How to Evaluate Your Work

"Am I getting fair compensation for my work?" This subject has always been a matter of discussion, but after the COVID-19 lockdown came into our lives and boosted remote work, it became even more relevant. On one side, working remotely has given businesses a unique opportunity to attract talents all over the world without budgets for relocation. From the other side, it brought new challenges into the subject of fair compensation.

Should a specialist living in the US or Canada, where taxes and living costs are much higher, be paid the same as someone with the same skills living in Argentina or Brazil? Regarding perks like health insurance, should a person who works from home be paid differently if they can't use the company plan? And when you're not in the office, how do you weight perks like parking or an office with a view?

The 5-Factor Method

Tech company Gitlab, one of the leaders in the adoption of the "all remote" approach, has provided their guidelines on compensation. However, I have seen multiple cases in my career when people refused higher compensation, in favor of some other factors. It looks obvious that money is not everything, but my inner rationalist wanted to get a comprehensive answer to the question, "How to assess what job opportunity is better?"

Here's where the 5-Salaries Method really comes into play. When I stumbled upon approach proposed by Calvin Rosser it gave me the answer to my question. Compensation should be assessed based on the next five factors: financial, psychological, social, educational, and freedom. Each category plays a distinctive role when evaluating overall compensation. Each person has its own set of weights for evaluating each category. As a result, it provides individually tailored decisions about which opportunity to pursue.

Let's review each factor in-depth to understand how they contribute to overall compensation.

Financial

Financial compensation is the most straightforward aspect, but it’s more complex than just a salary number. Gitlab compensation model provides a useful starting point for understanding how different variables impact financial pay:way:

Financial compensation = Role x Seniority Level x Location x Contract Type

Here is my understanding of variables that I use in the formula above:

Role: This refers to the specific position, which determines responsibilities and expectations. Tools like the Levels.fyi title directory can provide a starting point for comparing industry standards, though roles vary widely by company.
Seniority Level: Seniority usually comes in levels such as junior, mid, and senior, reflecting experience, autonomy, and soft skills. Senior employees are generally expected to operate with more independence and have a deeper understanding of their domain.
Location: Location-specific pay has become more common, with some companies adjusting salaries based on the cost of living or the hiring market in specific regions.
Contract Type: I classify it as either freelance or employee. Freelancers often receive higher hourly rates to offset the lack of benefits and stability, while full-time employees receive a more consistent salary with benefits.

In my experience, two additional factors often play a role in financial compensation:

Company Brand: well known companies attract more candidates and have the privilege to select the best from the best and give an opportunity to work on a product with millions of users all over the world. In order to compete for the best specialists, companies without sound names or starups have to offer higher compensation. If you open levels.fyi for ML specialists in Bay Area you will see that Twitter(X) offers the lowest compensation from the 3 positions shown.
Bonuses ratio: there is a subset of companies that use bonuses as a retention tool. In a job offer or contract, one can see significant compensation but only half of it to be paid as a monthly salary. Another half will be paid as an annual bonus in some cases in stock options. If monthly salary is more important, it could end up with minimal bonuses and a lower annual pay rate in the contract.

So, an advanced formula for financial compensation might look like this:

Financial compensation = Role x Seniority Level x Location x Contract Type x Brand x Bonus ratio.

Understanding these variables allows you to use tools like Glassdoor or Levels.fyi to assess whether your offer aligns with industry standards for your unique situation.

Psychological

The psychological factor is about finding deep personal fulfillment and job satisfaction in the work. In simple words, it means you love what you do and enjoy it. Job satisfaction can be affected by a variety of factors, including financial security, a sense of purpose, and feeling valued at work.

Common psychological challenges include:

Financial insecurity. If a person loses the source of income, one has to get a new one immediately, as there are no money reserves to continue normal life and looking for a new place without extra pressure. For me, having to spend all of my savings on moving and settling down in a new country was a burden. When my savings started to grow again and I could afford to go at least six months without working, it helped me get back to a point where I wanted to work instead of feeling like I had to.
Imposter syndrome. It is a psychological pattern where individuals doubt their accomplishments and have a persistent fear of being exposed as a "fraud." This can manifest in various ways, such as attributing success to external factors, downplaying achievements, and feeling unworthy of accolades. The impact can be profound, leading to increased stress, anxiety, and a reluctance to pursue new opportunities. To learn how to deal with it, read an article I wrote about it on my blog.

