About level, money, and fairness: our new salary system

What salaries does a federal limited company pay? And how are they set? At DigitalService, we implemented a new salary system in mid-2024 that is designed to strike a balance between attractiveness, cost-effectiveness, comparability, fairness, and reliability. Anna-Lisa, Head of People and Workplace at DigitalService, explains how this system came about, how it is being developed, and exactly what salaries result from it.

At DigitalService, we’re proud to be able to say that our motivation is purpose – we’re here to work together for a digital Germany. At the same time, we know that no one here does their job for free. Compensation is therefore an important topic for us, which we discuss openly in line with our “Open by default” value.

Let’s cut to the chase: What salaries do we pay? Every position at DigitalService is assigned to a job family and then to one of our nine levels within that. Our levels build incrementally on each other in terms of the scope of responsibility and the complexity of tasks. The salary for all positions moves within the band for the respective level. We start at Level 1, where the range is EUR 35,500 to 48,000, and go all the way to Level 8, where salaries are between EUR 131,000 and 177,500. Level 9 is for Executive Board positions – those salaries are determined by the Supervisory Board and are therefore excluded here.

We use our salary system to regulate which positions belong to each level and why, as well as the possible salary increases.

Within the People team, we took a very close look at compensation from summer 2023 to spring 2024. During that time, we further developed our salary system within a dedicated project with some external support and gathered a lot of input from the entire or­ga­ni­za­tion. We then implemented the changes from spring to summer 2024.

Our salary system is based on three principles:

• Comparability: We want our salaries to be in line with those paid for similar positions by comparable companies. Every two years at the most, we measure ourselves against benchmarks so that we keep pace with developments in the market.
• Reliability: We review and calibrate all salaries across the entire organization once a year to ensure individual contribution, performance, conduct, and development can be appropriately compensated.
• Fairness: We want to ensure individuals with the same scope of responsibility and performing work of the same quality receive equal pay – regardless of personality factors or negotiating skills and across the entire organization.

How much does a software engineer in Germany earn? What does a junior UI/UX designer in Berlin get? In our experience, titles are used to examine salaries at different companies in relation to each other. But we believe that’s essentially like comparing apples with oranges. Individuals with identical titles may perform duties that vary significantly. A UX designer may have an entirely different set of tasks and responsibilities in company A than in company B.

We developed our level system as a way of creating order out of such chaos. The scope of responsibility and the complexity of the tasks typically performed are defined for each level. These and other questions help us to decide on this:

• What is the main focus of the work in the position – more operational, conceptual, or strategic?
• How broad is the range of tasks?
• How complex are the tasks?
• How challenging are the interfaces at which someone in this role works?

We clustered the answers to these questions to create a basic structure upon which our level system is built. This also serves as a framework for conversion into the standardized categories used by most providers of salary benchmarking information so that we can make valid salary comparisons.

Accordingly, the level system allows us to compare our positions and salaries with the market in a far more precise and differentiated way. It also enables us to make com­par­isons within DigitalService: the scope of responsibility expected at Engineering Level 4 matches that at Project Management Level 4.

All positions at DigitalService are assigned to one of nine levels. But how do employees reach a level? The main focus of the work overall is decisive for the assignment to a level. At the end of the day, hardly any DigitalService employee performs tasks at solely one level. Typically, a position’s duties range across two to three levels.

Level 1 is for positions whose main tasks have the least complexity and smallest scope of responsibility. It is important to us that employees in Level 1 positions still work with a high degree of independence and make decisions on their own – within their scope of responsibility and in keeping with our “Take ownership” value. Set to-do lists with de­tailed, top-down implementation instructions are never a feature at DigitalService, even for our career starters.

The scope of responsibility and complexity of tasks increase from level to level. The main focus of the work shifts from primarily functional and operational tasks at Levels 1 to 3 to a more conceptual and increasingly strategic focus at Levels 4 to 6, culminating in an emphasis on core strategy for the organization as a whole at Levels 7 to 9. Our level spectrum ends at Level 9 with the Executive Board positions.

