave us confidence that our salaries were being based upon clear market data and that we had a good sense of where we fell in the market. One of the errors we made with this iteration, however, was that we did not constrain the market data by company size or stage. This meant that the range of salaries included in the data set was too wide and detracted from the true accuracy of where we sat in the market relative to other companies our size. This is something we have corrected in the Salary System.
Another important change we made in 2018 was to get more consistent in our approach to pulling in new market data. With Radford, we could regularly take new market benchmarks and adjust all of our salaries to keep up with the current market levels. Finally, we also chose at this stage to introduce steps between each of the levels of seniority. This gave managers some flexibility and autonomy in rewarding smaller steps of progression for career growth instead of a whole level every time, which often meant a title change.
Each salary formula iteration came at a financial cost to us as a company, as we committed to not lower salaries based on a formula or market data change. As an example, our 2018 update came at an increase in salary expenses of $711,565 per year. Often, salaries would rise for a whole function when we made changes to our approach or pulled in new market benchmarks. These costs are not insignificant; however, we came to value the consistency and trust gained as a result of adhering to our approach. It was a powerful vote of confidence in people that we would proactively raise salaries as we resolved flaws in our approach or when the market indicated salaries had increased. I believe that this is one of the reasons we have significant average tenure in the team and many people who have been at Buffer for over five years and a few who have even been at the company for over a decade.
We shared each of these salary formula iterations publicly, and we were open along the way about what we had not been able to include or fix in each version. In this way, we typically had a clear roadmap for the future of transparent salaries.
A living formula and system
Since the very early years of implementing a salary formula, we’ve been aware that for it to work, we will need to make continual iterations. A salary system can never be perfect, for a few different reasons.
Markets change and sometimes may change in unanticipated ways. Flexibility to adjust the numbers, and even the whole system, is necessary to maintain something that is fresh and feels like it truly works for us. One of the key ways we’ve developed to handle this has been regular rebenchmarking, where we go and get new base salary numbers for all roles in the company to bring us up to date with the market.
Another reason a salary system will never be perfect is that we’re a small, growing company, and as we grow, we need new roles and perhaps even entirely new functions. When this happens, we need to bring those roles into the system and find salary benchmarks. In some cases, there may even be components of compensation we have not accounted for, which we need to build into our system. We’ve always aimed to add to our formula in a way that holistically considers all members of the company and reflects any changes across all relevant roles.
Overall, we must embrace that the only constant is change with a working salary formula. This is not always the easiest thing to do because salaries are a sensitive aspect of employment to think about changing.
Downsides to salary transparency
There are a few downsides we’ve found over the years in maintaining salary transparency, and these are important to face head-on.
Having a salary system and being transparent in a way that holds us strongly accountable can create rigidity and make some necessary adjustments feel slower to be able to implement. This can especially be the case with brand-new roles, which we have to add to the formula. It also applies to flaws we discover in the process of hiring someone, which we then have to run through and determine if we are in a position to adjust many salaries rather than just one.
In general, salary transparency, along with other types of transparency, does inherently create extra work for us. The work in adhering to salary transparency, including our formula and the communication required to guide people through how it works, is not insignificant.
Being too strict in full transparency of salaries can mean that we are insensitive to situations where it may not feel appropriate for someone to share their salary publicly. On the other hand, no one generally feels completely comfortable with sharing their salary publicly, but the positive impact we can have of collectively doing this is significant. This can be a fine line to hold.
I’ve come to very strongly believe that the benefits and the positive impact we can have on the industry by leading by a strong and somewhat extreme example here, make these downsides worth pushing through.
Growing complexity and discrepancies
Over time, the required changes started taking longer and being more painful to implement. Our iterations became fewer and further apart. We pushed our spreadsheet to the limit, updates became less intentional and more spontaneous, and the salary formulas across functions became progressively less consistent.
Naturally, as we grew, we needed to account for greater complexity. The problem was that we weren’t pushing enough ourselves to ensure that as we added complexity, we also improved the user experience of exploring and working with our salary spreadsheet.
