R&D Compensation & Incentives

We analyze the compensation cost of modern-day engineering organizations in 2024, with a particular focus on the impact of factors such as stage of company and location.

Within R&D OpEx, compensation costs comprise the largest portion, usually accounting for ~70-80% of total spend; as such, setting up a strong incentive structure is a critical point of leverage for R&D organizations

Company stage and geography are the primary drivers of variance in total cash compensation (TCC), while revenue growth rate and sector show less impact on cash compensation levels

Total Cash Compensation (TCC) by Stage and Geography

  • Late-stage companies tend to offer higher TCC for all R&D roles, paying a median of 29% higher relative to early-stage companies
  • Employers that have the majority of their employees in 'tier 1' geographies tend to offer higher TCC for all R&D roles, paying a median of 21% higher compared to 'tier 2' geographies

Performance reviews are often conducted bi-annually, with assessments based on a mix of quantitative and qualitative metrics such as story points, number of PRs, and autonomy

Commonly Used Evaluation Metrics

  • Qualitative
    • Autonomy
    • Productivity
    • Collaboration & Communication
  • Quantitative
    • Velocity and completion time
    • Number of PRs, commits, and bugs
    • Story points completed

While some companies have started to leverage quantitative metrics for performance evaluations, it is important to note that these metrics are never viewed as standalone performance indicators and usually assessed in comparison to median performance to identify any potential performance issues. We generally do not recommend evaluating engineers purely based on development velocity metrics as these can be easily manipulated and incentivize the wrong behaviors.


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