In addition, each position is assigned to a job family group. The job family groups combine similar expertise and tasks from different areas:

• Core: The Core job family group includes all job families within what we refer to as our core divisions, namely the Agile Coaching, Communications, Executive Assistance, Finance, Legal, People & Workplace, Programs, and Strategy & Operations job families.
• Delivery: The Delivery job family group includes all job families that work on our products and services within interdisciplinary teams and directly with the federal public administration on our projects – Design & User Research, Engineering, Product, and Transformation.
• Management: The Management job family group includes Divisional Management, Senior Management, and Executive Board job families.

With a view to our nine levels, the job family groups each have a different emphasis:

• The Core job family group mainly encompasses positions with more of a functional/operational focus.
• The Delivery job family group, by comparison, is mainly for positions with a conceptual focus. This is because all positions under this job family group work on what are fre­quen­tly novel problems within interdisciplinary teams.
• The Management job family group has a strategic focus.

Accordingly, the three job family groups map to different sections of our nine levels.

There is a dedicated level description for each job family. This sets out in concrete terms the key features from the basic level structure for the respective division. Each job family established its own level description through different workshop formats with countless contributors and plenty of iteration loops. This was a challenging process for all involved and resulted in documents such as the level description for our Product job family below – as well as many valuable lessons learned and ideas gained for future iterations.

DigitalService is the federal government’s digitalization partner and our operations are funded by taxpayers. Given that, we are committed to the principle of cost-effectiveness. In respect of our salaries, this means that we take particular care to ensure that we find the right balance – between economy on the one hand and our ability to compete with other companies in the race for talent on the other.

We purchased benchmarking results from a renowned compensation consulting firm in order to structure our salary bands. Our current salary bands are based on 2023 data.
Within the project team, we initially expected to find that some job families earn con­sid­erably more than others at the same level based on the market comparison. Having delved in great depth into the various jobs per job family in our data analysis, however, we discovered there was never a difference of more than EUR 5,000 in annual salary across all levels for any job: for example, a Level 3 accountant earns comparatively the same as a DevOps engineer at the same level on the market according to our benchmarking. From a culture perspective, we highly value the fact that we can therefore use identical salary bands for all different DigitalService divisions.

Accordingly, we have defined one salary band for each of our nine levels that applies across the organization as a whole and to all job families. A Level 3 office management position therefore moves within the same salary band as a Level 3 engineering position. This is consistent with our principles of fairness and equality. After all, regardless of the respective specialization, every position at DigitalService contributes to the success of our projects within its own area of activity and scope of responsibility.

The primary point of reference for our Level 1 to 6 salary bands is provided by the market median – in other words, the value precisely in the middle of all salary data per level from the benchmarking. The bands spread out from this by ±15% in each case, rounded to the nearest five hundred. Let’s look at an example: The calculated market median for Level 4 is EUR 68,618. Accordingly, the salary band ranges from EUR 58,500 to EUR 79,000. Taking into consideration a number of factors, including the significantly positive outliers in the market at management level, we have decided as an organization to use a point of reference below the market median in respect of Levels 7 to 8. The salary bands there are structured so that the levels each overlap with the previous level by 30% in each case. We’ve retained the ±15% spread. Level 9 is not mapped to the salary bands, as this level is reserved for the Executive Board, and the Supervisory Board is responsible for negotiating and setting Executive Board salaries.

We will conduct new benchmarking every two years at least. If the salaries on the market shift, we will also adjust our salary bands accordingly. We therefore expect, for example, that the benchmarking will reflect inflation through salary increases.

To decide on salary increases and promotions, we conduct an organization-wide “salary cycle” once per year. Determining any individual’s salary within a salary band is dependent on a number of factors, including whether the person has just risen to a level, is moving in a very stable manner along a level, or is increasingly assuming responsibility at the next-highest level as well.

