Friends,

Major life update.

As of 14 days ago, my family has expanded to include little Nelly, pictured here in all her cuteness and tiny-ness.

Some of you may know that a couple of years ago we lost our last pup (Delilah, RIP) 😢 and it’s taken us until now to be ready for another little nugget to enter our lives. Nelly took all of 4.3 seconds to convince us she was the one.

So far, Nelly’s favourite activities include huffing socks (weird), and chasing her favourite toy (which is a cat toy, because clearly she’s confused about her species).

Suggestions have been made that Nelly become a regular feature in the newsletter, but I’m worried she’ll quickly overshadow anything I put in here, so I’ll include her cautiously to avoid this becoming a Nelly stan newsletter.

Enjoy this week’s edition ✌️

Matt

PS. you know one thing that’s better than me sharing my pet pics? Seeing yours! Hit reply and show me your gorgeous fur-babies.

In case you’re new here (or just missed it) here’s the past three editions of the FNDN Series:

AI, remote work, and global hiring are reshaping HR. This report from Oyster breaks down the biggest trends shaping teams in 2026.

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Pave have just released their 2027 Compensation Budgets and Planning Report. I’m partnering with them for this edition to share my view on the findings that matter for your next cycle, and how to make the most of them.

Every year someone asks me for the gut check on merit budgets. And every year the answer barely moves.

Pave and Alpine Rewards surveyed 251 companies for their 2027 Compensation Budgets and Planning Report, and the median merit budget in most geographies is holding at 3.5% (with India the standout, at 8%).

Flat merit is fine. It's defensible because it's what most companies are doing, and nobody in a board meeting argues with the median. It’s like saying nobody got fired for buying IBM.

And while that number might be easy to hide behind, the companies focused on getting better results aren’t doing the same thing as everyone else.

Most companies I speak to are continually being asked to do more with less (and I’d be surprised if it was any different for you).

So when voluntary turnover in parts of tech is running above 15% for a large number of companies, there’s a real chance to build a strategy that nets your organisation better results.

Here’s the three places where doing something different, with the same money, pays off.

The 3.5% is a useful reference point, but it makes a poor starting point.

Before setting your pay-review budget, identify the specific business goals you need to support. Then work backward: decide which roles and skills are most critical, what compensation investment would help attract or retain those people, and how you’ll measure whether the investment worked.

Bring that business case to leadership instead of relying on a standard market percentage or last year’s budget.

And a 3.5% budget doesn't have to mean everyone gets 3.5%.

Spreading increases evenly can mute the impact: giving little or no increase to struggling performers can free up more meaningful raises for top performers. Concentrated, it can change someone's decision to stay.

As a simple example, if your top 20% get 7%, the middle 60% get 3%, and the bottom 20% get 1%, you land within the median while still focusing your budget where it’s needed most.

Most companies already differentiate equity this way, with awards at the high end of the range the most common way to recognise top performers.

Doing it with cash needs two things in place first: performance ratings that have been calibrated, and a pay-equity check on the outcomes. If your ratings aren't there yet, concentrate on your highest retention risks and most critical roles instead.

AI specialisation is a focus for almost every organisation I speak to. Most are still pricing it the same way they price everyone else.

More than half of tech companies benchmark specialised AI roles against their standard peer group (the set of companies they compare pay against), and only around one in five use a dedicated AI or tech peer group.

At the same time, 37% are using sign-on bonuses to land scarce AI talent, while 21% rely on frequent out-of-range exceptions. In my experience, that's how a premium ends up being set mid-negotiation, with every exception becoming the precedent for the next one.

Part of the problem is definition.

Most roles are AI roles now, and they don't need a separate pay approach (although I find the more AI enabled they are, the higher they are in the range).

The specialists do, such as engineers building on large language models, or the AI enablement people helping every other team use these tools well (or building them).

The four steps I'd take before your 2027 cycle:

This was the finding that surprised me most.

Only 13.9% of companies make an employee's salary range for their own role automatically available through their HRIS or comp system.

Showing someone their band costs nothing, and the upside is real.

Research shows that pay transparency is associated with employees being far less likely to leave, and seeing the pay levels above you gives a more accurate, more optimistic view of where you can get to in an organisation.

I've seen the difference this makes.

When people understand how the bands were built, where they sit and what it takes to move, the pay questions and negotiations drop away.

They see a fair process at work, and they make better decisions about moving between roles inside the business (which is exactly what keeps them longer).

And I get it. Most companies hold back because pay transparency is scary. But the number is the easy part.

A number without the reasoning behind it creates more questions than it answers, so the investment goes into the foundation underneath. I’ve seen organisations that published all employees salaries internally, but without the basis to back it up, the People team spent their days firefighting pay questions rather than seeing it give people the answers they thought it would.

Here’s the four foundations to build before you share a band:

The common fear is that everyone will want to move to the top of their range. In my experience that fear usually means the business hasn't yet defined why someone would sit anywhere else.

3.5% will be in almost every 2027 budget proposal, and that's fine, as long as you chose it intentionally.

Concentrate merit where it changes decisions and pay your AI specialists deliberately. Then show people how it all works.

Which of these is your organisation already strong on, and which have you been putting off?

The full Pave report has merit and promotion budgets for 14 countries, plus the tech and life sciences splits. You can grab it for free here.

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A roundup of the most interesting stuff from the week:

When you’re ready, here’s three ways I can help you:

1. Tools & resources
Resources and tools that give you what you need to build your own startup compensation practices.

2. Comp consulting
Building startup compensation practices that are clear, fair and competitive.

3. Startup People Summit
A 1-day annual event for People professionals in scaling companies. Creating the playbook for startup people practices. Grab recordings from past events, or subscribe to join the next summit.