In short: (1) A UK startup CEO typically has a lower salary than their COO. (2) Stock options are a key part of startup compensation and are commonly awarded to employees at all seniority levels. (3) >70% of UK startups have a 25 day holiday allowance while 8% of companies offer unlimited holiday. (4) Working from home is here to stay with 80% of UK startups opting for a hybrid model (most typically 50/50). (5) 92% of startups have a higher average salary for male than female employees, leading to a pronounced gender pay gap. (6) If you’d like to benchmark your own startup/scaleup, just get in touch via our contact form.
Getting startup compensation right is important. While startups can’t afford to pay the same salaries as large corporations, their Founders and People leaders are typically very keen to pay competitive salaries and packages compared to other startups. That’s because they acknowledge that compensation is key – not just to attract great talent but also to retain and incentivise them.
The issue is – knowing what a competitive package looks like is actually pretty difficult, especially in the startup/scaleup world. Early stage startups have often never hired for a specific role before and simply don’t know what the market rate is. And other key People topics like work from home, attrition, diversity and benefits have only recently become part of their agenda.
But even for later stage scaleups, getting pay right is difficult. Public sources like Glassdoor are heavily skewed towards large enterprises, simply because that’s where the majority of data points come from. They also typically only look at job titles – and a “Senior Software Engineer” in a 60-person scaleup is typically at a different stage of their career than a “Senior Software Engineer” at Google. Glassdoor and other compensation reports also don’t take into account some of the key elements of being a startup employee – the potential for growth, the responsibility, the flexibility and the fact that equity is often a part of startup compensation.
We’re therefore running the Payspective benchmarking to support UK startups & scaleups with targeted and comprehensive insights around pay & diversity as well as other key People topics like employee retention, remote working, or holidays. The below is a summary of 5 insights from our dataset. If you’re keen to know more or if you’re looking to benchmark your own startup or scaleup, reach out right here.
CEO salary < COO salary in UK startups
85% of startups are led by a founder. But what’s a typical startup founder salary (or startup CEO salary) in the UK?
More often than not, startup founders are on lower salaries than some of their key employees. A lot of the startup founder income/wealth is tied up in equity so their salary is typically lower than, say, that of their COO (often the highest paid role in a startup). What’s more is that the startup founder/CEO salary is typically subject to board (in other words: investor) approval so can’t just be set by themselves.
But what about actual numbers? They very much depend on the stage of the startup. The chart below shows various percentiles of startup founder/CEO salaries in the UK. For a startup with less than 25 people, the median founder/CEO salary is £60k. This increases to £100 for founders/CEOs of startups with 25-50 people, further to £126k in startups with 50-100 employees and to £184k for larger scaleups.
Another interesting insight is the sequence with which C-level roles are brought into a startup. It most typically looks like this:
(1) CEO (almost always a Founder)
(2) CTO (very often a Founder)
(3) COO (typically brought in externally when the company reaches ~30-50 people)
(4) CFO (often the second external C-level hire at ~75 people)
Stock options are a part of startup compensation for employees at all seniority levels
In the UK, equity has historically been considered an incentive for senior leaders of a company. These days, however, it is an important part of startup compensation for employees at all levels, and startups tend to give stock options even to their most junior hires. In startups that have a stock option programme set up, ~80% of employees typically participate. The amount of stock options awarded increases dramatically with seniority – while they’re a small “goodie” for recent grads, they’re a key part of the package for Directors.
So why do startups offer equity in the first place? Typically for one of 4 reasons:
(1) To attract great talent: if you can’t compete on base salaries, you promise your candidates a piece of the future value of the company instead
(2) To retain great talent: you get your key people to stay by ensuring that a sizeable part of their compensation will materialise at a later point in time
(3) To incentivise performance: especially in smaller teams where people feel like their own performance has a large effect on the value of the company, it typically pays off to give them a part of that value
(4) To reward performance: some startups feel like letting their people participate in the value of the company is simply the right thing to do – after all they helped to build it
If your startup is setting up a stock option programme or if stock options are already a part of your compensation packages, make sure the structure of the programme is aligned with what you want to achieve. If it’s mainly a retention mechanism, you may want to build in a cliff. If it’s a tool to attract great talent or incentivise your staff, you’ll want to make sure that you get education about stock options right. “We expect that your options will be worth £100k in 4 years” is typically more motivating than a cryptic “You have 3,000 stock options that you can exercise at a strike price of £6.50 when we have raised our Series C”.
