Taking transparency to the next level at Codacy: our open salary calculator

One of the things that defines Codacy – and actually the reason why I joined the company – is the fact that we are always focused on being fair and doing the right thing for the team. It doesn’t mean that we don’t make mistakes because sometimes we do, but we strive to be fair every day.

This eagerness to be fair and to build respect and trust in our culture is mostly translated into trying to create a fully transparent company.

There are a couple of things that we have been doing for quite some time now to maintain a transparent environment:

  1. All of our meetings are open meetings, including Leadership Team ones.
  2. All of our Slack channels are open (we don’t have any private channels).
  3. We have a monthly all-hands meeting where we share everything about the business: updates from the past month, milestones, financial status, money in the bank, runway, revenue, churn, team changes, and important happenings, with a time for Q&A where everyone can ask anything, and get an honest answer.
  4. We share the same updates with our team that we share with our investors.
  5. And, above all, we believe in honest and direct feedback: we speak freely about our work, successes, mistakes and ways to improve.

Salaries and salary reviews were the natural next step to push our transparency game. This year we decided to create our salary calculator and now, we are making it public!

Why are we doing this? 

There are three main reasons:

  1. First and foremost, we want to do what’s right for the team.

We want to eliminate any potential pay inequalities, we want to be fair and unbiased, and we believe that the best way to achieve this is by creating a standardized process and making it public! Pay should be openly discussed and not a taboo.

  1. We want to build trust and respect both inside the team and within the community.

We believe that by creating the calculator, we are adding an important process to bring up our transparency mentality inside the team. By making it public for the community, we are aiming to gradually become more and more transparent and to create a healthy open flow of communication with other startups. We want to build processes and baselines that other companies can use and give feedback on to create a spirit of collaboration within the Tech community. If we all work together, we can grow faster.

  1. For the sake of hiring

We believe in being radically honest but with respect and kindness. We want to attract talent that is aligned with our culture; people that feel as strongly about transparency and honesty as we do. To be able to do this, we want to share more about our processes, principles and values.

And so, let’s deep dive into how we calculate salaries at Codacy:

Our Formula

Salary = Role x Seniority x Performance x Demand x (COL + Rent Index)

We were inspired by other public calculators like Buffer’s and Gitlab’s, but we adapted and created a simplified approach that best suits our team and stage.

The formula to get to each employee’s salary takes the base salary for a specific role based on our benchmark exercise (described below) and multiplies it with criteria relative to career progression and market reality.

  • Role: Refers to the employee’s function.
    • To determine the 50th percentile base salary for a specific role, we combined multiple available benchmarks adapted to the San Francisco market. We chose San Francisco for the following reasons:
  1. The roles and skill sets found in our teams are more aligned with San Francisco’s market than Portugal’s (particularly our product offering, technologies being implemented, sales and success strategies, etc).
  2. The volume of data available for the San Francisco market is superior to what is available for Portuguese market, making us more comfortable with the information veracity.
  3. As a hybrid (remote-friendly) company, we are defining a salary calculator that can be used in multiple locations.

For the benchmark, we decided to use Buffer’s Benchmark for 2019 — which uses Radford (a site that uses a global survey platform to gather compensation data) as a baseline — and cross-checked it against multiple other sources: Gitlab Open Calculator, Betts Recruiting, Glassdoor, Payscale, Salary.com and the Linkedin Salary tool, to create a complete view.

  • Adapting to career progression
    • Seniority – a multiplier that indicates the level of experience of the employee. It is the ability to perform and drive tasks that are expected for the role. The seniority factor is between 0.7 and 1.9. We used:
      • Junior: 0.7
      • Intermediate: 1.0
      • Senior: 1.3
      • Lead: 1.6
      • Director: 1.9
    • Performance – a multiplier that indicates the employee’s performance. It can also be applied to new employees based on the feedback we collect during the interview process. The performance factor is between 0.9 and 1.1 and defined as:
      • Learning: 0.9
      • Comfortable: 1
      • Thriving: 1.1
  • Adapting the benchmark to the market reality
    • COL + Rent Index – “Cost of Living plus Rent Index” – this multiplier expresses the location of the teammate. We factor cost of living plus rent index based on Numbeo, a leading crowd-sourced global database of reported consumer prices, perceived crime rates, quality of healthcare, among other statistics.
    • Demand – multiplier applied to indicate how difficult it is to hire for the position in each market. This is a pre-defined multiplier created by our HR department with the hiring managers based on our own experience hiring and on market feedback. We review this criteria yearly when we update the benchmark. The difficulty for a profile depends on the two criteria described before: Seniority and Performance. The Demand factor is between 0.9 and 1.1 and defined as:
      • Easy: 0.9
      • Average: 1
      • Hard: 1.1

The Salary Calculator

salary calculator[Codacy Calculator]

Impact of the Salary Calculator 

Creating this tool was a huge step for us. Not only did it have a great, positive impact on the team, but it also had a significant one on company budget. We spent the first quarter of the year researching, studying benchmarks, experimenting formulas and, finally in March, we were able to apply it for the first time during our biannual salary review process.

With the implementation of the calculator, our Employee Engagement tool, Peakon, showed a significant increase on teammate’s engagement in the Reward driver for both fairness and happiness with the process. Overall, scores increased from 6.7 to 8.0 (out of 10), putting us in the top 5% of tech companies on this driver according to Peakon.

Next steps in our Salary Calculator process

As with everything, this calculator is a work in progress. We will continue to review our approach and we expect to keep making changes to it. There are already a few iterations that we have on the to-do list:

  1. We want to add new criteria to the calculator for teammates that are at the top of their careers from a seniority and performance perspectives to ensure that their salary progression is never capped.
  2. We want to find a way to better link our Performance Review Process with the Salary Calculator. Although we would like to keep a degree of subjectivity while evaluating performance, we want to help managers make more informed decisions.
  3. We want to expand the calculator beyond our current criteria, adding VP and C-levels (which still require benchmarking), contractors, and more locations.

We will keep you updated!

We would love to hear your feedback on our Salary Calculator, how we can improve it, and what your startup is doing. Tweet at us @codacy or drop us a line on our site.

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