Salary negotiations are one of the hardest parts of being a CTO.
There's a reason actors have agents to negotiate for them. Its hard to be in a creative environment and be open and trusting and vulnerable - all the things that make a good creative environment - when you also have go toe to toe with someone over how much to pay them.
Money is a tricky topic.
It means different things to different people. Some people equate their self-worth with how much they're paid. I've met some founders who thought everyone was out to screw them for the last dime when it came to salaries.
Startups are always looking to extend their runway.
Salaries tend to be the biggest cost by far for a software startup. I've seen different approaches used by the founders and leaders I've worked with over the 25 years or so.
Here is my approach:
Do your homework. Know what the market is paying for each person in your on team.
Agree an overall budget for salaries for your team. Don't drop down into individual discussions unless the founders are as clued up on the market rates as you are. Engineers tend to be some of the highest paid employees and non-technical founders often jump at the salaries compared what people are being paid on other teams.
Decide if you're paying below, at or above market rates as a company hiring strategy. Most startups pay below or at market rates. You can't compete with the likes of Google, Meta, etc. just on salary as a startup. There are other reasons people want to work at startups than the monthly salary.
Have a salary band per role. Junior, mid and senior levels should have a salary range. The amount when the person starts at that level, what they get when they're half way through that level and what someone about to be promoted would earn.
When interviewing, ask the candidate what they want to earn. Don't take a generic "market rates" for an answer. Have them do their homework.
In the offer, give them what they asked for provided its in line with what you wanted to pay for that role.
Revisit salaries every 3 - 6 months. Keep up to date with market rates and how your engineers are progressing.
Give raises when needed without being asked for them.
Salaries should never be an issue.
Some founders feel that they should pay people the least amount possible so that their burn rate is as low as possible. They take is a point of pride how little they can pay for a particular role.
The issue with that approach is that it builds resentment and lose trust.
That leads to the startup being slower than it could be and that affects the startup's survival just as much as a higher burn rate.
I feel that you get the best out of people when you explain how you work out salaries and you stick to the principles.
Engineers don't like asking for raises - it's stressful. So take the salary negotiation off the table so that they can focus on writing great code.
What has been your experience negotiating salaries? Let me know in the comments.