Build Compensation Foundations That Scale

Startup compensation is one of the most powerful levers an early-stage company has and one of the easiest to get wrong. In the early days, compensation decisions are often driven by gut decisions, inconsistent data, and the pressure to hire fast. By the time a startup hits Series B or C, those early choices can create inequities, confusion, and misalignment that are hard to unwind.

That’s why this guide was created - to help founders move from ad hoc pay decisions to scalable, strategic systems and build compensation foundations that scale. 

This series was developed in collaboration with the Accel Talent Team, drawing on my 20+ years of experience as an HR operator in venture-backed startups and Accel’s expertise advising hundreds of portfolio companies through rapid growth. 

Our goal is to make startup compensation clearer, fairer, and easier to scale, without slowing down your growth.

It’s important to note that this guide is intended to provide you with an overarching education on the foundational elements of compensation. This is a framework to use as a starting point, but understand that every company is different and will have unique variables to consider. 

How Compensation Evolves as You Scale

Before diving into each of the foundational elements of compensation, let’s discuss how a startup's compensation program matures. You may be asking yourself, “What do I need as an early-stage company, and what can I wait to focus on later?” The answer depends on the company stage - each brings new challenges and priorities as you grow from scrappy beginnings to scalable operations. 

Series A Company ($2M-$15M | 10–50 employees)

This is your foundation-building stage. You’re establishing job levels, salary bands, and equity frameworks for the first time — not perfecting them.

Key priorities:

• Budgets are tight. Target around the 50th percentile for non-technical roles and 65th percentile for technical roles, with heavier equity weighting to offset lower cash. 

• Create early salary bands for current and near-future roles.

• Avoid over-customizing variable pay (e.g., Customer Success) until you have performance data to build meaningful goals.

At this stage, you are looking for mission-driven, risk-tolerant talent drawn to your founders and vision. Don’t stretch for big-company hires who won’t thrive in a Series A environment. As TLC once said, “Don’t go chasing waterfalls.” The “perfect” candidate on paper may not fit your stage or budget.

Series B Company ($15M-$50M | 50–200 employees)

With more funding comes more structure. You’re formalizing equity guidelines, salary budgets, and performance-based processes while introducing more consistency and transparency.

Key priorities:

• Refine your equity plan to account for executive hires and start planning refresh cycles for employees with 2+ years of service.

• You’ll reduce the volume of equity grants for the broader population while maintaining a strong equity component. 

• Driven by a more formal performance management process and career path development, managers begin to play a bigger role in pay decisions, and the company invests in transparency, consistency, and clearer growth opportunities for employees.

• Begin budgeting for merit increases and formalize compensation review processes.

At this stage, you likely have people who have been with you since the Series A. Employees will start to think, “Where will my career go with this company?” The vision and mission might not carry the same weight anymore. Employees will need strong managers to give feedback and focus on their career development.

New hires during your Series B may command higher salaries than employees hired at earlier stages, who can quickly find out about these pay inequities. This could lead to losing early talent with a lot of institutional knowledge, but it can be expensive to correct. Our advice is to talk to employees early about the issue and your business constraints. Consider if there are any non-cash incentives you can offer, such as more equity, mentorship, or skill development, additional paid leave, etc. 

You will likely hire a VP-level candidate or two, which will bring larger equity grants and more complex offers that include clauses such as accelerated vesting and change in control language. You will likely also have a performance-based bonus for executives that you didn’t have before.

Series C Company ($50M-$200M | 200–1000 employees)

Operational growth and scaling take center stage. Compensation becomes a strategic tool for retention, alignment, and predictability. 

Key priorities:

• Move toward 75th percentile market positioning to stay competitive, particularly against market industry peers. 

• Standardize equity refreshes, increasingly tied to performance. You may start planning for a transition to RSUs as valuation and headcount grow.

• Variable pay becomes more prominent, especially for customer-facing roles, now that the company has more clarity on business performance and the internal resources to implement a bonus plan more broadly. 

• Companies examine pay mixes for sales roles (Account Executives, Inside Sales Reps, Lead Generators) and sales commission plan designs to ensure they are driving the desired behaviors.

• Revisit job leveling and career development frameworks to sustain engagement and align with organizational changes.

Your executive bench now includes seasoned leaders who’ve scaled before. Compensation budgets become more predictable.

