EMMA Compensation Policy Through the Years

The EMMA Technology Cooperative is a worker-owned coop doing contract creative-technologist work. To over-simplify it, we are programmers who work on interesting things! We work on a range of different projects but they tend to circle around installations, performance, games & interaction. We’re in our fourth year of operation and are going strong!

One of the most liberating but challenging aspects of starting a coop like EMMA is figuring out how we want to be paid. As worker-owners we can dictate exactly how members are compensated for their work (within legal bounds of course). We were aware of relatively few tech coops doing work similar to ours so determining our compensation policy started as a blue-sky exercise when we were first discussing the potential of starting a coop.

Since we incorporated, we have gone through three iterations of this policy, but the guiding principles and most of the mechanics of it have stayed the same.

In this post we’ll cover the goals that we came in with as well as several iterations of the policy.

Goals

One of the initial reasons for EMMA to exist at all was to even out the jagged nature of cash-flow in freelance. Because we are nerds, we referred to this as a financial capacitor. A capacitor is an electronics component that stores up energy and discharges it at a predictable rate. They are often used to smooth out noisy signals. We wanted to apply that principle to the boom and bust periods inherent in freelance work that can make it difficult to plan life. We wanted to smooth out this flow into a more predictable pattern of regular payouts. We also wanted to rely on each other to spread out the risks of dry spells. Instead of one member going broke during a bad year, they can be buoyed by members who are doing well, and then provide that same support when they are the ones with high-paying gigs.

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The financial capacitor

From the outset we wanted a policy that would feel equitable but knew that we did not necessarily want a flat pay structure. Different members of the coop have different financial obligations in life and different desires for how much they wanted to work. For this reason we wanted a structure where individual members could scale their own work up or down without requiring that all other members do the same.

People will sometimes doubt equitable arrangements like these, assuming that they are easy to exploit. After three years we have certainly hit some snags, but a lazy member “taking advantage” of our setup has not been one of them.

To summarize, our goals were:

Hypothetical Policy

When EMMA was just an idea and not yet an incorporated business, we discussed a policy that looked like this:

We called this “Normal Mode.”

The idea was that members would get the bulk of the money they brought in with some going to EMMA for administrative costs as well as building up a reserve to provide members who were not working at that time, establishing a minimum salary of $5k per month ($60k/year).

This policy was never put into practice. We started EMMA with no investments and no member buy-ins, so when we first began there was no money in the bank account to pay salaries. For this reason, we opted to start with members receiving 70% of the income from their contracts but offered no safety-net salary if they were not working. We called this “startup mode”. A member would exit startup mode and enter Normal Mode once they had brought in a $70k startup cost.

This was buoyed by an extremely lucrative first year. It remains our best year by a wide margin and we would likely have had a much more difficult time getting out of startup mode without that.

Issues with this Policy

The time we spent in Startup Mode was useful not only for filling our coffers, but also to let us consider the ramifications of this policy.

Providing $5k/month to members unable to work was doing what we wanted on a conceptual level, but it was clunky in practice. Determining “working or not” during a given period can be surprisingly hard as contractors if we are only considering when a payment lands. Is a member not working for two months if they are on a three month contract that only pays at the end?

Another example where this policy gets weird: if Member A earns $100k in a single month and does not work for 4, they would be entitled to the $5k in those 4 months. A member who earns $20k per month during the same period has brought in the same amount of money but would not be entitled to the $5k because they were working the whole time, giving Member A $20k more arbitrarily.

For this reason, before any member reached Normal Mode we decided to redo the system to be a flat base salary that all members get no matter what in addition to a percentage of their contracts. This made our bookkeeping and payroll math easier because it removed the question of when a member was working or not. Putting more emphasis on the base salary (members will always receive a salary as opposed to it only kicking in when they did not have work) also meant that we were more actively supporting each other which was in line with our values.

This brings us to

Compensation Policy V1 – October 2022

During Normal Mode (called Default Mode in the policy) members are compensated in two ways:

Although we have updated it a few times, this policy essentially describes the strategy we are using to this day. The mechanism is the same, but the details and the numbers have changed.

