Fixing salaries, levels, and promotions in your engineering org

With people across the tech industry rethinking their relationships with work, company leaders have an unusual opportunity to rethink the ways we support employees.

Most obviously, scores of companies have made remote work a steady option. Some have offered four-day weeks, and many have expanded benefits. Plenty have also increased salaries sharply, and Big Tech compensation packages are now commonly stratospheric.

At Daily, where I’m VP of Engineering, we’ve recently adjusted salaries, levels, and promotions in nontraditional ways. Our new approach won’t be a fit for lots of other companies, and it might not even be a fit for us as we grow. But it is a good example of what smaller tech companies can thoughtfully offer employees during a time of substantial change and huge salaries at established companies.

Daily’s background

Daily, a developer platform providing video and audio APIs, is four years old, has about 50 people on staff, and has always been fully remote. When we started growing a couple of years ago, we leveled new hires based on years of relevant experience. We had three levels, each of which had a set salary, and we paid everyone at the same level the same rate, regardless of location. With no written career progression and few managers to guide careers, the company didn’t tend to promote people. But it also didn’t tend to lose people; attrition has been close to zero.

You might imagine we were paying unusually high salaries. But, in fact, we didn’t raise salaries for a couple of years, and we’d lately slipped below the market, especially for senior team members, who make up most of our staff. Instead, we offered people interesting work with lots of room for growth, helpful coworkers, and a high degree of autonomy.

When we recently raised our Series B funding, it was a natural time to revisit compensation, both to retain staff and draw new hires. We knew we couldn’t compete with companies like Google or Netflix on money alone, so we looked at what was working for us and structured our system to support those things.

Our new approach to salaries, levels, and promotions

Our staff and candidates generally liked that we based levels on years of relevant experience and that we had set salaries. These things felt clear and fair, and they were a good fit for people who didn’t like negotiating on their way into a job. Because those things had already been successful for us, we expanded them.

To better reflect career progression, we shifted from three levels to seven. To keep in step with the market, we adjusted salaries up, aiming to be in at least the 50th percentile for San Francisco companies that had raised similar amounts of money. And to take our leveling to its logical conclusion, we created a promotion system in which team members automatically advance by gaining more experience at Daily. We are not holding traditional promotions, but we still actively seek to help people grow in their careers. In addition, later this spring, we aim to develop rewards and recognition separate from salary.

After setting up our system, we releveled current staff according to our new tiers, adjusted up any salaries where a new level paid more, and let people know when they could expect to bump up to the next level. We’re still paying the same regardless of location, and we set salaries similarly regardless of function.

We aren’t using titles internally (like senior engineer or staff engineer), since they aren’t particularly useful at our size and can be a source of conflict at any size. But we are helping people figure out appropriate titles for LinkedIn and resumes. We didn’t include equity adjustments in this round of changes; that’s more complex and will take time to figure out, and we didn’t want to hold up raises. But we will be looking to rationalize equity across the team later this year. 

All told, our new system aims to pay people fairly so that they can continue to focus on doing work they find compelling, learn as much as possible, and spend time helping each other. The changes have landed well with our staff.

The benefits and trade-offs

I think of this work as ‘fixing salaries, levels, and promotions’, and I mean it both ways. In our system, these things are now fixed in place until we revisit them (which we plan to do as we grow and the market changes, probably in 12 to 18 months). But they’re also fixed in the sense that they’re improved from where we were, and a better fit for us than a traditional approach with negotiated levels, salaries, raises, and promotions.
But that doesn’t mean they’re perfect. Here are just a few of the benefits and trade-offs we can see now:

Fairness

Our system reduces the surface area for bias in critical ways. It helps us avoid perpetuating past inequality, in which people from groups traditionally excluded from tech might have been underleveled, or people from dominant groups might have been overleveled. And it helps us pay everyone equally. But it doesn’t eliminate bias. Most obviously, what we consider ‘relevant experience’ has room for interpretation (on the Daily blog, I talk in detail about how we calculate it). And as we develop mechanisms for rewards and recognition, they will inevitably create opportunities for inequity.

Career tracks

We pay everyone at the same level the same salary, so there’s no penalty for trying out a management role or a different department, and there’s no incentive to take a role that’s unappealing for higher pay. However, we might slip out of sync with the market fairly quickly on management roles in particular, since we don’t follow the industry norm of paying managers more than individual contributors with similar experience.

Focus 

In a system where levels, salaries, raises, and promotions have to be negotiated, managers spend an enormous amount of time working them out. The decisions are often politically fraught and divisive, and the results dubious. With our approach, managers avoid all of that and can instead focus on high-value work, like supporting teams and addressing customer needs. On the other hand, people who are motivated by those negotiations – both managers and ICs – won’t be drawn to Daily, and we’ll lose some good candidates as a result.

Uneven leveling

Because we base levels on experience rather than accomplishments, not everyone at the same level necessarily contributes the same amount. At organizations that use traditional leveling and promotion systems, this sort of disparity is common, for much less defensible reasons, so we’ve accepted potential variances. The benefit is that we expect removing office politics from levels and promotions will help sustain our collegial culture.

Diversity

Daily doesn’t yet have the structure to support a large number of people who are early in their careers, in the ways that are necessary for them to grow and have a good experience. While we’re looking forward to a time when we have that in place, we don’t want to make the mistake of hiring early-stage candidates we then underserve, especially if they’re from groups typically excluded from tech. Our levels reflect that; people at the start of their careers can get higher titles and raises more quickly at other companies.

This would be a non-issue if it weren’t for the fact that pipelines that include earlier-stage candidates are usually more diverse in tech than those limited to later-stage candidates. To ensure diversity among candidates for more-senior roles, we’re doing things we know work: reaching out to our networks, advertising to affinity groups, developing inclusive practices across the board, and being patient. Because it often takes longer to find candidates from typically excluded groups, we gain an advantage by giving ourselves time to fill each role.

Looking forward

The changes we’ve made are a good fit for our culture and our stage. But Daily will change and the market will, too, so we anticipate revisiting all of this periodically. We hope that the next time we’re looking at things as important as salaries, levels, and promotions, we’re able to bring an open mind again, figuring out what’s best for the company and our employees, rather than adopting common approaches without question. It’s been a meaningful way to examine our values, and that will be true again, in any era, and at any size.