4 ms·

You need to use the fully loaded cost of an employee when estimating opex savings, which includes health care costs, retirement funding, etc. Rule of thumb is

You need to use the fully loaded cost of an employee when estimating opex savings, which includes health care costs, retirement funding, etc. Rule of thumb is that fully loaded cost for US employees is approximately 2x yearly salary (although people who've actually run a company can correct my potentially stale or incorrect understanding).

CydeWeys 4y ago
2X is my understanding as well. Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Some other big employer costs related to employees you forgot include employment taxes, hardware/software expenses and licenses, and office space and related perks. Also I suspect that $150k as the mean TC of those being let go is low. Spotify might be saving up to $500k all-in per employee let go.
- WastingMyTime89 4y ago
  > Also I suspect that $150k as the mean TC of those being let go is low. Probably not low. It's an enormous salary for a developer outside of the Valley and Spotify has plenty of employees which are not in the USA.
  - phamilton4 4y ago
    TBH I think the average Sr. Developer is ~130k in the US. Of course this varies so much depending on the role and company.
    - bumby 4y ago
      The average software developer (not sure that it's pertinent to constrain it to "senior" devs) is $120k in the US. In San Francisco, the median is $161k [1] [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00
    - CydeWeys 4y ago
      Spotify pays significantly above the average, though. Not as high as the top-tier FANGs, but still high.
  - CydeWeys 4y ago
    Levels.fyi supports me at least: https://www.levels.fyi/companies/spotify/salaries https://www.levels.fyi/companies/spotify/salaries
    - phamilton4 4y ago
      I commented above, whether the salary is 150k, 250k, 500k... the impact doesn't change 0.1%, 0.2%, 0.33%. Not sure it really matters. Again I'm not defending lazy employees or saying employers are bad for doing this. I feel there is a hidden cost of layoffs from my own experience of being at a company doing round after round of layoffs.
      - CydeWeys 4y ago
        Agreed it doesn't matter much in this case, but it is a common misconception that employees don't cost nearly as much to employers as they actually do, so I wanted to step in and correct that.
  - pc86 4y ago
    I applied for an "entry-level" EM role with Spotify in 2021 and the base was 260-275, plus a generous bonus target and stock. TC would have been pushing $400k, for a fully remote USCAN-based role. I say that strictly as a calibration point - it's unlikely engineers are pushing half a million (maybe at the Staff+ level) but there's also not likely any engineers before $150k TC. I'd expect even mid-levels to be in the $200-225 ballpark but could be wrong. I think $150k median is probably on the lower side of correct, but not enough to meaningfully impact any of the numbers anyone is discussing here. It's close enough.
    - lotsofpulp 4y ago
      The stock price has more then halved since 2021, and based on their business model and history of profit, as an employee, I would not value the stock portion of compensation much. As far as I can tell, Apple/Google/Amazon will always provide the ceiling price for how much Spotify can charge its customers, hence capping revenue, and the 3 record labels will always extract just enough to keep Spotify operating. In a similar situation to Netflix, Spotify’s play would have to be to create their own content to lower their costs, but that is much easier said than done.
      - sarchertech 4y ago
        That’s what they attempted with podcasts.
- hello_moto 4y ago
  > Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Hardware/Software expenses, office spaces, health insurance are fixed cost. $150k employee vs 200k employee will have the same amount of fixed cost (assuming both are in the same function).
phamilton4 4y ago
Understand 2x, I was also looking across all the jobs at spotify. There are some that go as low as 70k salary, a majority seem to be 170k+. It was just for ease of calculation. even if we take 500k that's still 0.033% of revenue -_-
- thehappypm 4y ago
  Again, revenue is not really all that relevant for this kind of business. They’re a low margin business because they must pay huge bills to record labels. R&D doesn’t cut record label costs.
  - pc86 4y ago
    I'm having trouble understanding why 'revenue is not really all that relevant.' If you're burning $40M a year, and you press a button to save $90M a year, yes your label costs are the same but how are you not now at +$50M a year?
    - thehappypm 4y ago
      Payroll is a cost, so it’s more relevant to think about a layoff in terms of its impact to profit (your example) than revenue. Lots of companies sell at a tight margin, so tiny cost savings as a percent of revenue can be a big difference in profit.
- DeRock 4y ago
  You aren't using percentages correctly, I think you mean 3.3% (and 1% in your original comment). Also, as pointed elsewhere, revenue is not really relevant, majority of that cash flows directly to artists/labels.