The coop is promising to pay members base-salary even if they are not bringing in money. This obviously means that if members are not clearing enough contracts EMMA will start to lose money. This is acceptable for a while. We waited until we had money in the bank before entering Normal Mode specifically to ensure that we could do this. We generally want to be charging the capacitor, but there is no reason to have it if we never expect it to discharge.

The other important thing in this policy is the creation of a Salary-Only Mode. If our available funds dipped below about 3 months of salary for all members, we could elect to stop paying ourselves the 50% commission until cash-flow stabilized. At that point we would call a meeting and come to a decision about when to return to Normal Mode. If none of us were working for too long, the coop would still collapse in Salary-Only Mode, but in theory it would cushion the fall.

About halfway through 2023 we had to test our theory and enter Salary-Only Mode. It was a rough year for tech work in general and we got hit with an unexpected tax burden from the previous year. Luckily, we had stored up a bit of a nest egg in out first year.

Compensation Policy V2 – February 2024

The main updates from V1 was the creation of a third mode: Survival Mode

With this policy we essentially setup operational tiers based on the coop’s financial health:

We were not excited about it, but we flipped the switch and entered Salary-Only Mode in June 2023. As intended, this cushioned us for a while, but work was still pretty dry and we eventually had to enter Survival Mode near the end of the year when we did not stabilize.

It is hard to imagine working like this for a normal company, but EMMA is something we own collectively and built together. We had a strong incentive to keep it afloat and a belief that it would bounce back and pay us back — which it did! We were able to re-enter Salary-Only Mode in February of 2024 and have since resumed Normal Mode

As painful as it was to briefly enter Survival Mode, it was heartening to see that we were able to store enough away in 2022 to ride out almost all of 2023. Coops have a higher rate of survival over traditional businesses in hard times and after this experience that statistic is not surprising. This is an organization that we all have a deeply personal stake in. Furthermore, by not chasing infinite growth or immediate profits, we were able to store a lot of our profits from the previous year to get us through a lean time. If we had paid all of the 2022 excess out in bonuses or to investors, EMMA would have almost certainly closed its doors in 2023.

Compensation Policy V3 – January 2025

The biggest change in this version is a major adjustment to the revenue split to accommodate the changing economy. We arrived at this number by looking at the average revenue across our members for 2024. This means that in order to break even each member needs to invoice an average of $6,500 per month.

The three modes still do what they did previously, but we changed our thinking on how to approach member work. We are pooling our resources to make sure that everybody gets paid fairly so we decided that inconsistent or delayed client payments should represent an issue for the coop and not just the member working with them.

To this end, we have decided to have the coop calculate what a member is owed when that member invoices rather than when that invoice clears. Operating this way obviously requires a cushion in the bank account to pay members potentially before the money for a gig comes in, but we were very conservative about when we would leave Salary-Only Mode so we’ve given ourselves that wiggle room.

We also modified our policy so that exchange costs or fees for services like PayPal are absorbed by the org and not the member who’s client pays this way.

The ideology behind these changes is that we are operating as a collective. We formed EMMA partially to ensure a smoother flow of money than any of us would have operating as individual freelancers. We are expanding that slightly and applying it to some of the administrative headaches that come with our line of work.

Compensation Policy V4 – April 2025

A very minor update on V3. specifically We now exclude fixed project costs from the calculation of member revenue split. That is if the client paid $1000 but we spend $100 on supplies then the Member would receive 30% of $900.

The Future

As we grow and continue working, our compensation policy will almost certainly continue to change and be updated. The most likely aspect being the exact amounts of our EMMA/member split. The industry has changed very dramatically and we only returned to our Normal Mode in January of 2025. This number feels correct to our intuition but but there’s no substitute for real data.

Our core goals have remained the same, but the way we express those goals through mechanical actions have been revised as we find shortcomings or opportunities.

We are planning to write more about how we structure EMMA so stay tuned. And if you are in the need for talented creative technologists, please be in touch!

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