Building a Strong Compensation Foundation

A well-structured compensation program is a cornerstone of a successful company, attracting, motivating, and retaining top talent. As your startup evolves, you must establish a framework that balances competitiveness, equity, and cost-effectiveness. Let’s dive into the core components of a strong compensation program. 

• Compensation Philosophy

• Job Leveling

• Compensation Ranges

• Global Perspective

• Compliance Considerations

By carefully considering these elements and adapting your compensation program to your company's specific needs, you can create a competitive and motivating workplace that drives long-term success.

“Building pay practices that are clear, fair, and competitive helps startups scale efficiently, gives people their time back, and enables a Head of People to be a more commercial leader.” — Matt McFarlane, FNDN

Compensation Philosophy

Your company's compensation philosophy should be a guiding principle that informs your talent acquisition, retention, and engagement strategies. A well-crafted compensation philosophy should be clear, concise, and communicated effectively to employees. Transparency around compensation is key to building trust and avoiding potential misunderstandings.

Every strong compensation philosophy should include:

• Alignment with Mission and Values: Your compensation philosophy should reflect and support your company's mission and values. For example, if your company prioritizes innovation and risk-taking, your compensation plan might emphasize performance-based incentives and equity grants.

• Competitive Positioning: Determine your company's stance in the talent market. Are you a leader offering premium compensation packages to attract the best talent? Or are you a fast-growing startup competing on equity upside? Understanding your position allows you to tailor your compensation offerings accordingly.

• Equity and Fairness: Ensure that your compensation practices are fair and equitable across all employee levels and departments. This includes offering competitive salaries, benefits, and opportunities for advancement regardless of gender, race, proximity bias, or other factors unrelated to performance and impact.

• Performance-Based Rewards: Recognize and reward top performers through bonuses, promotions, equity retention grants, and other incentives. This motivates employees to excel and reinforces what behaviors you value as a company.

• Compensation Mix: A well-designed compensation package typically includes a combination of base salary, short-term incentives (performance-based or spot bonuses), long-term incentives (equity), and a comprehensive benefits and perks package. 

Want more? Check out Complete’s Compensation Philosophy Builder resource here. You can also read more on Compensation Philosophies from Carta here. 

Job Leveling

Job leveling is one of the most valuable — and overlooked — foundations of a fair compensation program. To me, job leveling is the backbone in which many other people programs are built on top of, such as performance and compensation. 

Job Levels differentiate roles based on factors like:

• Scope of Responsibility: The breadth and depth of responsibilities.

• Complexity of Tasks: The level of difficulty and problem-solving required.

• Impact on the Business: The potential impact of the role on the company's success.

• Leadership Responsibilities: The degree of leadership and people management required.

• Required Skills and Experience: The specific skills and experience needed to perform the role effectively.

  
  

Job families are groups of jobs that involve similar tasks, allowing companies to clearly define roles and responsibilities. They give employees more transparency about how they can advance their careers by outlining potential career progression. 

Some example job families include:

• Engineering: Software Engineer, Senior Software Engineer, Lead Engineer, Staff Engineer, Principal Engineer

• Product: Product Manager, Staff Product Manager, Group Product Manager

• Design: Product Designer, Senior Product Designer, Staff Product Designer, Design Lead, Head of Design

• BDR: Business Development Rep (BDR), Senior BDR, Manager BDR, Senior Manager BDR

• Sales: Growth Account Executive, Enterprise Account Executive, Strategic Account Executive

• Finance: Staff Accountant, Senior Accountant, Controller, CFO

• Marketing: Marketing Coordinator, Marketing Specialist, Marketing Manager, Director of Marketing

• Human Resources: HR Generalist, HR Manager, HR Director

While you may make singular hires for roles like HR and Legal, building out a framework for leveling will allow you to set expectations with employees, hire for the right skills and experience, and prevent over-leveling, where employees’ titles and compensation are greater than their actual background or impact. 

Benefits of a Well-Defined Job Leveling Structure

• Fair Compensation: Ensures equitable pay practices across the company.

• Career Progression: Provides clear career paths and opportunities for advancement.Improved Performance: Allows for a clear understanding of what success looks like in the role.

• Strategic Workforce Planning: Plan ahead for what your organization looks like today and could look like tomorrow. What roles will you need down the line to support future growth or organization changes?

