How to pay fairly in a remote-first for-good startup—Introducing the Acter Salary Calculator
Late last year, when it came to hiring another Senior Developer as an additional person for the team, we sat down and tried to answer the question "How to organize fair pay in Acter, as a remote-first for-good startup". Now that the latest version of the Calculator has been agreed upon at the General Assembly, I am proud to share with you what we came up with, how it works and why.
tldr; Acter has a publicly accessible Salary Calculator factoring in the position, work experience and local cost of living situation to calculate each ones fair salary.
Background and prior work
When embarking on the quest of creating a sane, accessible and fair way of calculating the salary everyone should get, we looked at the prior work out there, shoutout to wire for their a good overview. Inspired by by the Salary Calculators of Buffer and Gitlabs Compensation Calculator, we also wanted to create a transparent and fair compensation scheme for being employed at Acter that is transparent, easy to understand and follow. However, the numbers these come up with are just astronomical to us. We are not a multi-million-dollar venture-funded or publicly traded company with Silicon Valley offices and several hundred or thousand of employees. These numbers are high because the owners of these companies believe they need to be high to find the really good people. We don't believe that to be true—if your work is fulfilling because you have a purpose.
Being different with different goals
We are a Europe-based non-profit collective of workers, contributors and organizations using the app with less than ten people on payroll. Unlike Basecamp we have no reason to want to pay in the top 10% of San Fransisco rates.
We want to make sure we pay fairly among each other and make sure no one is under financial stress (which kills productivity). However, We are all working on Acter to create a better world. Thus any surplus we generate or money we save isn't meant to go into our pockets but is put towards expanding the accessibility and reach of the app, especially for people, who otherwise can't effort it.
Though our HQs are in Denmark, we are remote-first team, with the majority working outside of Europe in various other countries, many in what is called the "global south". So, how do we even figure out what is fair pay? Let me explain our thoughts about this and reasoning for the various steps we took when creating our Salary Calculator.
Breaking it down
When it comes down to it, what is considered fair can be looked at from various angels: fair within the organization, fair as compared to market rates, fair as in the workers prior experience... without going too deep into even the philosophical questions of what fair even means. But for this we went even slightly further: as a collective of people working on the app, together with volunteer contributors, what are we even paying for exactly?
Reliability, responsibility and productivity. Volunteers come and go, have other priorities and fade-in and out. Having people working on the development full-time allows for dampening those waves and ensure a consistent output, reliable operation and continuous progress regardless of how attractive it currently is for a volunteer to spent their time working on it.
Taking that as a starting thought you quickly come to realize that certain positions contribute more and others less to that reliance. You also realize that splitting hairs on whether someone is a front-end developer of doing supposedly "hard backend engineering" is just BS made up to divide the market of available laborers and undercut their prices. While at the same time, those weird 100-to-1 or even 1000-to-1 ratios that a lot of publicly traded companies pay their top executives don't make any sense: in our company no one can ever be a 100x more relied upon than someone else. Ergo: We want salaries to be in a decent ratio with one another.
Which also means the compensation can only ever be fair, if it is easy to understand how it is calculated. We can't take thousand factors into account that make it hard to follow how it results to specific amounts. Which limits the parameters we can even include in the "formula" and the mathematical operations you want to do. We opted to just express everything in factors you multiple with each other.
The starting point
Starting with just a base salary (we said 25USD/hour) we can quickly sketch up that a Junior software developer should be paid a factor of that, while a mid-level or a senior developer has a higher factor to be calculated with. While these factors do not diverge too far from one another, there is an increase in productivity and reliance the organization can put on someone the more professional experience they have in that position. That is reflected in those factors.
Doing that for the current positions we have and want to hire for, we come up with a simple scheme like this:
Extra responsibilities
Of course, one might be tasked by the organization to take over extra responsibilities, like leading certain aspects of the decision making - e.g. acting as the technical architect - or taking over people management responsibilities. We don't really want to create a huge hierarchy where such a responsibility ever becomes your only job but instead spread these among many people as an additional task they take over. Of course the organization needs to acknowledge that also through compensation. So we add a few additional factors that add to your salary, if the organization relies upon you for executing them:
Making it fair, global edition
That works fine and dandy if all the people have roughly the same expenses in their live - e.g. if they lived in the same city. But looking at it globally, how do make this "fair between different countries" is something that seems to be largely unanswered from our research. Here is what we settled on and why:
We decided to pick the cost of living index of numbeo as an independent rough guide for adapting to those circumstances. This gives you a ranking of the costs of various place of living globally (with New York, USA as the measure value at 100). We opted to take certain brackets and define a factor for these to multiply the value with. As of today these are:
As you will notice if you put in various different areas, these numbers are skewed in favor of lower cost of living situations. Meaning that if you lived in a place of low cost of living index (e.g. Lagos Nigeria with an CoL of 36.6) we are probably overpaying compared to local market rates, while in Mid-Low and Mid we are about market rate and the higher it goes the more we are undercutting the local market rate.