As a business, we started to lose sight of the benefits of maintaining not just transparency but also simplicity in the system. I only later realized that even if we may be able to continue stating that our salary approach is transparent, if it is hard to understand, then it erodes the trust that we gained early on. This happened gradually over time until we reached a place where only our dedicated, specialized finance team could truly understand the system. For the wider team, what was left was transparency of the numbers but not of how we reached them.
We started to feel cracks in our approach to salaries in two key areas: discrepancies in the application of our formula, and a gradual increase in complexity leading to deterioration in transparency. When the formula is not applied consistently, discrepancies occur, and this can result in a lack of complete fairness and equity in salaries. This goes against the very reasons we put salary transparency in place to begin with. And, when the ability to understand the way we arrive at salaries deteriorates, it undermines the level of trust in our approach and reduces the amount of feedback we receive from people who explore our salaries fully.
Maintaining and losing trust and integrity in our system
In addition to the transparency, there is another element required to maintain trust, and that is adhering to the formula and overall system. I take this responsibility seriously since the trust we’ve gained over the years can quickly unravel if we deviate from the system. This is something that for the majority of our decade with transparent salaries we have achieved.
With the increasing complexity of our salary formula and how it was implemented, it gradually became more challenging to work with. We deliberately expanded and adjusted our formula in specific areas where we couldn’t make the same formula work, such as customer advocacy, where we placed a different value on the role, or the executive team, where we determined we needed to pay slightly further above market to attract new leaders who could help us get to the next stage as a business. Our salary approach and implementation became more convoluted, and there started to be regular instances where a hiring manager struggled to easily find the salary they should offer a new team member. And then, we made our biggest mistake of all.
A couple of years ago, we made a mistake in how we implemented our formula when making an offer to a teammate. The error occurred in a particularly high-pressure season, and I know this was purely a mistake and came from a place of feeling a weight of responsibility to get Buffer on a great track. We ended up making an offer at a lower level of seniority than appropriate but with the incorrect (and higher) location band for their city. It meant that this individual, unbeknownst to them, received a salary that deviated from our formula. Since we maintain full transparency, a few people in the team noticed the discrepancy and brought it to our attention. It pained me significantly that this error happened. I knew at that moment that we had lost some trust in our salary approach; team members could not know for sure that we did not intentionally break away from the standardized formula.
Soon after this mistake, I took full responsibility for the mistake, corrected the salary, and shared the full details of how it occurred with the wider team. At that time, in mid-2022, I made a commitment to working back towards our high bar for salary transparency and simplicity.
I’ve reflected that for almost every other company out there, these types of discrepancies are just a part of life. Offers are made differently by hiring managers, negotiation happens and may affect the salary number, and promotions may be unevenly distributed. For us, however, we had never had these types of discrepancies, and our complete commitment to transparency and fairness is what made the whole approach work. As soon as we had a clear discrepancy occur, it started to feel like the whole approach was at risk of breaking down.
Making the decision to overhaul our approach and resolve the debt
In general, I had been feeling that our salary system had deteriorated over the previous few years. I was no longer proud of our approach, and I rarely heard from people with questions and suggestions for changes we could make. This indicated to me that we were no longer succeeding with our original ideals for salary transparency.
After some chaotic and less focused years, we were arriving at a place as a company where we could improve and take things to a new level. This was mirrored across a variety of other areas. 2023 was the year that we drove a turnaround in our shipping pace, improved our metrics more than any of the previous three years, enhanced the quality of our strategy, became closer as teammates and with customers, and made a renewed commitment to our values.
When we stepped back and reflected on why we weren’t successful in avoiding these pitfalls in salary transparency, it became clear that, fundamentally, it was due to the fact that we always thought of our approach to salaries as a formula. A formula alone did not have enough flexibility to adapt to new roles, market data, and our evolution as a company. We decided to rethink our approach from the ground up, and this is how we arrived at our Salary System.
More open dialogue around our salary system
Something that became clear over the years from our experience of operating with transparent salaries is that in order to maintain the high trust in our approach, there needs to be some level of regular discussion around it across the entire company. This shouldn’t be so much that it causes distraction from the areas we’ve been entrusted to drive forward, and the system should feel solid and be something we all trust in general.
