How to build and run compensation across 70 countries — Oyster case study

In November 2021, I joined Oyster and became their Director of People in what was one of the most profound experiences of my life.

Part of the appeal of this role was that I’d be joining the organisation at a truly formative stage. Oyster was about a year old and was a series B company. When I joined, there were 150 people, and the People team were about 10, 90% of whom had joined in the last handful of weeks. It truly embodied a greenfield opportunity.

What did I get myself into?

Let me give you a bit of context about Oyster at the time of my joining, and the landscape ahead of us.

Oyster was a VC-backed, B2B SaaS company. Their product was a global employment platform (Employer of Record, or EoR, is the term more traditionally used). Their product aimed to automate the entire global hiring experience, the contract, payroll, tax, compliance etc. for companies wanting to hire and employ people anywhere in the world.

This is important to note because Oyster pursued a hiring strategy very much in line with their mission — to create an equal world of work by enabling companies anywhere to hire everywhere. Being their product, Oyster pursued a hiring strategy very much in line with their mission. This meant that, for any given vacancy, a shortlist might include candidates from myriad countries. We could not know with certainty whether we were paying right for the market when it came to determining how to compensate people in those most far-flung regions of the world. At a time when the zero interest rate phenomenon (ZIRP) was very much alive and well, we just offered the asking rate for candidates. Benchmarking was done with a 90/10 ratio of art vs science, through an Option Impact account and some loose triangulation to sense-check what they were asking for. This process could take upwards of an hour per role. Something had to give.

The next piece of context is that Oyster was about to become a Series C company as I joined. With a product that was still a ‘service’ aspiring to become ‘Software-as-a-Service’, we needed people to scale.

We were going to hire 500 people in 12 months — peaking at 650 employees based in 70+ countries.

Knowing the road that lay ahead of us, we got to work building a strategy and tools that would enable our compensation practice to operate in a way that was agile, adaptable to our hiring and aligned with our culture as a company.

Starting the journey — compensation philosophy

The first port of call was the compensation philosophy — a critical piece given that the organisation was already staunchly diverse in our employees' expectations around how we should pay.

On one extreme were those who subscribed to the geo-agnostic school of thought (short for geographically agnostic). Here, the thinking was that, with remote work unlocking the global workforce, it was incumbent upon organisations to pay all talent the same salary for doing the same job, no matter where they worked.

Conversely, there were those with a more local market-based approach, who felt that the market within a country dictated the price for those skills.

Philosophies are not as easy as choosing one camp or another. We began by unpacking Oyster’s strategy and culture as a means of distilling our sentiment toward either approach.

First, we had to acknowledge Oyster’s strategic and cultural environment:

• We were preparing to scale enormously, by several hundred roles.
• We wanted (and needed) the opportunity to hire people no matter where in the world they resided.
• We wanted to create opportunities for employment around the world by delivering our product.
• At the time, we were not profitable and relied on a finite runway of cash for several years (remember this was during ZIRP, too).

Where did we end up?

From here, it was a simple process of elimination regarding what was and wasn’t possible.

Was a geo-agnostic approach reasonable? We knew we wanted to hire anywhere in the world, which meant that we had to be competitive in the most expensive regions of the world. We had ready access to data for those areas, and it was clear from the get-go that hiring everyone at New York/Silicon Valley salaries (one of the priciest markets) was entirely unaffordable, especially at the volumes we were anticipating.

But the alternative didn’t sit right with us either. The mid-market rate in emerging economies, where we sought to make the greatest hiring impact, would mean continuing to pay salaries that were typically suppressed and taken advantage of. It didn’t speak to Oyster’s mission for it to be a wealthy organisation that exploited low salaries in emerging economies.

After significant deliberating, we found the solution that was right for us. We would pay those first-world economies at mid-market (50th percentile). A rate that was fair but did not seek to deepen the salary disparity with the rest of the world. For mid-tier economies, we would pay to the 75th percentile, highly competitive but not at the top of the market. And for emerging economies, we would pay to the 90th percentile, seeking to lift the salary norms and be highly competitive for talent.