>70% of startups stick with 25 days’ holiday
72% of startups give their employees exactly 25 days’ holiday, with some companies looking to scale that at senior levels as the years are ticked off. Only 4% of startups offer less than 25 days and ~25% of startups offer more than 25 days. A small but significant (8%) number of startups is offering unlimited holidays as part of their compensation package.
This unlimited holiday allowance typically works well when it’s (1) reflected in the company culture (i.e. senior leaders take more than 25 days off, there is no explicit or implicit reward for taking few days off); and (2) when there is a structured policy in place (i.e. people know they can’t just go on holiday for a week tomorrow without having anyone to cover their work).
Overall, most of the companies that put a strong emphasis on work-life-balance simply still stick with a set number of days – they just make that number 30 or 35 rather than 25. However, if you get the details right, you might just be part of the 8% that are doing things a little bit differently and making it work for them.
80% of companies are adopting a hybrid WFH/WFO model
Apart from compensation, startups are more and more often competing for talent through remote working practices. 8% of startups are going fully back to the office and 13% are going fully remote. The rest is somewhere in the middle with a half-half split being the “median option” for UK startups.
Typically more flexibility translates very well in recruiting – esp. (software) engineers have become used to being able to work from anywhere and attach a large value to that flexibility. It’s not unheard of for developers to reject financially more interesting offers in favour of more flexibility.
On the flip side, employee engagement, company culture, onboarding and coaching are much more difficult to get right in a remote setup. Even fully-remote companies sometimes require their new-starters (and their teams) to come to the office for the first few weeks to ensure an effective onboarding experience.
By the way, the majority of startups are reducing their per-capita office space which typically means that they’re growing but sticking with their office as they don’t expect everyone to ever come in at the same time.
Startup compensation is not equal between men and women – the gender pay gap stands at 25%
The median gender pay gap of a UK startup is 25%, which is substantially higher than the median gap of larger companies. In 92% of startups, the average pay of male employees is higher than the average pay of female employees. But where does this gap in startup compensation for men and women actually come from? Are they still paid different salaries for the same job in 2021?
Mostly not. The main driver of the gap today is a gender skew in seniority levels: companies tend to have a balanced gender ratio overall but men still dominate leadership positions, which drives their average salaries upwards (founders are still predominantly male). So while startups do hire roughly equal numbers of men and women, men are more regularly progressed or hired into senior roles and are more regularly part of the founding team.
The second key driver is a skew in terms of functions. Technical functions like Engineering / Software Development are among the highest-paid in any startup – and they are still dominated by men.
What this in turn means is that the 2 key levers to get your gender pay gap down are:
(1) Hire or progress women into leadership roles: support women on the path to become leaders of your organisation, make sure you have robust flexible working arrangements in place, offer appropriate maternity (and paternity!) leave, communicate that a strong gender balance is (or has become) a key priority for you.
(2) Hire women into technical roles: go to relevant recruiting events (e.g. Women in Tech), communicate externally about your diversity agenda, don’t restrict hiring to candidates with a Computer Science background but consider training or re-skilling high-calibre candidates with different backgrounds.
And of course, if you do happen to have a man and a woman who do exactly the same job – make sure to pay them the same.
For more on the gender pay gap and how to close it for your startup – have a look at this article.
Working for a UK startup or scaleup? Get in touch!
The first step to being competitive when it comes to pay (as well as perks, holidays, WFH,…) is to know where you stand compared to your peers and competitors.
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