The work trial is no longer required, but it is an option since some candidates really enjoy working with us to get a better sense of what it is like before deciding.
I think it served us really well in the early days but you're right it doesn't work for all people (especially more senior folks). And of course we offer to pay people for the time.
In terms of overall comp, we pay more than 7 out of 10 comparable companies (sub 200 employees, tech, in the bay area) across both cash and equity according to http://conneryconsulting.com/ who we hired to help us with this.
Overall, our hiring process (especially in the early days) was weighted toward not making a bad hire, so this means we missed out on some good people occasionally, but ended up with a stellar team. Given the chance to do this over again, I'd make the same choice.
Finally, I'd suggest reading some of Paul Graham or Sam Altman's advice on this topic, for example: http://blog.samaltman.com/how-to-hire
"Have people audition for roles instead of interviewing for them" "A single bad hire left unfixed for long can kill a company." etc
We definitely didn't have it perfect early on, and still don't, so apologies if you had a negative experience. It is something we are always working on.