This approach had a bonus feature. By virtue of its product, Oyster's customers were also seeking a level of insight into what to pay their people in these far-flung places. This offered the opportunity to influence what those customers paid, by establishing this 'Oyster-suggested’ approach to compensation. The benefit being that, if widely adopted, it would see the low and mid-tier regions lift in salary until they reached parity with the high-tier region. This would ultimately achieve globally agnostic salaries.

The rollout

From the beginning, something inherent in Oyster’s approach to compensation was the level of transparency we sought to maintain. One of Oyster’s values was ‘we build trust’, and we believed that a high degree of transparency on a topic as important as pay underpinned that.

It was always a reality that this pay philosophy would be published internally and made available for our people to read and understand. When we launched this approach, we did it with a bang.

We created slack channels to facilitate Q&A with the team, crafted FAQ’s, and recorded town halls and fireside chats. We did all of this to give as much exposure and understanding as possible among our diverse workforce, especially with the change management effort required to fold the spectrum of pay beliefs into Oysters new position.

Grounding the philosophy in reality — Job levels

Our job level design here was straightforward for a SaaS company. We had two tracks for our job levels, one for professionals (individual contributors) and one for leaders (managers/exec). There was some overlap between tracks, enabling those in technical roles to continue to practice at a more advanced level (principal or guru) and reducing the incentive to become a manager in order to grow your salary.

We had 16 levels, with every second level intended to act as a progression step within a role ‘coupling’. This meant that level 1 and 2 were the same role, but 2 was the step up level. This enabled us to offer more frequent progression milestones. With a workforce that had an average age of 30, the younger the age, the more frequent the progression expectation tends to be.

Pulling things into alignment - levelling our people

I’ve done a lot of ‘levelling’ exercises in my time, and I’ve never seen it done without stepping on toes. In some ways that just proves the value of levelling structures. They exist to align roles in a way that provides clarity and consistency where previously there was none.

In the absence of a levelling structure, the most common issue I’ve come across is title inflation. When a company undertakes a levelling process on the role (not the soul), you come to recognise the position they’re in is actually not at the level they’ve been titled. Bummer.

Due to the pace we were growing, we levelled quickly. With that speed comes errors. We over-indexed on managerial freedom and didn’t have the capacity to be as hands on as we should have been. Something I have learned from for subsequent cases, so there was lots of mopping up to do as a result. The biggest stumbling block was the uniqueness of the two-step progression structure. But, these issues resolved and ultimately after a couple of months, people settled into their rightful places.

Ok, but what do we pay them? — establishing total compensation

In many ways, it would have been much easier to adopt a geo-agnostic approach when determining what to pay someone. We could have had one set of bands and adopted them for all regions in the world, informed by readily available data for the NY/SF market. Alas, we decided to forge a new path.

The philosophy we had in mind required ingenuity. It’s all well and good to intend to pay at something as accurate as the 50th, 75th or 90th percentile of any given country. But, I probably don’t have to tell you how little data exists for compensation outside of established geos like the US, Australia or parts of Europe, let alone data for SaaS startups.

Let me break down how we crafted artificial bands to meet the intended philosophy.

Crunching the numbers

First things first, we had three regions with three separate pay positions (at the 50th, 75th and 90th percentile). We needed to distinguish which countries were in each of the three categories before determining their pay position.

We deliberately chose not to distinguish pay within a country (i.e. metro vs regional) as we didn’t want people to feel they had to reside in a metro to earn the highest salary. After all, we were about creating opportunities for work where previously they weren’t. But in reality, it would have also been exceedingly complex to build and maintain a system like this, let alone explain it to our people.

We chose the Cost of Living (COL) index as a measure of a nation's effective ‘wealth’ in order to distinguish categories. Wealthier nations like the US or UK have a higher COL, while emerging nations have a lower COL. The COL index is by no means a perfect proxy, but it was close, and data on COL was readily/freely available (we used Numbeo).

From this, we formed a spectrum of all countries via their average COL, and divided them into thirds to give us our categories. From there, we could set about establishing bands at the percentile for each category.

Without giving away all the intellectual property of what we generated, the approach we took here involved using the available data for those three regions, combining it with Oyster's global employment data, and filling the gaps through computational analysis.