The thought behind this is as follows: a lower cost of living is associated with a lower quality of live and generally a less developed social security system. Additionally the cost of living index is also associated with the professional opportunities given, especially for our industry: lower cost of living is typically associated with a larger amount of outsourcing companies which puts a hard stop-gap into a professional career growth path at some point.
The lower the cost of living the more you have to a) spent to reach a similar standard of living, in particular social security, e.g. health care and b) the fewer opportunities you generally have to reach them. While a higher cost of living also typically means you have more professional opportunities and generally a more robust social network (healthcare in the US being the hard outlier here). We consider it just fair to compensate for these short comings and through that prefer paying better for people that otherwise probably do not get the same opportunities and social security. Our little effort to make the world a more equable place.
Putting it all together
Putting that all together, we have a Salary Calculator where anyone can put in their current position (as agreed upon with your direct "manager"), any extra responsibilities taken on, hours you work, etc and it will tell you what the company offers to pay you (split up into whatever payment cycle is locally preferred so it is easy for you to compare)
Or put in your colleagues information and you know what they are offered. You can even look up the formula and find it being very simple and something you could calculate yourself if you wanted to. Full transparency, in all fairness.
Agreement and amendments
As mentioned in the beginning this Salary Calculator has been agreed upon at the last General Assembly, the highest legal entity of the Acter Association. Which means we are bound to it in all future contracts. With the exception however to add further positions (as you noticed the list is pretty short right now) that the board can do as needed and get an agreement upon them at the next following general assembly.
Further more the General Assembly has decided to make it a default topic of on the yearly assembly to decide upon amending the base salary across the board to adapt for inflation. An increase of wages by 5% to adapt for inflation has been scheduled for later this year. As an employee you are eligible to become a member of the association and thus influence and vote in these decisions. No more asking for a raise just to make up for inflation.
What do you think?
That's our thoughts and idea, we have been practicing for more than half a year now and will continue to report on as it goes along. But what do you think about it? Anything important we missed? How do you try to make work pay fair and equitable? We'd love to hear your thoughts and experiences on any of that.
Typical Questions answered
We asked ourselves these but were also previously asked, find our answers below:
But doesn't this mean you will miss out on talent at higher cost of living places? In particular the US?
Potentially. But as said above we don't believe that you have to pay 10% of San Fransisco salary to find top talent. You need to offer a job with a purpose, we want to have a meaning in what we do. 10x engineers do not exist (especially outside of a team), and we are not interested in subsidizing the already overheated Silicon Valley housing market by paying several hundred thousand dollars in wages a year. Especially if that is easily 3-4 full time positions of the same quality at a lower cost of living place. If that "talent" cares more about making that kinda money, we are sure they have the opportunities to get it some place there.
What about if they have a family to take care of? Dependents or special conditions that require extra pay?
In order to keep the salary calculator simple and transparent, we had to limit the number of parameters we can put in. We didn't even put in the specific place or a hard cost of living index specific counter but opted for brackets to simplify it. Once you start adding variables the complexity increases and while it starts to feel more fair, these specific factors in relation to one another start to become a point of contention. Instead, we decided to keep it simple and ignore factors that don't have a direct influence on the key objective the organization is paying for: responsibility, reliance and productivity.
That said, this is the base salary calculator. While we don't have any stock options or share or alike (see above: non-profit association), by becoming working on Acter you become eligible to become a member to vote on this and future changes to it, as well as to everything else, including the overall strategy. What Acter additionally offers is that we can cover certain expenses for work, like an co-working space membership or buying of hardware. And next to that we have a fund for every employee to spent on their own education to e.g. go to conferences or pay for online courses or books.
Does that mean you lowered salaries when introducing this?
No. Though we were mostly winging it beforehand in regards to pay (which I consider a stress factor myself, I want to pay fairly but negotiating salaries is always pretty weird) and we have a few people that are being paid slightly above what the comes out here, the agreement is that we won't be lowering any salaries when introducing the calculator. Instead their salaries will just not be changed upon the inflation increases until the salary calculated has reached what they are being paid already. They'll just skip the increases until the calculator caught up to their current salary.
I would work for you for less!
Some of us do, actually. Our personal situation allows us to not be paid all we are deserved from the perspective of organization–in particular in founding team. But that is a personal choice. which is appreciated and won't ever be expected. The company deems that you deserve that compensation and if your situation ever changed so you'd need it, you'll get it (not retrospectively though).
So, no paying of volunteers or contributors?!?
No, not at this point. It is always hard to judge how and what to pay for in terms of volunteer contributions, and it is even harder to make that a somewhat "fair" deal without angering others or feeling like you are underpaying. For now, we are staying away from this idea. We pay for responsibility, reliance and productivity.
That said, we are willing to discuss covering expenses if you are doing something in a somewhat official or representative capacity, e.g. going to a conference to present Acter, or provide merchandise and other sponsoring. If this is of interest to you, please ping us (we are thinking about setting up an official support program for that).
I can't change the form in that calculator...
Yeah, the shared link is a viewing only one and you need edit rights on Google Sheets just to play around with that, it's a bit annoying. What we'd recommend is that you "File -> Create Copy" and then you can play with that version as much as you like 😄 .