• Enhanced Efficiency: Streamlines processes and improves the quality and speed of decision-making.

How do you know the right number of levels to have? 

Series A companies tend to have fewer levels, often 3-5 levels total, prioritizing agility and flexibility and team members “wearing a lot of hats.” As you scale to Series B and beyond, you will likely expand the number of levels to 5-8 levels. You may end up having more levels if you create sub-levels within roles (e.g., Associate I, Associate II).

Word to the wise: Don’t overtitle early hires. Did you accidentally hire a “Head of Sales” who turns out to really be a “Senior Manager” or “Director” level? This common occurrence is why investing in level definitions early on helps companies avoid having to demote key hires down the line. 

“Don’t conflate performance with level — it’s impossible to pay for performance if companies don’t effectively know what the level is.” - Ashish Raina, Managing Consultant, Optimize Talent

By carefully designing and implementing a job leveling structure and job families, your company can create a foundation for sustainable growth, employee satisfaction, and business success. 

Want more? Check out Carta’s Leveling Guide. 

Compensation Ranges

Once you have job levels defined, you can begin defining compensation ranges for each job. Compensation ranges provide a structured approach to setting salaries, ensuring consistency and fairness while allowing for flexibility based on individual performance and market conditions.

When determining compensation, market data is not the only factor to consider. 

• Company Stage: Where you set the range midpoint will differ based on what percentile of the market you are targeting. For example, if you are targeting the 75th percentile, the 75th percentile salary becomes your midpoint and you add +/- 15% to create the low and high end of the compensation range. 

• Cost of Labor & Geography: You may have different compensation bands for various geographies to adjust for the cost of labor. Alternatively, you may choose to have a wider compensation band to account for those differences. 

• Pay For Performance: Consider performance metrics to differentiate pay within bands. Those on the higher end of the band should be consistently high performers and those who may be ready for promotion. 

• Using Multiple Market Data Sources: We recommend using these various market data sources as an input to develop your compensation ranges intentionally and artfully. 

• Creating Smooth Range Progression Between Levels: You cannot set compensation ranges for roles in a vacuum. You must think about the various career levels below and above each role to make sure there will be a smooth salary progression across levels. As employees get merit-based increases and/or promotions, there should be meaningful jumps between levels (larger range progression as you increase in career levels).  

We consider a competitive market range to be between 85% and 115% of the range midpoint. Generally, employees who are new to their role can be found at the low end of the range, and high performers with special skill sets at the high end of the range.  

The above visual explains how you can think about developing compensation ranges and where employees might fall in the range. As employees consistently perform well and grow in their roles, they can “move to the right” by receiving merit-based salary increases.

Considering hiring someone at the high end of the range? Think again! If you’re solely motivated to hire employees on the high end of the range to close the deal and get someone in the door, this sets both the company and the new hire up for potential problems down the line. They’ll have no room to grow within their role unless they’re promoted or paid beyond the range. 

Word to the wise: The right amount to pay involves several factors: role, responsibilities, location, company stage, comp philosophy, and market demand for the role. Be highly intentional about your comp philosophy. If it’s well considered and well communicated, it will attract the talent that is right for your company and, importantly, right for your stage. If a candidate is “perfect” in every way, except that their salary demands are wildly inconsistent with what you’re planning to pay, then that candidate is not “perfect.” They are also not right for you or for your stage. Walk away.

Why do ranges matter? They:

• Attract The Right Talent: Clearly defined compensation bands help ensure that companies are offering salaries that are competitive and fair — and that they can afford.

• Improve Morale: When employees understand how their salaries are determined and believe that the system is fair, they are more likely to be engaged and productive. 

• Control Costs: Compensation bands help companies budget effectively and avoid overspending on salaries.

• Simplify Salary Decisions: Compensation bands provide a clear framework for making salary decisions, which can save time and resources for leadership, managers, HR, and Finance.

• Ensure Internal Equity: Compensation bands help to ensure that employees in similar roles are paid fairly and help to minimize internal pay inequities. 

• Require Regular Review: Regularly review and update compensation bands every 6-12 months (possibly more frequently for hard-to-fill roles) to ensure they remain competitive.

Global Perspective

If you choose to expand hiring into more than one country, you will need to plan ahead for how your global compensation program will be managed. 