CydeWeys 4y ago

2X is my understanding as well. Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Some other big employer costs related to employees you forgot include employment taxes, hardware/software expenses and licenses, and office space and related perks. Also I suspect that $150k as the mean TC of those being let go is low. Spotify might be saving up to $500k all-in per employee let go.

WastingMyTime89 4y ago
> Also I suspect that $150k as the mean TC of those being let go is low. Probably not low. It's an enormous salary for a developer outside of the Valley and Spotify has plenty of employees which are not in the USA.
- phamilton4 4y ago
  TBH I think the average Sr. Developer is ~130k in the US. Of course this varies so much depending on the role and company.
  - bumby 4y ago
    The average software developer (not sure that it's pertinent to constrain it to "senior" devs) is $120k in the US. In San Francisco, the median is $161k [1] [1] https://www.onetonline.org/link/summary/15-1252.00 https://www.onetonline.org/link/summary/15-1252.00
  - CydeWeys 4y ago
    Spotify pays significantly above the average, though. Not as high as the top-tier FANGs, but still high.
- CydeWeys 4y ago
  Levels.fyi supports me at least: https://www.levels.fyi/companies/spotify/salaries https://www.levels.fyi/companies/spotify/salaries
  - phamilton4 4y ago
    I commented above, whether the salary is 150k, 250k, 500k... the impact doesn't change 0.1%, 0.2%, 0.33%. Not sure it really matters. Again I'm not defending lazy employees or saying employers are bad for doing this. I feel there is a hidden cost of layoffs from my own experience of being at a company doing round after round of layoffs.
    - CydeWeys 4y ago
      Agreed it doesn't matter much in this case, but it is a common misconception that employees don't cost nearly as much to employers as they actually do, so I wanted to step in and correct that.
- pc86 4y ago
  I applied for an "entry-level" EM role with Spotify in 2021 and the base was 260-275, plus a generous bonus target and stock. TC would have been pushing $400k, for a fully remote USCAN-based role. I say that strictly as a calibration point - it's unlikely engineers are pushing half a million (maybe at the Staff+ level) but there's also not likely any engineers before $150k TC. I'd expect even mid-levels to be in the $200-225 ballpark but could be wrong. I think $150k median is probably on the lower side of correct, but not enough to meaningfully impact any of the numbers anyone is discussing here. It's close enough.
  - lotsofpulp 4y ago
    The stock price has more then halved since 2021, and based on their business model and history of profit, as an employee, I would not value the stock portion of compensation much. As far as I can tell, Apple/Google/Amazon will always provide the ceiling price for how much Spotify can charge its customers, hence capping revenue, and the 3 record labels will always extract just enough to keep Spotify operating. In a similar situation to Netflix, Spotify’s play would have to be to create their own content to lower their costs, but that is much easier said than done.
    - sarchertech 4y ago
      That’s what they attempted with podcasts.
hello_moto 4y ago
> Whatever you think an employee costs based on TC, double it to get the rough cost to the employer. Hardware/Software expenses, office spaces, health insurance are fixed cost. $150k employee vs 200k employee will have the same amount of fixed cost (assuming both are in the same function).

phamilton4 4y ago

Understand 2x, I was also looking across all the jobs at spotify. There are some that go as low as 70k salary, a majority seem to be 170k+. It was just for ease of calculation. even if we take 500k that's still 0.033% of revenue -_-

thehappypm 4y ago
Again, revenue is not really all that relevant for this kind of business. They’re a low margin business because they must pay huge bills to record labels. R&D doesn’t cut record label costs.
- pc86 4y ago
  I'm having trouble understanding why 'revenue is not really all that relevant.' If you're burning $40M a year, and you press a button to save $90M a year, yes your label costs are the same but how are you not now at +$50M a year?
  - thehappypm 4y ago
    Payroll is a cost, so it’s more relevant to think about a layoff in terms of its impact to profit (your example) than revenue. Lots of companies sell at a tight margin, so tiny cost savings as a percent of revenue can be a big difference in profit.
DeRock 4y ago
You aren't using percentages correctly, I think you mean 3.3% (and 1% in your original comment). Also, as pointed elsewhere, revenue is not really relevant, majority of that cash flows directly to artists/labels.