Is it time to ask for a raise? Being underpaid can sour your love of the product, modern tech stack, and company culture at your startup.
It’s tough to watch the company – and your pile of responsibilities – grow while your salary remains stagnant.
It’s common to think that the only way to get a higher salary is to jump ship. But what if you could stay with your current team and get a higher salary?
We spoke with various startup leaders about how startup employees can improve what goes into their compensation packages, evaluate if their current salary is fair, and ask their managers for a raise to yield the best possible pay in their startup role.
Table of Contents
1. How to evaluate whether you’re being paid fairly
While there are telltale signs that you’re being underpaid, the full image is rarely that clear at startup companies (where resources are limited and compensation packages can vary depending on the company’s life cycle stage).
Anand Safi, an Engineering Manager at Mark43, argues that evaluating if you’re being paid fairly at a startup requires a “more holistic approach” than merely assessing your take-home paycheck. To him, the best approaches measure both current and potential future benefit. Taking time to compare the company’s current performance with its future market value and options exercises will help you identify if your overall compensation is rising at a steady rate alongside the growth of the startup as a whole.
Anand also recommends researching your company’s target compensation philosophy (i.e. does your company use market averages or medians for baseline salaries?). You can take advantage of industry resources like PayScale and levels.fyi to find the standard market compensation for your location and role. Anand also suggests “checking deductible, co-pay, and out-of-pocket expenses for all healthcare benefits along with the potential RRSP match.” Taking these steps will help you gauge whether your current salary and benefits are competitive with individuals in comparable startup positions.
In addition, one of the easiest ways to evaluate your current startup pay is to leverage your network. Hilliary Turnipseed, Founder & President of Hill Street Strategies, says that asking past and present colleagues about their experiences can go a long way in terms of managing expectations about fair compensation in your position.
She says, “If you feel like your current salary is not an accurate reflection of the value you bring or doesn’t match similar positions in the market, it’s well within reason to ask for a re-evaluation of your salary.”
2. When you should ask for a raise
Finding the right time to ask for a raise is often just as impactful to your overall startup compensation as knowing how to ask for a raise. Regular performance meetings with your manager provide the strongest signals about when to expect a salary increase. But not all startup companies have recurring one-on-ones baked into their workplace culture. Depending on the circumstances, you may need to take matters into your own hands.
Hilliary believes raises should typically accompany an increase in responsibility or workload that falls outside of your initial job description. It’s important to keep in mind that a rise in daily duties is more difficult to measure at startup companies where team members wear multiple hats and jump on new projects when their skills are requested in different areas.
In addition to raises for a fixed set of tenure at a startup (i.e. 1 year, 3 years, 5 years), Anand asserts that it’s justified to explore the prospect of an increase in salary after your company goes through a liquidation, funding, or growth round event.
If you receive an offer from another company, be careful using that to increase your current compensation. Jeff Nettleton, a Staff Software Engineer at Color, does not recommend trying to “extract more money from your employer” after you receive offers from other companies. While that approach may work in the short term, he explains that it also “lets your employer know that you’re a flight risk” and ultimately makes them lose trust in you.
3. How to ask for a raise
If you’re wrestling with how to ask your boss for a raise, you’re not alone.
Start by taking a deep breath. If you can see the value that you bring to your company, it’s likely they see it too.
Nevertheless, going in with a plan will ensure that the conversation is a success.
Hilliary shares three main steps that will help you determine the right time to ask for a raise (outside of a promotion):
- Document what you’ve accomplished to date
- Gather your compensation insights from peers
- Outline how your role has changed from the time you were hired
According to Anand, you should enter the conversation with clear evidence for why you deserve a higher base pay or equity ownership. It is crucial to highlight how you have met the expectations for success that were set by your manager. Then presenting market data for similar companies and roles, emphasizing the high risk/high reward philosophy, and making a case for why you deserve an increase in compensation will also improve your chances of holding a productive discussion and leaving your boss’s office with a few extra dollars in your next paycheck.
Remember: you want to clearly define the type of increased compensation that you’re asking for. You may be presented with an increase in equity stock options or benefits in lieu of a larger annual salary. Some individuals pursue startup careers for the opportunities for equity raises. If that’s you, then make sure you know what questions to ask to understand your equity package. However, if you instead seek a larger paycheck at the end of the month, Anand explains that you should reiterate to your boss that a pure equity move would not necessarily help with your day-to-day expenses and needs.
Conclusion
Evaluating your current pay at a startup and asking for a raise are rarely simple, easy, or comfortable.
But trust your instincts. The fact that you are even thinking about an increase in salary ultimately reflects your desire for a meaningful change in your career. Ignoring your gut feeling to avoid a difficult conversation can undermine your potential long-term growth.
Remember that there’s no harm in just considering an increase in compensation.
You may discover that you are being paid fairly.
You may discover that you deserve more and your company is willing to give it to you.
You may discover that your startup is unable or unwilling to pay you more, which can serve as a signal that it might be time to move on from your current company.
No matter the outcome, you will leave with more clarity (and potentially more compensation).
