Of all the things that are hard to get right in startup compensation, communication tops the list.
Not frameworks. Not benchmarking. Not budgets.
Communication.
Especially when it comes to explaining how the market for labour actually works.
I once saw a compensation philosophy that did this brilliantly.
It didn’t just explain what the company paid — it explained why, anchored in how the labour market functions. It walked employees through supply, demand, and skill scarcity in plain language.
It wasn’t about defending pay; it was about teaching context.
Here’s a simple example that brings that to life. Right now, I’m travelling through Europe.
Somewhere between Porto and Turin, I was reminded how reliant I’ve been on locals who speak English when my attempts at using Google Translate fails.
Along the way was a bus driver who sold me a ticket from Milan airport to Milan Centrale.
He spoke fluent English — far better than my Italian — and I realised that interaction might not have happened at all if he didn’t.
Now imagine the business decision behind that.
At some point, the bus company probably said:
“We’d sell more tickets if our drivers spoke English.”
Which means they now need a driver who can both drive a bus and speak English.
That combination — bus driving + English fluency — is rarer than bus driving alone.
So what happens?
They probably have to pay more to attract it.
Because:
Supply of that combined skill set is smaller.
If pay stays the same, English-speaking drivers won’t bother using (or maintaining) their extra skill. Why would they do more for the same pay?
Over time, other drivers may see the premium and upskill, learning English themselves.
When enough do, supply increases again — and the premium eventually falls (or becomes the baseline).
That’s the labour market in motion.
Demand for a skill increases → pay rises → supply responds → pay normalises.
It’s the invisible logic sitting beneath every pay decision you make.
And it’s the part most employees never get told.
If you want your people to trust your pay decisions, teach them how the market works, not just what their salary is. When they understand the system, they stop assuming bias and start seeing logic.
How else have you seen companies help their people understand the 'why' behind pay?