Using a country's place on the COL spectrum, we generated a salary band that was proportionally higher or lower than the market data we had access to. From this, we crafted a bespoke band for each job family at each level in around 100 countries.

We rigorously compared those bands against the offer data or other available data to determine where they landed against the market. With some minor tweaking, we crafted a framework that consisted of over 3,000 unique bands, which we used for Oysters entire job taxonomy in the 100 most prominent countries in the world.

The good, the bad, and the ugly

Oysters approach to compensation had other nuances, including narrow bands for each level, with a roughly 10% spread. This was coupled with a ‘no-negotiation’ stance on hiring. If a candidate came in above the benchmark (almost uniquely a feature of high COL countries), then we would either part ways or they would accept the mid-market salary in order to join the mission and be part of the cause.

Conversely, if someone came in with lower expectations but could demonstrably do the role, they were lifted to the band. As you can imagine, this had a profound effect in cases of candidates from less wealthy or marginalised backgrounds. Personally, it was enormously gratifying to have had a hand in a compensation philosophy that could have such a positive impact on someone's life.

The challenge with our narrow bands was the limitations in flexibility for things like rewarding performance. Oyster did not do standard cost of living adjustment of 2-3% per year for standard performance, or higher for improved performance. This was something that many organisations had established as a standard practice and that many at Oyster were largely accustomed to.

You did not get a pay increase despite a strong performance. You could get a lift if you progressed into the ‘experienced’ level of your level pairs, but aside from that one off increase (which was irreversible if your performance dropped), that was it. We did not give bonuses systematically, which ultimately meant that we had to focus on setting expectations through robust communication.

The most challenging part of this approach to compensation was the granularity and complexity. We had too many bands for departments and sub-departments with negligible differences. This hindered internal mobility and made it difficult to explain the pay philosophy to leaders. Getting leaders, including executives, to fully understand and embrace the philosophy was a challenge. While some of the complexity stemmed from employing in 70 countries, in hindsight, there were opportunities to simplify and make it easier to understand and apply.

Giving people their slice of the pie - equity

Oyster was a US tech company at heart, despite our global makeup. With this came the expectation of offering options as a means of instilling the virtue of ownership across the workforce. Our approach to equity was distinct from that of cash compensation, and here we chose to be geographically agnostic.

The rationale behind this was that salary was necessary for day-to-day living expenses (food, housing etc.), and equity had a long term payoff — one that may also never happen. We liked the idea that, if Oyster was successfully exited/acquired it would generate significant benefits in developing nations, because they would have the same volume as someone in, say, the US. We also felt that the distribution of equity should be made based on the contribution of someone's role to Oyster, not the place in the world from which they make that contribution.

With this in mind, it was straightforward to use the market benchmarks we had access to (for the US) and generate a set of option grants by level. We also found the data distinguished clearly between Engineering, Product, and Legal roles, vs all others, so we had four tracks. One for professionals and leaders in the Eng/Prod/Legal roles, and professional/manager tracks for all others.

If I had my time again, I would have merged professional and leader grant amounts to further reduce the incentive to become a manager (which received higher grants). I would have also kept all functions the same because I ultimately didn’t see the need to distinguish, or that it aided our hiring efforts materially, just added to the complexity. After evaluating our burn and dilutions rates against our hiring plan, we established these tables and began using them to inform our hiring efforts.

Equity was one of those things I left Oyster feeling we only got half right. Our global distribution worked against us in our ability to offer equity in every country, meaning there were some countries we couldn’t offer that financial instrument, hampering the effect it had in all locations. We also didn’t do a good job of thinking about the latter part of our options. By this I mean that we offered a very lucrative amount of options to people in poorer nations, but in reality they had very little ability to front the cash necessary to purchase this, meaning they were priced out of owning shares, or possibly even participating in a liquidity event.

Being jointly shared by People and Finance teams meant it never had one true owner. So, it suffered a lack of prioritisation amongst what was an exceedingly long list of important things to do.

