When you’re in the thick of building; hiring fast, watching runway, reacting to growth, it’s easy to treat compensation as something you’ll figure out later. At Scede, we get it. But after working with dozens of startups across seed through Series B, here’s what we’ve learned:not having a clear compensation approach early on can cost you trust, time, and talent.
This isn’t a how-to guide. Instead, it’s a set of lessons we’ve seen play out – again and again with founders, early teams, and scaling companies. These patterns emerge whether you’re a five-person team or preparing for your fiftieth hire.
1. “We’ll figure it out later” often turns into firefighting
In the early days, pay decisions are usually made on instinct. Someone is great, you want to close them quickly, and suddenly you have set a precedent. Those decisions are difficult to unpick once your team starts to grow.
Maybe your first engineer got X% equity because that felt right. Your second got XX% because you were more cash-constrained. Your third negotiated up to XXX% because they had competing offers. Those decisions are difficult to unpick once your team starts to grow.
not because of performance, experience, or scope of responsibility, but because one joined during a hiring crunch and the other did not negotiate hard. The undoing of this can be as simple as pulling on a thread that unravels everything else.
These things surface eventually, especially when people talk. And they always do; over lunch, in Slack channels, during team off-sites, or when someone gets a competing offer.
The firefighting starts when that first engineer asks why the newest member of the team is earning more (or receiving more equity), despite joining later. Or when your Head of Engineering realises the salary structure is so inconsistent they lack confidence on pay structures for new hires.
By then, you’re not building a system, you’re doing damage control. We’ve seen founders spend weeks reworking compensation across their entire team because early ad-hoc decisions compounded into something unsustainable.
2. You need some kind of philosophy, even if it’s simple
When you’re scaling, you don’t need a 50-page playbook. But you do need to answer a few core questions as early as possible:
- Do we pay at, above or below market, and why? Are you targeting the 75th percentile to compete with bigger companies, or the 50th because you’re offering meaningful equity? Being deliberate about this helps you stay consistent.
- How do we decide what a role is worth? Do you use benchmark data? Do you tier roles (e.g., Engineer I, II, Senior)? Do you have a view on how much an employee’s experience matters versus their impact in this role?
- Do we adjust salaries by location? A Software Engineer in London may expect different compensation than one in Lisbon or Berlin. Some start-ups pay the same globally; others use location multipliers. Neither is inherently right, but you need to know where you stand before you hire across borders.
- Who makes pay decisions, and how are they reviewed? Is it just the founders? Does your Head of People or Finance weigh in? What happens when a hiring manager wants to go above band? Having a lightweight approval process prevents drift.
Even a short document in Notion or Google Docs can give hiring managers and founders a consistent reference point. It does not need to be perfect. It just needs to exist.
3. People care more about fairness than you might think
Especially now. Teams are more open about pay, and access to benchmarking data is improving. Candidates and employees want to understand: is this fair? Is it applied consistently? Does it make sense compared to my peers, my market, my contribution?
This isn’t about entitlement. When compensation feels opaque or arbitrary, it breeds anxiety and resentment. People start wondering if they’re undervalued. They question whether their manager is advocating for them. They compare themselves to others and assume the worst.
When you can explain how a salary was decided, rather than just stating the number, you build trust. And trust is what keeps people committed during the fast-moving, often uncertain stages of start-up life. It’s what makes someone stay through a tough quarter or a pivot. It’s what makes them refer their friends and peers.
4. You’ll need to defend your decisions – so make them defendable
Pay is personal. It reflects value, progression and recognition. If someone does not understand how their salary was set or what they can do to grow it, they will start filling in the gaps themselves. This approach rarely ends well.
We have seen people lose motivation or leave not because their salary was too low, but because it felt arbitrary. Clear, structured thinking is just as important as the final number. This doesn’t mean you need rigid bands that never flex, but you should be able to articulate why someone is paid what they are, and how that might change. Is progression tied to impact? To time? To skill development? To market movement?
Documenting your thinking also protects you during review cycles. When someone asks for a raise, you need more than gut feel to respond. You need to reference their level, their performance, their market rate, and your budget. If you’ve been making decisions on the fly, these conversations become emotional negotiations rather than structured discussions. They take longer, create more friction, and often result in inconsistent outcomes.
5. Communication is your strongest lever
You may not be able to pay the highest salaries, especially at Seed stage or Series A, but this isn’t necessarily a negative. When competing with later stage companies or big tech firms that have deeper pockets, you can explain your thinking – and that counts for more than you might expect.
Transparency builds credibility. Whether that means publishing internal salary bands, sharing your sources of market data or being upfront about how you approach progression, people notice. It signals that you take this seriously. It shows you respect your team enough to be honest.
We have also seen a measurable increase in applications when companies include salary ranges in job ads. Being open works. It filters for people who are aligned with your budget, reduces time wasted on mismatched expectations, and signals that you’re a transparent, modern employer. In competitive environments like London, Paris or Berlin, this can be a genuine differentiator.
Even when the news isn’t great – for example you can’t match a competing offer – being direct and explaining the context builds more trust than staying silent. People can handle trade-offs if they understand them. What they struggle with is ambiguity.
Final thought
Every founder we have worked with wants to do right by their team. The intention is always there. But when pay is vague, inconsistent or left unspoken, it creates avoidable problems – problems that compound as you grow and become exponentially harder to fix later.
You do not need a fully built system on day one. But getting your principles down early, even just a handful of bullet pots – and sharing them with your team and hiring managers, will save you time and tension later. It will help you hire faster, retain better, and build a culture where people feel valued and understood.
Start small. Keep it clear. Let it evolve. Your first compensation philosophy might be half a page. That’s fine. What matters is that it exists, that people can reference it, and that you’re willing to refine it as you learn. The startups that get this right early don’t necessarily pay more, but they build trust faster, move more confidently, and avoid the costly firefighting that comes from winging it.
If you’re reading this and thinking “I should probably write something down” – you’re right. Start today. It doesn’t need to be perfect. It just needs to begin.
From comepnsation frameworks to manager enablement, Scede People helps you scale with clarity, fairness, and real structure.
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