However, without the ability and a clear way to share feedback, it can feel like the rigidity of a salary formula and salary transparency really become downsides, as we lose individual agency in impacting the system and our own salary, at least in some form. And on the company side, without feedback from folks across the organization, there’s no way we will be able to anticipate all the scenarios and differences that might need to be factors in our approach.
With salary formula discrepancy and a mistake, the fact that our system is transparent led to multiple people spotting the issue and raising it. This is one of the powerful things about having transparency, and I’m very grateful to everyone who chose to raise the concern and point out the discrepancy.
We have plans to create more specific opportunities and structures for team members to share their feedback on our system. This started with putting in the work to revamp our entire approach and make it more understandable, and then share it in detail. We did this internally through presentations in a couple of our monthly All Hands meetings and by building out a comprehensive wiki for the Salary System detailing various aspects of the implementation and our philosophies. This is also why we’re sharing our lessons learned and our new system today. Increasing the amount of input we get will hold us even more accountable, ensure greater integrity of the approach, and lead to more trust and pride in our commitment to salary transparency.
Our Compensation Principles
Over the years, we started to reach clarity that it would be important to capture the key principles with which we approach salary decisions and changes. This led to us establishing a set of Compensation Principles a few years ago. Upon establishing the principles, they guided us in making a number of smaller, iterative improvements to our salary formula, which started to get us back on track. And in the second half of last year, they guided our efforts in fundamentally re-imagining our approach to salaries and arriving at the Salary System.
Our Compensation Principles are derived from our Values and Operating Principles. We strive for Buffer’s approach to salary, equity, and benefits to be:
- Transparent
- Fair
- Simple
- Generous
Each of the compensation principles stand alone, and additionally, if we fulfill all of the principles, they are strengthened by each other, and the sum becomes greater than the parts:
Transparency: We have full transparency of salaries internally in order to create trust, hold ourselves accountable to these principles, and invite open discussion around specific decisions embedded in our approach rather than pushing the conversation to be shared privately. We openly share our approach and our salaries publicly to hold us to an even greater standard and to serve as a resource for the industry. We believe that the world would be a better and more equitable place with more transparency around pay, and we have chosen to drive this shift to our full capabilities.
Simplicity: We aim to maintain an easy-to-understand approach to salaries that allows anyone to easily see how we arrive at any individual salary. Transparency is achievable without simplicity; however, when we also succeed in keeping salaries simple, it makes the understanding of how salaries work much more accessible to everyone, and this enhances the trust that we gain from our focus on transparency and fairness.
Fairness: We believe that those with the same role and responsibilities who are at the same experience level should be paid equitably. We believe in maintaining fairness, and attracting those who value that fairness, over deviating from our approach to clinch a specific skillset we may need at a particular moment.
Generosity: We pay above market to attract high performing team members, and to create the possibility of a small, tight-knit team that achieves great outcomes together. We believe that when we achieve results as a cohesive team, the rewards of those outcomes should be shared with those who created them.
Building a salary system for the long-term
Putting together all of our lessons learned, deeper reflections, and clarity on the flaws uncovered, we determined that we were ready to take a more fundamental change to our approach to salaries.
We realized that we had accrued enough debt in both the salary formula, our implementation of it, and the existing salaries and leveling of the team, that it would be best to take a first-principles approach and reflect on how we think about and calculate salaries at Buffer. We wanted to put in place a system that could serve us in this decade rather than the previous one.
The key breakthrough we had was that a salary formula alone was not adequate to capture the variety of changes we need to make over time in our approach to salaries. This led us to arrive at a Salary System.
Our Salary System could contain the salary formula; the literal equation used to arrive at an individual salary. But it could also contain the market data, the ways we pull in fresh market data, and how we adjust benchmarks to make them our own. We also wanted to make it straightforward to maintain legacy salaries in those instances where we arrived at a lower salary with new market data or formula changes. By making legacy salaries from a previous formula a core part of the overall system, it would give us the ability to once again make more frequent improvements. Team members would always keep the previous salary if it was higher until a future formula change or promotion led to an increased salary.