Global considerations include:

• Geo-Location Strategy: Determine how to compensate employees in different geographic locations. We highly recommend NOT paying everyone the same, as you will overpay for talent and have challenges rolling back this strategy down the line. Equitable doesn't mean equal.

• Cost of Labor Differences: Employees are not paid equally for equal work around the world. Compensation data looks at the cost of labor and cost of living across various areas, and shows you what the market is willing to pay in different locations. 

• Global Equity Plans: Managing equity grants for international employees can be tricky, considering local tax and regulatory requirements. 

• Expatriate Compensation: Packages for employees working in foreign countries, including housing allowances, relocation costs, and hardship premiums.

There are considerations when balancing your approach to hiring in the U.S. with hiring in other regions. For example, let’s focus for a moment on hiring in the U.S. as it compares to the European markets:

• Expectations: European candidates expect salaries to meet their lifestyle. Far fewer European workers have experienced highly lucrative exits so are less willing to settle for a much lower cash compensation package for higher equity grants.

• Dynamic: It’s slowly changing, but what makes the U.S. attractive for startups (capital available to founders, overall valuations, dual-class share ownership structure) is not easily available to European founders. This creates a dynamic where valuations are significantly lower, so net wealth creation realized is much lower than in the U.S.

• Equity: Ongoing equity refresh is not expected in Europe. Companies rarely have all employees eligible for equity refresh grants unless it’s a U.S.-based startup.

• Attraction: Europeans are very entrepreneurial, but the tech industry is nowhere near as central as far as career choices, government funding, and the general zeitgeist/culture. This means Europeans are generally less interested in risky early-stage startup roles. 

• Performance Feedback: The difference between performance ratings is much lower than in the U.S. U.S. companies will double/triple/quadruple performance pay for the top 1-5%, but you rarely see differentials of that magnitude in Europe.

By carefully considering these factors, companies can ensure a fair and equitable compensation strategy that supports their global operations. 

Compliance, Pay Transparency & Market Trends

As your startup scales, compliance and transparency become table stakes, and not optional.

Pay transparency laws are rapidly expanding across U.S. states and international markets. Even where not required, proactively communicating your pay practices builds trust and credibility with employees.

Employees — especially Gen Z and early-career talent — expect openness around how compensation is determined. Companies that embrace this early will have a cultural and retention advantage.

“Fair compensation is not equal compensation. One of the biggest issues with startups is that they want to do the right thing, but that doesn’t always align with how employees think about and value their own compensation.” — Ashish Raina, Optimize Talent

Economic Impact and Strategic Considerations

The COVID pandemic and subsequent economic downturn forced companies to prioritize cost-effectiveness and performance-based rewards.

In recent years, we’ve seen:

• Salary Normalization: Salaries have stabilized, and candidate expectations are catching up to better align with market realities.

• Talent Market Dynamics: The increased supply of talent has shifted the balance of power, allowing companies to be more selective. Talent still remains competitive for highly sought-after roles, such as AI engineering and product/engineering leaders. 

• Targeted Compensation: Companies are focusing on strategic investments in high-impact roles, while optimizing costs in lower-priority areas.

• Equity Management: Prudent equity management is essential to balance dilution and employee motivation.

"Most recently, we have been observing a divergence in compensation rates within the engineering function itself, mostly driven by the AI boom. Companies are making large investments in AI, resulting in higher AI-related engineering headcount and intensifying the competition for people with experience in machine learning, data science, data engineering and AI research science. This is naturally leading to an acceleration of compensation rates for those specific roles, for both cash and equity, while new grad engineers and generalist engineers are commanding less of a premium" — Tudor Havriliuc

Don’t Be Overly Influenced by the Trends: The companies winning today are those using data-driven pay strategies, rather than chasing trends or inflated market chatter.

If you’d like to listen to more on this topic, check out Bill Gurley's discussion “Rethinking Compensation” with Jessica Neal and Patty McCord on the TruthWorks podcast. 

A Blueprint for Success

This framework serves as a blueprint for Series A–C startups looking to build compensation programs that scale sustainably.

Ready to take your HR strategy to the next level? Let’s connect to discuss how my expertise can drive your company’s growth. 

Here are a few ways I can help:

• Schedule an "Ask Me Anything" micro consulting session to get personalized advice

• Purchase a Playbook to accelerate your progress

• Ongoing retained Advisor to your leadership and people team to build a strong people operations foundation and best-in-class employee experiences