The lessons I took from this were:

• It's obvious, but if you’re going to offer equity, do it consistently across your workforce.
• Being inconsistent hampers effective communication about it, ruining the ability to drive an ownership mentality.
• Distributed workforces need to take a creative approach towards ensuring they can meaningfully drive the ownership mentality. Options like shadow equity may be things to consider.
• Different cultures have varying awareness and appreciation for equity. You need to be clear up front (in hiring) about what equity is and how it benefits the employee, so they see the value of it immediately.
• Talk about it relentlessly. We didn’t issue equity consistently, so we spoke about it too infrequently. This undermined any ability for equity to incentivise people.
• Consider equity comprehensively, not just how you issue it, but how people can benefit from it. What is your post-termination exercise period, how will people buy the equity etc. are all important considerations to ensuring your plan has the desired effect.
• In sum, don’t let the whole equity plan be an empty gesture of ownership, make it actually work for you and unleash its true benefits.

Benchmarking, Faster and Furious-er

With salaries and equity finalised, what it enabled in terms of benchmarking prowess was nothing short of phenomenal given the diversity and volume of our hiring. What we were able to establish with this approach was a robust method for benchmarking total compensation for any role in any location.

This was developed into a simple lookup tab on a (not insignificant) spreadsheet, meaning we could now accurately benchmark any role in seconds. Much nicer than the hours it used to take.

See below for a mocked up version I made of this lookup tool. The numbers are not real, please don’t rely on them.

The maiden voyage - compensation review

In April 2022, we undertook our first compensation review. Oyster was about 2 years old and had about 400 people at this stage. 400 people that had been hired without any real compensation philosophy, benchmarking, or levelling being in place.

It was ugly.

People’s salaries were all over the place. Some were severely underpaid, and some were severely overpaid, when compared to our new benchmarks. Neither scenario is preferable. Bringing people up towards their band is solvable with cash (if you have it spare). Being above your band, though, can only be solved by getting promoted into a higher band, or seeing the salary bands catchup through the market rate lifting (not likely, as we entered the downturn of the tech industry…).

One step, two steps

Review cycles at Oyster consisted of two stages. The first was the promotion stage, where reviews were compiled, calibrated and approved. I won’t spend time talking about that except to say that one effective strategy I’ve seen work well is making the procedure for performance reviews mandatory in order to receive any kind of compensation adjustment. It’s the ultimate incentive — use it.

The second step was the actual compensation review. This stage consisted of making sense of the budget, applying the budget, calibrating increases, and approving the budget.

I mentioned earlier that Oyster valued transparency, so we began implementing an important practice at the start and end of these processes: a briefing and debriefing of the overall process. This served two purposes. First, we could ensure that people understood the process that was about to take place, acting as a semi-training course on what was to come and clarifying everyone's role in the review. The second part involved helping the organisation recognise the objectives of each review, such as the number of people within band and how it varied across different regions. This allowed us to communicate the goals of the review, providing accountability in what is often seen as a mysterious exercise for many companies. On the other side of it, we could discuss the outcomes of the review. This included promotions, pay increases, and the criteria used for distribution. We also reflected on what we did well and what needed to be addressed in the next cycle. It was initially challenging to openly discuss such a traditionally taboo topic, but it significantly enhanced trust and confidence from the team. They felt that we were treating them fairly.

Now to the challenges with our approach. The challenge of promotions before compensation increases was that we didn’t have accurate foresight into the likelihood of promotions, the individuals who would be promoted, and the associated costs. This meant we had a budget that was set almost entirely independent of the need, and this caused us many headaches in successive cycles — usually resulting in too little being spread too thinly.

Some of this was due to the limitations of our performance platform not having a good ability to snapshot promotional likelihood. But when you don’t know how calibrations will play out and how many will be approved, it’s hard to predict what your cost will be for bringing everyone into band.

In our first compensation cycle, there was enormous effort in triaging promotions to see the cost of promoting various scenario groups (high priority vs mid vs low) and what was achievable with the budget. This resulted in a reduced number of promotions being approved, affecting our ability to meaningfully recognise all.

This decision was reversed in subsequent cycles, and people were promoted even if our ability to compensate them in a meaningful way was limited. Ultimately, we felt that it was a double blow to not only not get an increase, but also not get the title — especially if you’d been demonstrating readiness. It was a difficult challenge and I’m certain that no two companies would do the same.