The other vital breakthrough was the importance of separation of concerns. Previously, we included everything in a single spreadsheet. With our new Salary System, we decided that we would have three separate spreadsheets, as we have three fundamentally different elements of our approach. We chose to keep market data completely separate from the way it is utilized. This would allow us to easily swap out market data for fresh benchmarks or even a completely new source. It also enables the team to view market data prior to any adjustments by us, which increases the overall visibility into our system. We also separate Buffer Benchmarks, where we pull in market data and adjust it to arrive at our own benchmarks for each role and level, from the overall salaries spreadsheet, which shows the list of everyone in the team and their title, role, location, and salary.
The Buffer Salary System
Evolving from a salary formula to a salary system means that it isn’t something we can share in one sentence, but at the same time, the overall system is more flexible and adaptable to scale and grow with us over time. We believe what we’ve arrived at is as simple as possible, and as complex as necessary.
There are three parts to Buffer’s new salary system, and we intentionally designed the elements of this system to live independently of one another.
- Market data: Market data of salaries in tech for our company size, which we derive our salaries from.
- Buffer benchmarks: A grid of the salaries for every role and level we have in the company. The benchmarks are guided by market data rather than beholden to it.
- Buffer salaries: The salaries for everyone in the team and the calculations to arrive at each salary.
Let’s get into each of these.
Market data
Broadly when talking about compensation, most salaries are based on market data. We have gone through several data sources over the years, and in this move to a new salary system, we moved to Carta Compensation as our data source. We chose Carta because it allows us to compare salaries with other companies that are peers in terms of industry, financials, and size. Carta Compensation also collects its data directly from HRIS (i.e., payroll) integrations, so data is flowing in continuously, which allows for updated market data on a regular basis. The platform is also intuitive and easy to use.
The market data that we use is filtered by company size (based on post-money valuation) and location (we use San Francisco, CA). Our salary system is built in a way that it is easy to update and adjust the market data inputs, so we can change our source of data at anytime. The market data informs the Buffer benchmarks, which are unique to Buffer and ultimately determine a teammate’s salary.
Buffer Benchmarks
At the highest level, the Buffer Benchmark is a grid of every role at Buffer with every level within that role. The grid provides a single view of how salaries progress for each role at Buffer.
We’ve arrived at this grid by using market data and making our own adjustments based on the uniqueness of each function and our decisions on how salaries should increase from one level to the next.
We use level 5 data to establish our benchmarks
The Buffer Benchmark helps address the challenges of sample size. We’ve often found in market data that sample size can be quite low for roles at certain levels, so we are using market data to inform only the level with the best data. This not only allows us to gain flexibility in the other levels, but also ensures that as we bring in new market data we don’t see fluctuations beyond those truly reflected in the market change.
The Buffer benchmark references level five market data; we did this because, across all data sets, we found the data to be most consistent at mid-levels (i.e. less variance in the percentage increase than at lower levels).
Using level five data, we can then look at overall trends across areas and roles to create a standard percentage jump from one level to the next.
We have consistent level percent increases
We decided to make the level percent increases consistent between levels, which felt fairer. In traditional market data, the jumps might be inconsistent. We’ve made them consistent for Buffer while adding a “fast early growth” track to apply for some areas like Finance and Advocacy where there was a lower entry-level point and, therefore, it made more sense to apply a higher percentage increase early on (i.e., levels one to three). At level four, the jumps even out to align with the Standard Path. See below the increases that we have for all levels at Buffer.
You can see the exception is the CEO salary. We’ve embraced the concept that the CEO salary should be primarily tied to the performance of the company. The formula for CEO salary is simpler than other roles due to the lack of levels. Therefore, CEO salary is calculated as follows:
CEO benchmark * Cost of Living (90%)
The CEO benchmark is determined solely on the percentile we choose for CEO pay, and the company size filter we are using for all salaries. There are no other factors, and therefore we are limiting opportunities for discrepancies and exceptions which could solely benefit the CEO
Use of percentiles to determine where we sit in the market
A Percentile is a concept in statistics that identifies a specific data point in relation to a group of data. In the context of salaries, the way to think about it is: the 80th percentile means that only 20 percent of all salaries for that role are higher than that number.