The cycle starts with a discussion between the manager, who we refer to as the people lead, and their direct report – in other words, the respective employee. Both explain where they believe the employee fits within the level description. This involves looking at how the employee sees themselves and is viewed by others. Prior to this discussion, both parties obtain feedback from colleagues who are key stakeholders for the direct report’s position for this purpose. The focus here is on the following questions:

• What is the employee’s scope of responsibility and at which levels are these tasks or comparable examples found in the level description?
• What has been the quality of the employee’s work results over the past year?
• In this discussion, the people lead and employee also look at our corporate values: How has the employee organized their cooperation within the team? Have they been able to practice our values? Has their conduct complicated interactions within the team in any respect? Or have they perhaps been perceived as having a positive effect in respect of our culture and been able to help their colleagues with their conduct as a result?

The aim of the discussion is for employees and people leads to reach a consensus on the right fit in the level system.

It’s important for us to establish here that this dialog is not an “annual performance review.” Ideally, none of the feedback should be entirely new – instead, it is meant to give both parties the opportunity to jointly consider the situation and use feedback already discussed to address where the employee fits in the level system.

We use other formats intended to promote continuous, open exchange for feedback and development. That is because we firmly believe that we need such dialog in order to grow as people and an organization, to feel secure in ourselves, and to collaborate with the greatest possible trust and ease.

The period following the discussions between employees and their people leads is a time for calibrating the level classifications and salaries. For this, we work from the small to the large: we start by comparing all level classifications in the individual job families and finish with an organization-wide calibration of all positions by our leadership (management) team. We take two days for this calibration with our leadership team and People Partners (how we refer to our HR business partners). At an offsite meeting, we discuss which adjustments may still be needed to the classifications in order to achieve the fairest possible overall structure within the job family groups. Following this, we still have to undertake a calibration across the job family groups, which we can only accomplish partially in the offsites. This is where our People Partnering team comes in, working in multiple cycles to further calibrate comparison groups with the various divisional managers and harmonize salary and level proposals.

Following approval from the Executive Board, the changes are implemented and the results communicated as a final step. For this, too, the people leads hold discussions with the employees that report directly to them and share the results, justifications, and findings from the process.

Enough about structure and process. I’d like to finish by taking a look at how the system has been working to date and share some general thoughts. In DigitalService, the extent to which our salary system impacts our organization, our people, and our culture is as important to us as cost-effectiveness. From my own professional experience, I am yet to come across the perfect salary system. Compensation is always a complex and often difficult topic. It affects every single person within an organization, typically in a way that is crucial to their well-being, and is therefore an absolutely fundamental hygiene factor as a minimum. Frequently, employees also view compensation as a key factor in their sense of being valued and their development.

At the same time, compensation is always a bit of a “messy” topic: Rather than being a simple matter of math, it depends on how we see ourselves and are viewed by others. These considerations should ideally be as objective and fair as possible, but can probably never be an accurate representation of reality. We end up with numbers that decide how much hits our bank account each month and titles that give others an outline of our professional career.

The feedback from the organization has been just as varied. Overall, however, we’ve been pleasantly surprised within the People team. Given the scale of the changes, for example, we had anticipated far more critical than positive feedback. And we had expected the values associated with the salary system in our anonymous employee survey to initially decline somewhat in the spring. To our surprise, the trend is actually pointing upwards: in addition to getting suggestions in the survey and discussions for how we might improve the system, we’ve also received lots of positive responses.

We never claimed we would build the perfect salary system – but we wanted it to be as fair, reliable, and comparable as possible. And we also consider this objective a perpetual work in progress. We are guided by our “Dare to learn” value in this. We are continuously collecting and analyzing feedback, holding retros, and (already since 2022) directly planning the next iteration after each salary cycle. In this way, we are constantly refining our salary system and hopefully making it that bit better each time thanks to the feedback and support of so many of our colleagues throughout the entire organization. Although we’d still welcome if the next iteration for 2025 were that bit smaller in scope!