- Initial offer sets your comp for your first 4 years.
- If stock outperforms the expectations (as it has historically done) you get no refreshers.
- If your comp is at the top of your band, you get no/nominal raise.
- Newly promoted engineers get paid the bottom of the new band. If they are already earn that much or more (via stock growth) they get nothing.
And then the truly key points.
- The company stack ranks employees every year. Only top performers (a tiny fraction) get raises to the top of their band. If they are already at the top or above (via stock growth) they get nothing.
- Most other employees get no/nominal raises.
- Employees must be 'consistently performing at the next level' in order to get promoted. This avoids the Peter principle [1].
Why do I say this discourage retaining talent? Let's consider the following scenario:
- You are a good engineer, and get hired for your level at top of your band.
- Because you are at the top of the band, no matter how hard you work, you won't get any raises. Being rated top performer, which is quite difficult, gets you nothing (other than an ego boost).
- You need to consistently perform at the next level to get a promotion. This might take a few cycles in the best case scenario. If you are doing well, essentially you are doing L+1 work for L salary.
- When you finally get promoted, you go to the bottom of the band. Including stock appreciation, you will still probably not get a raise.
- You need to be a top performer at the next level to get a raise.
Also once your initial grant runs out, you rely on stock appreciation and top performer ratings to get more money.
This model incentives behaviours like these:
- Get hired at the top of the band. Use competing offers between top companies to get there.
- Work just hard enough to not get fired in your first 4 years.
- After your initial grant expires, interview somewhere else.
Or, if you have a very good shot at a promotion.
- Get hired at level L.
- Do good work to get promoted to L+1 within your first 4 years.
- Shortly after the promotion, look for L+1 positions in other companies. Chances are that a new hire offer elsewhere will be much higher than your current comp.
Anecdotally a good number of people leave after a promo, and this is probably one of the reasons why.
EDIT: Fixed formatting.