With Carta Compensation as our source for Market Data, we have access to the 25th, 50th, 75th, and 90th percentile salaries for every role at every level. With those numbers, we are able to extrapolate to determine salaries for every percentile from 70th to 90th. This is the range of percentiles we use for salaries at Buffer.
Starting with the level five market data, we then apply a specific percentile per area. With our prior data source, we used to pay all roles at the 50th percentile of market data for San Francisco. This meant that our salaries fell at exactly the average or midpoint of salaries in our industry. This was, however, without filtering based on our size and stage of company.
Since we started using Carta Compensation as our data source, we’ve seen a significant improvement here. The data source itself is a much better representation of our industry, and we are using a company-size filter that is accurate for the stage we are at. With Carta Compensation as our data source, we can confidently see that all salaries at Buffer already fell between the 70th to 90th percentile of the market.
In the migration to a new data source, we applied a unique percentile for each area, ensuring that we kept salaries mostly consistent with where they were. Our resulting percentiles across areas are as follows:
Bringing it all together by pulling level five market data at a specific percentile and then applying our chosen level percent increases, we can build out our full grid of salaries for all roles across all levels. This is what we use to determine the exact salary for each team member and is what enables us to maintain complete consistency in salaries.
Give our salary system a try!
While we are able to share our Salaries and Benchmarks sheet openly with you, the Market Data is commercial, and we, therefore, must keep that private.We’ve created example spreadsheets with a fictional team and fabricated market data so you can understand how this system works holistically. Jump into any of the sheets below to see how they are connected and explore the salary system:
Buffer salaries
We calculate individual team salaries using the Buffer Benchmarks as the starting point, and then we combine other components of the formula: cost of living and salary choice.
Cost of living adjusts salaries based on either a high (100 percent) or global (90 percent) band for every location. The cost of living is a multiplication factor on the Buffer Benchmark, either keeping it where it is or reducing it down to 90 percent of the number.
Salary choice is a legacy option that is no longer offered to new team members. In the earlier years of Buffer, new team members were offered the option to take additional equity or take the “salary choice,” which would give them an additional $10,000 in salary. This is the final element added to a salary if it applies. The salary choice does not make sense for us at the current stage of the company, and we plan to eventually phase it out, likely when we attain our vision for location-independent salaries.
A detailed view of the Buffer team’s salaries
Here are the new salaries we arrived at for the whole Buffer team based on our new Salary System. This change resulted in 56 teammates seeing a salary increase, which was 71 percent of our team. The total annual budget impact of the new system is $236,644.
Buffer’s Philosophy on Salaries
Approaching salaries from first principles
Since the early days of Buffer, we've taken a first principles approach to how salaries work. A first principles approach means aiming to break down something to its most fundamental truths. In the case of salaries, this means asking ourselves questions such as “What are salaries?”, “How should salaries be determined?” “What are the core components that should make up a salary?” and “What is absolutely necessary to factor into determining a salary versus what can be left out?”
Our beliefs on salaries
We believe that a salary is the appropriate remuneration for work put in to contribute to making our company a success. We believe that pay should be in relation to the stage and state (performance) of the company, the role and the impact that role has on the business, and the seniority of the position in terms of the level of responsibilities and impact that on the company.
At its most basic principles, we believe a salary number should be tied to the value that work brings to the business in direct monetary terms. In reality, this is very hard to quantify, and the ability to quantify varies drastically between roles. Therefore, we also value the market rates and believe in the concept of a market for compensation. With enough individuals and companies, a market is formed based on the pay companies offer and the pay employees expect.
Based on the existence of a market for compensation and our preference for this methodology over attempting to value every role, we heavily utilize market data in our approach to salaries. We have created a level of flexibility in our approach to enable us to have some element of value-driven differences in salaries based on a foundation of market-driven salaries.
Where we choose to sit in the market
When reflecting on the market of salaries and where we want to sit in the market, we have determined that we want to pay on the upper end of market rates for most roles. This is reflected in our Compensation Principles, specifically to be Generous. The reason for this choice is that we want to have a small-for-revenues, high-performing, tight-knit team in line with our Operating Principles. We want the team to generally not be concerned about compensation, and be able to focus on delivering value to customers and creating something special.
