Fair, transparent pay structures beat variable bonuses: shift incentives into fixed salary bands, tie growth to career frameworks, and avoid demotivating performance-based pay.
Compensation for software teams works when fairness and transparency drive the design, not when variable bonuses dominate. The article argues that a clear set of principles-fair pay for equivalent roles and open communication about salary bands and promotion criteria-creates a stable foundation for any compensation model.
Variable bonuses, while common in sales, create a culture where developers only work when a coin is in the slot. The author recounts seeing bonuses lead to instability, demotivation, and talent loss when company performance dips or when engineers are penalized for building features that later see little adoption. These traps make engineers reluctant to take ownership and erode trust.
The recommended fix is to embed the bonus component into the fixed salary by raising overall salary bands. This approach aligns compensation with the career growth framework, makes progression feel earned, and filters out underperformers without conflict. A challenging probation period with clear success criteria further reinforces expectations.
If a variable component is unavoidable, the article outlines a metrics split: roadmap focus (40%), initiative completion (30%), business metrics (15%), and product stability (15%). Clear, communicated metrics prevent misunderstandings and keep engineers focused on what they can actually influence.
Additional options like stock options or merit-based pay are presented for later-stage companies, but the core message remains: build a compensation system that rewards fairness, transparency, and career growth, not short-term financial targets.
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