Am I underpaid?

Things to think about when you are comparing compensation

Last week, a company tried to headhunt me. The recruiter was enthusiastic, and pointed out that “the compensation is very competitive”. She gave me a peek at the maximum base salary, equity package, and benefits that were on the table. At first glance, the total package was almost twice what I have today and I was very flattered.

Offers like the one I got is one of the reasons that people sometimes wonder if they, in fact, are underpaid. But there are many factors to take into account, and comparing offers can be tricky. Here are my two cents on what to consider.

Comparing equity and stock options

The beauty, and the challenge, when equity or stock options are part of the deal is that it’s not the two figures in the offers you’re comparing, but your own expectations on the success of two different companies.

Example: If Company 1 is a successful and wildly exciting company still in the beginning of what you expect to be a long and prosperous journey, and Company 2 is a less exciting company where you expect the development curve to be slow or stagnant, then the employee stock options offered by Company 1 will in the end be much more valuable than equity in Company 2, even if the offered equity today is a higher figure. So don’t look at the equity value today, but what you expect the value to be down the road.

Consider what really matters to you

When you look at an offer you have to consider what’s important to you, personally. What do you value most? Money? Sense of purpose? Personal growth? Freedom? If it’s important to you to work for a company where the culture is in line with your values, twice the compensation will not be enough to satisfy you at a company where the culture makes you die a little inside.

Me, I love working at Spotify. There is focus and dedication to growth, and 99% of the people around me are absolutely hands-down awesome. I consider myself lucky – very few people get the opportunity to spend their work life in a 99% environment like this. That’s what’s important to me. But everyone has to figure this one out for themselves.   

“Global compensation” does not exist

If you are willing to move to another city, or country, where compensation is higher, you can probably get a higher salary too. Compensation for similar jobs differs between the 195 countries of the world. A lot. There is a multitude of reasons for this. I’ll leave it to the economists to explain why, and how this will evolve the coming hundred years, but think cost of living, taxes, welfare, policies, support systems, and so on. The point is you can’t look at an offer for a job in one country and expect to get the same compensation in a completely different country.

What about global compensation, some of you are saying now? Can’t we have the same pay regardless of where we choose to work from? We produce the same output, so why shouldn’t we?

Well, my main point here is that “global compensation” doesn’t exist. I know that many people have heard about global salaries. And I have read about small companies that brand themselves with it, but those companies never seem to actually be global. When the subject is brought up as a “trend” for discussion in my network of global tech companies, this is what it sounds like:

– Our employees say that Spotify has global salaries – how does that work?
– We don’t, I’ve heard that you do though. So how does that work?
– We don’t either.
– …

The reason global compensation doesn’t really exist is because it does matter where you work. That’s why we still have people employed in terribly expensive places. Because we need them there. Because people need to collaborate and that gets harder if they are spread out and rarely meet. And even if that was wrong, if we could, in fact, get the exact same output regardless of where in the world our people were employed, then it’s a fair guess that “global compensation” would not be on London or Silicon Valley levels like one may hope, but something a lot more affordable for the companies. Because talented people are found all over the world, that’s not the issue. Location is, and different locations have different conditions with different compensation levels.

Don’t compare apples and oranges

If you are offered a bigger salary for a bigger job than the one you have today, like bigger responsibility, more people to manage or bigger budgets, then that’s reasonable and fair and it doesn’t mean you are underpaid in your current position. It only means that you could get a higher salary if you were to take on a bigger job.

I may be biased, but I’m not underpaid

My conclusion after evaluating that very flattering offer I got (and politely declined), is that I’m not underpaid. Yes, I could get a higher compensation if I were willing to take on another job, and/or move to another country with higher compensation levels. But that doesn’t mean I’m underpaid where I am now.

Of course – I may be a little biased here. I work with the guidelines for our compensation, so it’s easy for me to trust our system. I know that Spotify benchmarks high when compared to each local market because it’s my job to make sure we do. I know that our employee stock option program has been very favorable so far, I have the data on that and my analysis gives me no reason to think this will change in the foreseeable future.  

Spotify also has some global benefits, like our parental leave and flexible public holidays. These benefits are awesome, and the office perks make my life easy. But more than anything, I appreciate working where we are rewarded for growth and performance and not depending on how good we are at salary negotiation. This focus on growth and development and actual performance is the most sustainable currency I am aware of.