Thursday, December 26, 2013

One company posted a formula to calculate its employees salaries - How measurable it is?

For most companies we worked with, we were always told that salaries and remunerations are confidential information and should not be shared with other employees in the company. The main reason for this is probably to refrain colleagues from comparing and resenting another's employees salary, especially if one's productivity is lower but receives a higher pay.

One recent Social Entrepreneur start-up company based in San-Fransisco - "Buffer" - has surprised everyone by being a company that publishes a transparent formula for all of its employees. But just how much measurable and effective is it?

If you see from the formula, the only subjective element is probably the "Experience" factor, which to me is probably the most important factor but surprisingly has one of the least multiplier. So take for instance, a fresh-grad who has a "Junior" level of experience earning a 1x multiplier versus a mid-level candidate with an "Intermediate" level of experience who has worked for several years and earning only a 1.1x multiplier - the difference seems so meager and uncalled for.

I am actually a little surprised that being an US company they did not put any multiplier on the level of education (Degree, Masters, PHD, etc) that a candidate has completed. From what I know, US is one of the few developed countries who has put much focus and respect on its education metrics.

The formula also did not take into account the better performer versus the average performer and pays everything according to the formula. So we could have a situation where an employee hit a high level of experience, living in Hong Kong and choose a salary choice but put minimal effort and still goes home with the most amount of paycheck.

I wonder how sustainable will this formula be for the employees.

Can a paycheck be measured effectively by such a formula? What do you think?


  1. Hi B,

    I started following your blog recently. Your financial sensibility for someone so young is very impressive. I wish I knew how to invest my money when I was younger. I am also following the blogs of DW and AK71 regularly.

    I started investing in the Singapore stock market 6 years ago but stopped in the past 2 years when I decided to take break from work. Back then, I did not really have a plan and would rely a lot on my instinct and "kind" advice from family and friends. After reading through your blogs, I have a better sense of my investment plan. I have identified a list of stocks and prices I want to purchase and will enter the stock market slowly but surely this year during market correction.

    Like you, I strive to attain financial independence by having more passive income than active income as soon as possible. However, when I shared this achievable dream with my friends, many of them were incredulous and wondered why I would want to "retire" earlier when the official retirement age is 62. Being financially independent in their 30s, 40s or even early 50s is simply unfathomable to many.

    Do continue blogging regularly knowing that there are many people who read your blog and are benefiting greatly from what you are sharing with us.


    Renewed investor

    1. Hi Renewed Investor

      Thank you for your kind comments.

      I too am still learning everyday in my life and I found it to be a blessing to have many bloggers that share the same goals as I do (just like you :))

      The thing I feel about the retirement is like a taboo word that many people cannot imagine. It seems so far away from them that they do not give a single thought of it. But as a year slowly goes by, all of us will grow a year older and sooner or later this will become a serious topic for us to consider. So why not deal with it early and get done with :)

      Hope to see you around and thank you again for visiting my blog.