Fairness and transparency change the power dynamic and build trust
We fundamentally believe that pay should be fair and equitable. Again, our Compensation Principles reflect this with our Fair principle alongside Transparency. Being fair leads us to have a clear system and formula for salaries and limiting opportunities for discrepancies and exceptions. Transparency means that anyone can verify that we are, in fact, being fair and meeting our other stated goals since they can see the entirety of the methodology. This helps us to establish full trust in our approach to salaries as a company.
Our salary methodology changes the power dynamic that usually exists at companies. Where most companies keep their methodology secretive and opaque as it puts them in the stronger negotiation and power position, we choose to make our methodology and all salaries fully transparent. Candidates and team members have full information to make their decisions and can actively share feedback, which can and often does lead to changes to the system that positively impact everyone.
A rising tide lifts all boats (salaries)
A core philosophy of our Salary System and Compensation Principles is that over time, adjustments we make to refine and improve the approach, or changes we make when we have more resources, will benefit everyone at Buffer.
This is reflected in how salary negotiation works at Buffer, where we do not allow negotiation to change or impact salary numbers and instead take on negotiation as a point of feedback.
Put simply, we will never make a change that solely benefits a single person. Any change that results in a change of one or more salaries in the team will be a change to our salary system and formula itself. Therefore, it will almost always impact several people; specifically, it will impact all salaries where the specific change is a factor.
The appropriate level of simplicity
When reflecting on Simple as one of our Compensation Principles, it may not feel at first impression that our Salary System is indeed simple. Our goal has been to create a system that is as simple as possible while also being as complex as necessary. There are a few examples of where we believe greater simplicity is possible (see what’s next below).
On the whole, however, we believe that if the Salary System were any simpler, it would not meet all of our stated goals or capture all the key differences in how a salary should be determined. And, if it were any more complex, it would detract from our pursuit of simplicity and transparency.
How we approach the CEO salary
The CEO salary is a unique case within a company. Whereas every other role has the concept of levels, progression, and seniority, there isn't really the concept of a junior or senior CEO or a level six, eight, or ten CEO. Of course, CEOs grow and learn over time and become more experienced. However, those learnings should generally translate into company growth that can lead to salary increases, rather than choosing to increase the salary separately. The idea that a CEO does not have levels or seniority is corroborated by our market data source, Carta Compensation.
When approaching salaries from first principles, the conclusion is that CEO pay should be very closely aligned with the success of the company and the positive impact the results have on customers and the team. If the CEO is successful in their role, then the company will grow, and it will have the ability to pay higher salaries across the board.
It’s also vital that CEO pay is transparent since, in many companies, this is not the case and is a key source of distrust. CEOs are often excessively overpaid, and the gap between the lowest and highest salaries in companies can be extreme. This is one of the reasons why salaries are transparent at Buffer.
We have no salary negotiation at Buffer
Negotiation is a very common practice when it comes to how compensation works generally across our industry. As we focused on approaching salaries from first principles, we also reflected deeply on the why behind salary negotiation, and the implications of salary negotiation.
Salary negotiation is largely necessary because without negotiating, individuals will end up with a lower salary than they deserve or than is possible. This is very much because most companies strive to pay the minimum salary they can negotiate for themselves. This could be argued as an efficiency gain, however, we believe that there is a significant lost opportunity for trust in the company, in leadership, and among the team with this approach.
The impact of salary negotiation and why it isn’t a fit for our goals
The direct implication of negotiation occurring and a salary being determined through a process of negotiation is that there will be discrepancies in salaries across the same role and level. We hold ourselves to a high standard and fully adhering to our Compensation Principles. By holding ourselves to having Fair salaries, we have committed to no discrepancies or exceptions in salaries of the same role at the same level. Further, we are committed to having a very clear system for our salaries and full transparency of that system.
