Shopify has announced Flex Comp, a flexible compensation to reward talent working for the company. It challenges the norms set by tech companies worldwide, though Shopify believes that its rewritten story of compensation will soon inspire other giants to follow Flex Comp.
In a blog post, the Canada-based e-commerce giant first explained what a conventional story of compensation looks like in a tech company:
- Contract: “Company extends offer (in the form of a nicely bundled letter…kind of),” Shopify said. This is the first promise you get from the company in return of your commitment.
- Acceptance: “Employee accepts offer (a forever contract despite any changes life throws at them).” Once the employee accepts the job offer, they abide by it no matter what happens to them outside work life. This commitment becomes tiresome at some point as challenges of life never refuses to die down. One example is how many employees quit their jobs to peruse independent work after failing to stick to office commitments during the coronavirus pandemic.
- Incentive: “Employee does good work, and so company pays employee per agreement (except that nice bundled offer letter now becomes a confusing mess of paystub, equity portal, benefits portals, etc.).” So, what motivates employees at work? An incentive based on your contract. However, it feels so less in comparison to what efforts you have put into your work. Add to this, there are technical jargons that cause confusion when you see sudden deductions in your salary.
According to Shopify, the world of tech industry has changed but the story of compensation has remained the same for decades. “But at Shopify, it no longer made sense. We saw an opportunity to write a better story: Flex Comp, an approach to compensation that changes the very foundation of how we reward talent,” Shopify states.
Shopify’s Story of Compensation
Shopify has introduced Flex Comp, a compensation model, based on three key elements:
Agency
The prime aspect of Flex Comp discusses how employees can decide if they want to get paid in cash (the conventional way) or in equity. “Bringing agency to our people was a foundational principle for our build. Why should a company decide for you how much of your total reward should be in the form of cash vs equity? This makes no sense. Now, our employees can choose exactly how they want to allocate their total reward.”
With examples, Shopify explained if one wants to save for a house or big asset, cash is the right choice. Similarly, if one is young and has just started his career, then he should go for “restricted stock units (RSUs)”. Having said that, Shopify explained the flexibility of choice one could make.
“We also killed the one-year cliff on equity, so vesting begins right away, and, because life happens, allocation windows will open a few times a year. This means your equity will no longer be tied to the quarter you started, and you can adjust your choices as your needs change,” the company explained.
Clarity
Talking about clarity, Shopify shared how the UX design options of Flex Comp will make each employee easily understand the complexities of pay.
“Under the old industry structure, it was annoying and time-consuming to understand exactly how much you earned. You’d find base salary on your pay stub and equity in another, made even more complicated by vesting schedules, stock-market unpredictability, and unreliable bonuses tied to company performance. Figuring out your annual take home pay was a pain. Flex Comp lays it all out, simply – our UX design bundles all aspects of total rewards for the first time so employees now have a one-stop-shop for understanding pay,” Shopify said.
Impact
In the third point, Shopify promised no “speed limits” to the growth of each employee. The only thing it is concerned of is how an employee creates a positive impact on Shopify’s shared mission.
“We’re a mission-driven company, and everything we build is in support of this mission – including this new comp system. We’re tying rewards to the mission, not the market or world events. As employees advance in their careers and have a positive impact on our mission, their compensation will grow (no speed limits here).”
Bold Step
Company news: We totally revamped our compensation system this summer. In short, "Flex Comp" now gives everyone a simple UX where you see your total compensation and choose a mix of Cash/RSU/Stock via simple sliders. pic.twitter.com/5ISYiNA6WO
— tobi lutke (@tobi) September 16, 2022
Shopify didn’t hesitate to call Flex Comp a “bold vision”, but it takes pride in having built it amid tough industry-wide realities.
“Armed with a strong vision of what we were building, we got to work. The ongoing industry-wide realities in which we had to operate were not uncomplicated: compensation tied to market value; geographic salary disparities for a global workforce; and the few making choices for the many. There were as many reasons not to pursue this as there were to dig into it. But this is peak Shopify territory,” Shopify said.
Flex Comp model of compensation is built consensus from people representing “nearly every team at Shopify”. The coding for Flex Camp model was created in two weeks. Shopify called it a war room of founder, CEO and developers who partnered to program Flex Comp late into the night.
“The commitment to build the best possible system that would work for a diverse set of employees in different jobs, geographies, and levels, each with their own unique needs was palpable. And it paid off, with room to build in the future,” Shopify said.
