Best Practices To Setting Salaries As A Startup

December 13, 2023
min read


Table of contents

Best Practices To Setting Salaries As A Startup

Structuring salaries is one of the lesser talked about challenges faced by startups. You have a limited budget so you need to be careful about managing your budget. At the same time, you want to attract the most talented professionals. There’s no doubt about it, no matter how satisfying a job is, at the end of the day, compensation is still one of the top factors influencing employee loyalty. 

In today’s world where talking about salaries is no longer taboo, you can’t just set salaries on a whim or base it on personal equations. Salaries need to be fair, comparable to what your employees would get at other companies and have justifiable returns. You need a compensation strategy and here is some help to get you started.

Determine The Structure for Your Startup Salaries

When it comes to structuring salaries, you need a foundation on what to base your salaries on. Every organization will have their own set of variables they consider important and each may be given a different weightage. This could also depend on the role. 

For example, educational qualifications are an important metric for technical roles while it may not matter much when setting a receptionist’s salary. These metrics won’t give you a standard figure. Rather, they should be used to determine pay bands. 

Let’s take a look at some of the common metrics considered when establishing salaries. 

Job Type

Salaries must justify the value a person brings to the company. So, you may choose to give business development executives a base salary and commissions based on their sales. But, this won’t work for administrative and IT teams.

Categorize the position into a job type. Some of the common categories are:

  • Managerial roles involving supervision
  • Professional roles 
  • Technical roles
  • Operational roles
  • Business development roles

Seniority Level

There could be multiple levels in each job type. For example, a team leader and a department head are both managerial roles but at different levels. So, once the job role has been categorized, it must be slotted to the appropriate level. 

Seniority level is all about responsibility, the scope of work and the organization’s chain of command. At the very least, seniority can be set as entry-level, mid-level and senior-level. Each job type may have a different number of levels. 


For technical positions, qualifications, certifications, and education can be important variables to consider. Simply put, a post-graduate will have more knowledge on a subject and hence deserves a higher salary as compared to a graduate in the same field. 


While education offers theoretical knowledge, experience is where practical knowledge is gained. Of course, for experience to influence salaries, it must be relevant.

For example, when moving up the career ladder, an individual may have 5 years of experience as a salesperson but none as a team leader. Thus, their salary and that of a team leader with 2 years of experience will vary. 

Number Of Dependents

In many cases, an individual may be earning not only for himself or herself but also to support a family. Some start-ups do choose to pay employees with dependents a higher salary. It’s a debatable topic and a personal decision for each company.

The European Union has certain family allowances regarding dependents that you may need to consider.

To be fair, it isn’t only young children who should be considered dependents but also aging parents, specially-abled siblings, etc. Rather than vary the cash component of salaries, you may choose to let this variable influence benefits such as insurance, day-care, etc. 


The cost of living is different in different countries or even cities in the same country. You need to decide whether you pay people differently depending on where they live.

To help you do this, we have set up a global salary converter, so you can see what salary you should be paying in each country.


The longer an employee stays with your organization, the more familiar he or she is with the operations and the more value they can add. Hence, in addition to their overall experience, you may also want to consider structuring salaries with annual increments to reward loyalty.

Decide On A Compensation Strategy for Your Startup

Once you’ve established the structure on which you set your salaries, you need to decide on your compensation strategy – do you want to lead or match the market in terms of compensation?

As a startup, it would be very difficult to pay less than what is being offered in the market and still be attractive to job candidates. In either case, you need to know what your competitors are paying their employees. This is where benchmarking comes in.

Benchmark Startup Compensation

Benchmarking salaries refers to comparing salaries and benefits being paid for a particular job role by companies in the same industry, stage of growth, location, etc. About half the respondents to a survey said that they were willing to discuss salaries with their colleagues. Hence, it is important to pair fairly and the only way to achieve this is by benchmarking salaries. Benchmarking helps structure salaries in a way to attract talent as well as keep employees from looking elsewhere for a higher salary.

This raises the question – What is the best way to benchmark startup salaries?

It’s relatively easier to get salary information today as compared to a decade ago. There are many websites that give people a platform to share the salaries they are being paid in a bid to bring about transparency. As an employer, you can access this information and assess an average accordingly. However, you should note that there is no guarantee of this information being truthful. 

A benchmarking tool is a much better alternative. 

How A Benchmarking Tool Can Make A Difference for Your Startup

A compensation benchmarking website assures reliable, accurate data. There are quite a few benchmarking websites. When you’re structuring salaries, look for a website that meets the following criteria.

  • Data sources: As a startup, you need to benchmark salaries against what is being paid by other startups. Hence, the data should be sourced from companies at a similar stage of growth and in the same location.
  • Validity: You don’t want to see salaries that were being paid 5-years ago – you need to know the current salaries. Look for data that preferably reflects salaries for the last year. 
  • Reliability: Depending on salaries entered by employees isn’t always a good idea since people may not be entirely honest. Look for data collected from a reliable third party. 
  • Filters: You started structuring your compensation package by determining important variables. Hence, you should be able to filter salaries accordingly. 

Consider Other Benefits in Startup Compensation

Truth be told, though almost 90% of all employers assume their employees leave a job for more money, only 12% actually do.

As employers, you need to address the need for employees to feel valued and look at all the different ways you can do so. Some of the ideas you could use include:

  • Insurance for employees and their families
  • Tuition reimbursement
  • Corporate discounts
  • Paid vacations
  • Retirement plans
  • Performance bonuses
  • Stock options
  • Childcare
  • Wellness programs
  • Training and sponsorship for certifications

In the post-COVID work environment, flexibility is another point to consider. A survey revealed that inflexible working hours and no remote working is one of the primary reasons that made about 36% of the respondents leave their jobs. 

You also need to offer substantial potential for growth. As a startup, this is one of the key differentiators between you and more established firms. Employees need to feel like they are working towards a visible goal. The easiest way to do this is with a transparent compensation strategy. Employees should know how their salary will improve as their career progresses. Employers should also seek to understand what is employee experience and why it is so important. Alongside salary, this is a key factor for employee retention & satisfaction.

Summing up Startup Salaries

On average, businesses lose 33% of an employee’s annual salary to replace them. Further, it could take up to 2 years for a newly hired employee to match a tenured employee’s productivity. An attractive salary structure and a transparent policy about it could reduce the employee attrition rate considerably and help protect you from such losses. Lowering attrition rates also builds a positive image for the brand and makes your company a good place to work in.

Whether you have 2 employees or 20, you should put the same amount of thought into structuring your salaries. Using a benchmarking tool ensures that you match the existing market salaries and also allows you to strategize when and if you can lead the market for more senior positions.

We're an easy-to-use compensation benchmarking tool that addresses the specific requirements of an entrepreneur. With Figures, you can set attractive salaries and make your employees feel valued and an integral part of your team – the foundation for a happy, productive team. Want to try our benchmarking tool?

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