Compensation 101: paying people fairly without a comp consultant.

Founders avoid comp because it feels complicated, political, and irreversible. So they do it ad hoc — every offer is a negotiation, every raise is a one-off, every equity grant is a fresh argument. Six quarters in, they've built a pay structure no one can explain, which means no one trusts it, which means every offer leaks information that erodes morale.

The good news: you don't need a comp consultant to get this 80% right. You need bands, benchmarks, and a discipline of writing things down. Here's the working model.

The four building blocks (and the order to build them)

• Levels — a small ladder (4–6 levels is plenty for under 50 people). Each level has a one-paragraph definition of scope, autonomy, and impact.
• Bands — for each level, a min / mid / max for base salary. Width should be ~20% (e.g. $120K–$144K).
• Equity bands — same shape: a range of % equity per level, or a dollar value at last 409A.
• A philosophy — written down. 'We pay at the 60th percentile of [benchmark]. We don't counter outside offers. Raises happen twice a year.'

Where to get free benchmarks (no consultant needed)

• Levels.fyi — strong for tech roles, especially engineering, PM, design.
• Pave Open Data and Carta State of Compensation — startup-specific, by stage and city.
• BLS / national wage data + a local cost-of-living multiplier — for non-tech roles.
• Your investors' platform teams — most VCs will share benchmark data for free if you ask.
• Two competitor JDs with posted salary ranges (now required in many US states and the EU) — instant calibration.

The psychology: equity theory and why ratios matter more than absolutes

Stacy Adams's equity theory (1963, still bulletproof) shows that humans don't evaluate their pay in absolute terms — they evaluate the ratio of their contribution to their reward, and they compare it to the ratios of people around them. A $20K underpayment relative to a peer feels more unjust than a $40K underpayment relative to the market. This is why pay transparency, done badly, blows up morale. And why pay bands, done well, defuse it.

The four comp decisions you'll get wrong without bands

How to handle the conversations you're already dreading

'Why isn't my raise bigger?'

Walk them through their band position and what would move them up — performance, scope, or a promotion. Don't apologise for the band. The band is the protection, not the limit.

'I got an offer from a competitor.'

Two questions: 'What's the offer?' and 'What would you need to stay?' Then decide. Counter-offers are sometimes right, but as policy they're poison — they teach the team that the only path to a raise is a resignation threat.

'I found out X earns more than me.'

Have the data ready. Show them the band, their position, X's position (anonymised structurally if needed). If the gap is unjustified, fix it that week. If it's justified, explain it in 60 seconds. The worst answer is 'I'll look into it' followed by silence.

Equity in one paragraph (for founders who skipped this class)

Equity is a multi-year retention and alignment tool, not a salary substitute. Default to 4-year vesting with a 1-year cliff. Refresh grants annually for high performers — Carta data shows refresh-grant companies have 40% lower senior attrition. Use the latest 409A valuation as the conversation anchor. Be honest that equity is illiquid and may be worth zero. Anyone who joins for equity at a Seed-stage company is either an investor or being misled.

Take this home — your comp foundation in one weekend

• Define 4–6 levels with one-paragraph descriptions.
• Set a base-salary band (min/mid/max) for each level using one external benchmark.
• Write your comp philosophy in 5 sentences. Share with the team.
• Audit current employees against bands. Fix any unjustified gaps within 30 days.
• Schedule comp reviews twice a year. Stop doing them ad-hoc.
• Bring in a fractional comp advisor once a year for a half-day calibration. Cheaper than one bad offer.