What is the pay system you dream of? Beyond the taboo of money

As an employee for 16 years, I was thankful for my regular pay checks. I never really gave a thought to how I would dream of being paid.  In 2007, I co-founded my own company and I was faced with the freedom and possibility of all that compensation could potentially be. A journey began.

At the start, submerged in the business of starting a business, my associate and I agreed on a model that was a cinch to administrate, though somewhat naive: equal salary. No need to waste time tallying up who is bringing in more business or debating who has more value. All company earnings go into a collective « pot » and equal pay comes out, irrelevant of what each person put in. A bit idealistic you might say? Yes. The model requires similar work experience, similar weekly work hours and similar vacation time. And of course it also requires sufficient revenues for all.

As the company grew, we realized we wanted to offer freedom and possibility for people to create the working rhythm and pace that suits their needs and desires. We didn’t want to systematize any obligations, giving preference to diversity and modularity. This meant that we needed to move on to a different compensation model.

Initially, we were attracted to an algorithm based compensation model. We were inspired by Buffer’s approach. They even have a transparent salary calculator whereby you can find out how much you would make if you worked there.   What were the variables that could help us establish our own contextualized formula?

After a bit of in house exploration we crafted a proposal for the team with our percolab variables as complexity of the work, experience and risk. We held a team workshop and each of us plugged in numbers to try to see if the formula would work for us. Major flop! The process revealed that working abstractly with numbers caused us to create a collective salary budget much higher than the funds available. We were operating from a dream scenario rather than reality. This is when it started becoming clear that the path to fair and equitable pay required the whole team to understand money flows of our company.

But how could we do this? The regular salary model offers stability and regularity of bi-monthly pay checks of fixed amounts as well as benefits. We generally have little influence or involvement in this approach as it is directly linked to an organisation’s budget and pay scale.  The freelancer model offers flexibility and autonomy around our earnings as we are responsible for negotiating our own contractual agreements. The latter model usually comes with extra administrative burden and stress to be able to ensure regular and sufficient pay. Was there a way to blend the advantages of these models together?

Things were becoming clearer. Not only did we want self-set salaries but we also wanted to allow for variance from month to month in the amount each person was earning or wanted to work. As simple as that, we broke free from our fixed salaries and stepped into a negotiated agreements model that we also call variable self-determined salaries.  In so doing, we each gained control over our earnings, began benefiting from a shared administrative system and were better able to leverage the collective work opportunities amongst ourselves to help ensure regular and sufficient pay for all.

Our percolab model goes like this.

  1. Each project has a project lead and project budget parameters (projects can be client based and others not)
  2. A fixed percentage of the project goes to the company  to cover our collective services  (our beautiful office, insurances, web services, resources, business development, accounting, work tools etc.) and development.
  3. Together, the project team (anyone in the team) discusses and makes financial agreements based the project honorarium budget, with full transparency. We strive for a feeling of fairness and there is freedom in how agreements are made
  4. Administration of the compensation model is carried out in a distributed, collective way.  Percolab team members keep track of their agreements with standardized tools and are responsible for their own data entry into the online book keeping system (WaveApps). The project lead takes care of all agreements, invoicing and billing with external contractors, clients and suppliers.
  5. Any challenges with a project that have consequences on the budget are managed within the project with the team and do not overflow onto the company.

Each month any percolab member is involved in multiple projects (as lead, team member or business development).  Therefore your salary is the sum of the work you accomplished that month in each project as per your agreements.

For the system to work, everyone needs to make explicit their work availability and skills they can offer or wish to develop within projects.

Suddenly it was if each person was injected with more space, freedom and creativity to sculpt their ideal professional world. A new service went from idea to reality and the team was stepping up to greater challenges  than ever before. Having control over ones earnings reveals itself as a key lever for empowerment and leadership. Services and business development grew. With hindsight it seems evident that for people to be in their full potential having control over their pay is a key condition.  

Underlying principles

  1. Engagement is commiserate with our power to self-determine our own salary and expenses. Each person is responsible for the salary they want to earn.
  2. Practicing conversations around value helps us to better own our own value.
  3. Our relationship with money is not a taboo, but a skill that can be developed.

Impact

This flexible compensation model has supported us getting beyond our assumptions and fears around pay. It helps us get to deeper conversations around value and to work with money without it being the finality. The potential of a team is strengthened through this compensation as practice approach. More specifically:

  1. Individual: We are all even more responsible and engaged. Each person is finding her own balance with how much she wants to be working, earning, learning, playing and making their personal projects come to action. We are each developing skills around money, business and value.
  2. Teams: More solidarity, mutual support and good spirit.
  3. Organization: More initiatives and entrepreneurship and more revenues.

Lessons

1. A compensation model is meant to be energizing a team forward – if that is no longer the case, then try out a different model. It’s as easy as that.

2. A compensation model can be flexible and self-managing

3. A flexible negotiated compensation model can be an enormous driver of individual, team and organisational development.

If you want to know more about this model and the tools that support its functioning, contact Samantha Slade sam@percolab.com

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