According to Patrick Lencioni, author of "The Three Signs of a Miserable Job", there are three key indicators that suggest a job may be fundamentally unsatisfying:

Anonymity: Employees often feel anonymous when their managers do not show interest in them as individuals. This lack of recognition means that workers may not feel valued or understood, which can lead to feelings of isolation and frustration. Personal connections at work are essential for fostering a sense of belonging and fulfillment.
Irrelevance: This sign occurs when employees cannot see how their work impacts others. Everyone needs to understand that their contributions matter, whether to customers, colleagues, or the organization as a whole. Without this awareness, employees may struggle to find meaning in their tasks, leading to disengagement and dissatisfaction.
Immeasurement: Immeasurement refers to the inability of employees to assess their own performance and contributions effectively. Workers may feel helpless and unmotivated when success is solely based on outside judgments, frequently from managers. The lack of tangible metrics for self-assessment can diminish an employee's sense of achievement and control over their work life.

Recognizing these signs can empower employees to seek changes in their work environment or even consider new opportunities that align better with their needs for recognition, relevance, and measurable success.

Social

Your “social salary” includes the reputation, recognition, and influence that come with your job.
For many individuals, the social aspects of a job carry significant weight, often rivaling or even surpassing financial compensation in terms of importance. Factors like job title and influence can greatly impact one's satisfaction in their role. If you believe that your job enhances your social status and personal image, then your social salary is quite impressive.

Job Titles and Status. Job titles play a crucial role in shaping an employee's identity and social status. Research suggests that impressive or senior-sounding job titles can significantly impact an individual's sense of self-worth and satisfaction. Nobel Laureate economist John Harsanyi noted that social status "seems to be the most important incentive and motivating force of social behavior," often surpassing economic rewards.

Impact on Behavior and Performance. Interestingly, job titles can influence not only how others perceive us but also how we behave:

Employees given more senior-sounding titles tend to display greater satisfaction, commitment, and performance, as well as lower turnover intentions.
Creative or self-reflective job titles can reduce emotional exhaustion and help employees cope with challenges. For example, an infectious disease specialist who dubbed themselves "germ slayer" reported lower levels of burnout.

External Perception and Influence. Job titles significantly affect how others perceive and interact with employees:

Clients and customers often make assumptions about an employee's capabilities based on their job title. A more prestigious title can lead to increased respect and authority in client interactions.
Colleagues may pay more attention to ideas and requests from those with impressive titles, assuming they possess the knowledge, skills, or leadership abilities associated with their position.

Educational

The "educational salary" reflects the knowledge, skills, and personal development you earn from your job. It can be very satisfying to have a job that pushes you, lets you learn, and helps you grow as a person and as a professional.

This salary is crucial for long-term career growth. If your job is helping you acquire new skills, expand your expertise, and grow as a person, it's like receiving a high educational salary. On the other hand, if you're feeling stuck and uninspired, it might be worth investing time in the area in question.

Freedom

Finally, the "freedom salary" embodies the sense of freedom and independence that comes with your job. This could imply the freedom to work from anywhere, create your own schedule, or have a substantial influence over the projects you take on.

For a lot of people, having freedom and flexibility in their work is becoming more and more crucial for their overall job satisfaction. Having a job that offers flexibility and allows you to prioritize your personal life and interests can greatly contribute to a fulfilling and rewarding career.

Conclusion

When you feel dissatisfied with a job, it's common to concentrate solely on financial compensation, believing that a raise or a new position with a higher salary will solve all issues. However, this method frequently overlooks fundamental issues in other aspects of job satisfaction. Instead, consider evaluating each of these five factors—financial, psychological, social, educational, and freedom—by rating them on a scale of 1 to 10 based on your current role.

This evaluation can assist you in pinpointing areas where you may be lacking and in adopting targeted strategies to boost your job satisfaction. For instance, if your psychological score is low, seek a role that better aligns with your values and offers more recognition. If your freedom score is low, consider positions that allow more flexibility.

Taking a comprehensive approach to compensation can transform your perspective on work. By considering not only financial gain but also psychological fulfillment, social respect, learning opportunities, and personal freedom, you'll be better equipped to find a job that aligns with your needs.