We tried making everyone’s salaries the same
...and it didn't work out. Here's what we tried to do, and what we learned along the way⏳ 4min read
Coming up with the idea
In our first year, everyone who joined Spill had taken a big pay cut. Will had worked at some world-class ad agencies, Matt is an in-demand developer in London, and Maria came from Microsoft where she was a stellar software engineer. They were all earning less than a third of what they could be getting.
I felt guilty every day. We simply couldn’t afford to pay everyone what they deserved, and some people were dipping into their savings to make ends meet. Yes, everyone had equity in the company, but at the end of the day, you can’t pay your rent in Spill stock.
After we raised a seed round of investment to grow Spill, we finally had the ability to pay people more in line with what they deserved. Because we were a small team everyone had ownership of an important area of the company. Everyone was integral to building and growing Spill.
Someone suggested the idea of us all being paid the same amount and the idea stuck. We loved the idea of pushing for equality within the team. We decided that we should all get the same salary — and, more importantly, we should decide how much that salary was as a team.
In order to come up with a number, we needed to know two things. One, how much could we afford to pay ourselves, and two, how much did we all need to live on.
In order to work out how much we could afford to pay ourselves, we first calculated how quickly we wanted to spend the investment and how much we wanted to grow the team over the coming months. From that, we knew how much we were left with.
And to estimate how much we needed to live, we each shared our monthly outgoings. Our monthly spending ranged from £1,000 to £2,000. Added onto that were taxes, national insurance and student loan repayments.
Taking all this into account, we arrived — as a team — at a figure of £36,000 per year. We realised that it was still below market rate for each of us, but nowhere near as steep of a pay cut as it was before. Also, we each wanted Spill to be as successful as it could be so didn’t want to hamper its growth by spending too much on salaries.
How it worked in practice
Things were great for the first month or so and it made complete sense that we were all paid the same. However, we hadn’t really considered how much this would affect future Spillers and what hiring would look like.
We hit our first problem when we set out to hire our first salesperson. Given that Gavin and I had no experience building a sales team we looked for advice wherever we could find it. We spoke with people who had built huge sales organisations and we spoke with people who had sales teams of two or three. Every person that we spoke to told us that we needed to have commission as part of their compensation package. It was just “how it’s done”.
We wanted to defy conventional wisdom and go it alone, and we nearly did. But as soon as we started speaking with candidates, conventional wisdom seemed like it could be conventional wisdom for a reason.
Craig had reached out to us about the role and it quickly became apparent that he was a perfect fit. We were still unsure of whether we wanted to stick to our ‘everyone gets paid the same’ approach or not, so we decided to ask Craig. We said to him honestly: “this is how we’re doing it at the moment; do you want to be paid based on your performance or not?”. After some thought, he decided that it made the most sense for everyone’s incentives to be aligned. And sales is an area where this works especially well, as output is objective and easily measurable. We trusted Craig’s judgement. We know that he would do right by Spill and only focus his energies on business opportunities that would work well for both parties. We also respected what Craig preferred, and so we wanted to let him decide what was right for him. We gave him the agency over the decision, just like we had done with the early team members when deciding our salaries.
We could also come unstuck when we look to hire for a more junior role. Although £36,000 isn’t necessarily a lot in London, market rates for certain roles can be quite a lot below the amount the five of us had decided on. It didn’t feel right for somebody to be applying for a role at Spill simply because it paid substantially more than everyone else. I hope that someday, unreasonably high salaries can be a perk for working at Spill, but we wanted people who were applying because they wanted to work at Spill, not because it paid more than other jobs.
We could also struggle with hiring software engineers. Firstly, the “market” for software developers is heavily weighted in favour of the developer. There aren’t many software developers and every company is looking for them.
Also, in the UK, there is a government scheme called R&D tax credits. The UK government wants to encourage companies to invest in technology and innovation. This essentially means that for certain roles, if you’re paying somebody £50,000 a year, the cost to the business could be only around £30,000.
So for some software development roles, salaries are artificially inflated.
So our experiment didn’t exactly work out: we went back on our idea of paying everyone the same when we hired our first sales person. But we did at least give them some autonomy over the decision.
Perhaps we just didn’t commit hard enough. We could have had a hard line about no commission.
And for our future problems, we could just pay a junior person a higher salary, or hire more experienced candidates for the job — perhaps waiting a bit longer until such a role was necessary.
We still like the idea of giving people more ownership over their salary, and in general having more openness and transparency around earnings, and we’re going to try this more going forward. I’m also interested in exploring a more formulaic, objective way of arriving at salaries — like Buffer has done with its employees. Maybe the formula is something we can create as a team.