Last week I asked an important question, and I didn’t get a very strong answer 😢 .

So where does that leave me? I guess continuing with what I’ve always been doing.

Fine.

Today you’re getting my first in a series of write ups on compensation. In these, I look to discuss some of the varied scenarios I see in my role as a compensation consultant. I’ll discuss what it is, why it’s helpful, and even breakdown how to do it.

Today I’m talking about ‘liveable wages’.

If you’re new to reading something from me, you probably don’t know that I’m personally all for a salary being liveable before it’s anything else.

Not to get too opinionated here, but while I’m very much a fan of supply and demand driving market forces for labour — what I’m not a fan of is when an economy is overwhelmed by supply, enabling companies to take advantage of that with low wages.

Call me idealistic, I just like to think people should afford to do some fairly basic things on a full time salary (you know, eat, clothe themselves etc.).

Anyway, write up is down there 👇️ I’m a sucker for feedback, so let me know what you think by either clicking the voting button or writing back and giving me your unabashed opinion.

In other news - this weekend I’m off to see Mission Impossible 429 (I’ve lost count, but who cares, they’re all great). Are you one of those people who just loves movies that you kind of don’t have to use your brains for? Yeah me too. So I think that will be mine for this week. Let me know if you’ve already seen it and what you thought. Luckily by the time you’re reading this I’ll have already seen it, so you won’t spoil it.

Ok, that’s me done - see you next week.

✌️ 

Matt

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Designing a Liveable Salary

I recently published a somewhat controversial LinkedIn post about a couple of my clients who had built their compensation bands to be a living salary first, and market aligned second.

This brought up a few comments about cost of living and cost of labour, among others, and so I wanted to spend today's article exploring just what exactly a living salary looks like in this circumstance, and how you might implement something like this if it’s right for your company.

I’m going to focus my example on one of these companies, who are a bootstrapped SaaS company with less than 100 people spread across Australia and New Zealand. They were fully remote, and their talent strategy meant they could theoretically hire anywhere in that geographic scope (important for later).

One of their compensation principles was ‘Sustainable’.

Sustainable for the company, but also sustainable for the individual.

What came through really strongly in our discovery was that this concept of a living salary was seen as an underpinning element. For a salary to be sustainable, it must enable someone to do and achieve certain things in their life. The company agreed.

So what did this look like, what was a living salary in this context. To be able to price it, we had to define it.

What came to bear was that we defined living salary based on the following criteria:

It would be based on a single person

They needed to be able to afford rent in a one bedroom apartment

They must be able to eat out from time to time

They have to be able to afford certain fresh food and amenities

Importantly, a living salary meant they could save money, not just be scraping by affording these things.

There exist ample resources on the cost of various items that comprise what we considered necessary for a living salary, but one key thing was missing. These costs all vary based on location — so where should we benchmark?

Given the company could theoretically hire anywhere in ANZ, it stands to reason they could hire someone in the most expensive place, being Sydney. So we decided to peg our pricing to that location.

This had the double benefit of actually incentivising people not to feel like they had to reside in a capital city, because living regionally would in all likelihood raise their purchasing power, compounding the benefits of a living salary, which now would go further.

Eagle-eyed readers may already be wondering what the knock on effect of this ‘heightened’ baseline salary meant for other levels. Firstly, it should be noted that many of the job families (like Product, Software Engineering, Finance etc.) all had level 1 salaries that were already above our new living salary, so it had no impact on them and they were purely market driven.

For the 1-2 job families (like customer experience) where market data fell below this level, it did indeed mean that we had to consciously increase all levels to ensure sufficient ‘lift’ between them, and to ensure we were still rewarding people who were being promoted. Because there’s nothing worse than getting a promotion and receiving a 2% pay increase in recognition of all that extra responsibility 🙃

Ultimately though, this is what it means to be driven by your principles vs driven by the market.

Of all the companies I work with, I consistently see those that take a principles-led approach to be having the most impactful, well understood and appreciated compensation philosophies by their people.

In my experience, people often respect the rationale behind the number more than the number itself, and this approach made it clear to the workforce that the company cared for those who might otherwise fall behind.

It gave even those who might not even benefit from it a strong signal that they were cared for.

That’s all for this week.

Sure, this is technically the end of the newsletter, but we don’t have to end here! I’d love this to be a two-way chat, so let me know what you found helpful, any successes you’re seeing, or any questions you have for me.

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