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How much
should you pay?

S alary is one of the most important things that you will talk to your prospective employees about. After all, everyone wants to get paid. The good news (or maybe bad news?) is, though, that once someone has been at your company a while, they actually don’t care as much about the salary. According to a study done at Northeastern University: if you start someone off at a fair salary, you likely won’t see any added frustration from them based on salary moving forward. As Laurence Stybel, a researcher says:

If I think I’m underpaid in the marketplace, I am absolutely dissatisfied. If, on the other hand, I just get a 15% bonus, I’m going to be happy for a while — but only for a while. It’s not necessarily going to make me happy.

So, getting it right from the start is pretty important. How do you do it?

Many companies have started to work towards the idea of transparent salary after Buffer introduced their truly transparent scale and calculator to the world. While Buffer has iterated on this multiple times, their formula has always remained somewhat constant in its consideration of its employees.

The newest version uses the following formula:

50% of the benchmark salary of the role (based on San Francisco market salary)
multiplied by a cost of living multiplier (based on where you live)

So, for example, if you live in a high-cost city, like New York, your multiplier would be 100%. If it was a medium cost city, like Nashville, your multiplier would be 85%, and a low-cost place to live, like the suburbs of Atlanta, would be 75% of the original base salary mentioned above.

Buffer also takes into consideration the role that you are working in, and how long you have been doing that kind of work. So, if you are coming in at a Director position, and have been working in that type of role for several years, you’ll get paid more than someone who has never done it before but is stepping up into the position.

When you build your salary system, whether it be transparent or otherwise, considering these factors is important. If you are working in a co-located office, you can still use the formula based on whether the city that you live in is high, medium or low cost of living, and you can continue to use the modifier based on experience and role. Setting your employees up with fair base salaries sets you up to be in a better place with them in the future.

Keep in mind, too, that if you use things like studies or guides for baselines on your surveys that they can be skewed by the types of people and industries that are attracted to the survey. For example, the Support Driven Customer Support Salary Survey shifted significantly as they attracted a larger, more diverse group of survey-takers.