I can see clearly now — Pay transparency

You already know we released the compensation philosophy to all employees and spoke openly and candidly about the focus and results of our compensation reviews. There was one other major step we took towards our pay transparency aspirations.

We released the compensation tool.

This meant that every employee could now see every band for any role in any country at the click of a button. They could see what they should be paid for the role they’re in, or the one they aspired to reach through their growth.

If pay transparency was a spectrum from opaque to full transparency, this took Oyster to about a 9/10. A 10 being akin to Buffer, who freely displays everyone's salary, both internally and externally.

But it wasn’t easy

Despite Oysters stated value of ‘we build trust’ and the steps it had taken so far, this decision was contentious. This was not due to any aversion to the values, but for the gaps it would show and the lack of ability to remedy it.

I mentioned earlier that a compensation structure being established so late meant longer for the unregulated approach to run rampant and for people to be paid differently to our now stated position. Now, we were about to reveal just how much havoc this played.

As a fledgling startup (albeit a big one), Oyster wasn’t in a position to immediately remedy the discrepancies of those who were below band. This required a significant investment, and every bit of capital was needed to invest in expansion. Expansion, due to a heavy reliance on people, meant hiring more versus remediating low salaries.

This created an effect where we had a strong no-negotiation stance at the point of hire, but a different approach for those internally. So now, those who were below band may be paid less than those new people being hired to do the same role. Ick.

It was challenging to convey the need to outgrow the problem by hiring the people we need, to earn the revenue, to become profitable, to fix the problem. But that’s a difficult journey to tell amidst what was now an unpredictable business environment and numerous layoffs (for both Oyster and the market generally).

Don’t get me wrong, the transparency in general was lauded. We saw significant growth in trust through engagement scores, and the verbal praise for the transparency was extensive. But we were now dealing with two problems that could only be resolved over time: those who were overpaid and those who were underpaid.

Logic may tell you that if someone is offered the salary they asked for (or more) at the point of hire, being told later that they are underpaid would be a positive development (I’m worth more money!). But no. Not because people are greedy and want the maximum amount, but because they now feel they were paid unfairly compared to others.

We worked hard to provide leaders with remedies and resources focused on facilitating career growth for their overpaid direct reports, ultimately resulting in salary growth.

We debated on whether this was the right move to make, and ultimately I wouldn’t have changed things. I learned an important lesson about how to adopt pay transparency to such a high degree. I would encourage other organisations aspiring toward something similar to do it more gradually and get this basic set of expectations in place first, rather than rush into it.

Turning sand into pearls

Ironically, when an Oyster develops pearls from grit or sand, it’s called ‘culturing’. I like to think that this case study captures exactly what can happen when you add culture to the specks of a pay process.

No endeavour is without its challenges, and we uncovered many due to a globally complex hiring and business landscape. But we benefitted immensely from what was one of the most progressive compensation structures I’ve ever witnessed. The benefits were numerous, but some I managed to capture or recall are:

• We reduced hiring costs by ~25% — seeing our average salary drop from approximately $100k USD to $85k USD per employee. While maintaining an offer acceptance rate above 80%.
• This was due to a targeted hiring effort in mid/low COL countries, something our salary model enabled.
• Improved engagement by 10% over a 12 month period (68% > 78%). The reward and recognition driver rose by 15%. It’s important to note that this was measured during a challenging business environment and accompanied by layoffs.
• While we didn’t quantify this, the scalability it gave the People team was enormous. Benchmarking went from an hour per role to seconds per role. It empowered the Talent Acquisition team to move swiftly on shortlists (because salary was aligned from the start) and close with agility.
• We had extreme accuracy in our ability to quantify and report on any aspect of our pay philosophy, or the expectations we had of ourselves when it came to things like pay equality.

Oysters compensation journey wasn’t without its challenges. It will likely never be, due to its complex and diverse geographic makeup. But for every challenge it generated, it was met with a thoughtful and effective means by which to support and enable its mission.

Compensation continues to emerge from the back office and into the spotlight through legislative and social change. This case study is a great example of the perspective companies can take in rising to the occasion.

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