To achieve these outcomes, we have no salary negotiation at Buffer. Where a salary negotiation conversation occurs or feedback is shared on the outcomes of our salary system, we treat this as an input to improve the system overall. The Salary System is always evolving and is never complete; it is more comprehensive today as we have grown significantly from our early days, and in the future, when we grow larger, there will be roles or necessary elements that aren’t currently captured.
Therefore, it is essential that we have ongoing feedback so that we can understand any issues and improve the system. When we find an issue that should be resolved, the improvement will positively impact everyone in a role where that particular change is relevant to them.
What’s next for salaries at Buffer?
One of the benefits of our new salary system is that the extensive rebuilding of our salary methodology means that it is relatively easy for us to explore future scenarios of changes we could make. There are a number of changes we have in mind for the future, which represent areas of opportunity to further simplify our approach and adhere even more to our Compensation Principles.
It is important to note that all of these scenarios would have a budget impact; the budget impact based on the team as of December 2023 is listed below for each scenario.
Location-Independent Salaries
We have a long-term goal that salaries at Buffer will not be based on location. We stated this commitment when we shared our vision for location-independent salaries in early 2022 and made our first significant step towards it by eliminating two of the four location bands we had at the time.
Today, salaries fall on either the global or high band. Global sits at 90 percent of the high band. It’s important to note that by paying 90 percent market rates which are based on San Francisco, we are already paying well above market for almost every location in the world.
We can explore a scenario where we bring our 90 percent global cost of living band up to 100 percent and eliminate the concept of cost of living entirely from our salary system.
Annual budget impact: $1,030,772
Note: we will likely remove the Salary Choice when we carry out this change (see below for more details). This would lead to an adjusted annual budget impact of $820,772.
Aligning Percentiles
One area we plan to improve in the future is to align the percentiles we use across the company. In this update, we matched percentiles with our prior formula, which has kept salaries mostly consistent but resulted in a lack of clear consistency of percentiles across the team. For the updated percentiles, we have two scenarios:
- We could bring all areas up to at least the 80th percentile.
Annual budget impact: $314,467
- We could bring all areas up to at least the 85th percentile.
Annual budget impact: $802,551
Salary Choice
When we are in the position to be able to make significant changes to our salary system as detailed in the scenarios above, we will take the opportunity to remove the Salary Choice, which is a legacy element of the Salary System from the earlier days of our salary formula, which was more appropriate for the early stages of the company. This will most likely be a change we make when we eventually move to Location-Independent Salaries.
We currently have 21 team members with the Salary Choice option applied to their salary. Three of these team members are in the high-cost-of-living band; the other 18 are in global cost-of-living locations.
Annual budget impact: -$210,000.
My hope for salaries
It’s been a wonderful journey of over a decade of transparent salaries, and I’m feeling energized by the significant step we’ve just taken to resolve debt and discrepancies in our approach and set us up with a more robust system that can serve us for years to come.
Something that I’ve thought about a lot over the years is just how hard salaries are to do right. And also how important they are. People really care about not only what their salary is but the way that a company approaches salaries. From how different functions and roles are valued to whether there are disparities between pay to whether it is accepted (or even encouraged) to talk openly about compensation. I don’t think we’ve perfected it yet, and I don’t believe we ever will. But we’ve put a lot of time and energy into compensation because we believe it really matters.
As a business and an individual focused on the long-term, I think a lot about what the future may hold for salaries within our industry. One of my hopes is that the work we do can make a positive difference to people and businesses. Could our salary system approach become adopted by others? Can we help others save time while also improving their compensation practices? Could businesses start to share openly how they adjust the market data to suit their unique circumstances? Could companies commit to having no exceptions or discrepancies in how they determine and set salaries? Can businesses commit to doing annual re-benchmarking and raising salaries for those who are now below market rates?
These are questions I don’t have all the answers to. We’ve seen progress in the past decade for salary transparency to become more widely adopted, but I believe that there is much more work to be done. I hope that our efforts and what we continue to share openly can have just a small impact in driving a movement towards transparent and equitable salaries.
I want to give a very special thanks to Jenny, who was my key partner and driver of the work on our new Salary System, Hailley and Caro who helped brainstorm, review, and edit this article, and Martin who helped with visual design.
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