Compensation Formula examples (not a thorough explanation, but a way to start your thinking if you already took my Part 3 Workshop on this :)
With hourly workers, this was a formula I’ve used:
Level: so junior folks with low levels of project responsibility were level 1, project managers level 2 and managers level 3. These were flat amounts like $20/hr, $22, etc.
Cost of living: a 5% increase per year anniversary
Professional Development budget: also a flat amount based on level
Flat vacation days by level, and they would gain a full vacation day on their yearly anniversaries. This is one place where people negotiated sometimes, and we had a $ amount that each vacation day cost (based on the rate we’d pay to have someone cover them for the day) but there was a minimum number of vacation days, so that someone didn't "trade" all of their vacation days for money (which is bad for mental health and stress :).
Profit sharing based on # of hours: Every six months 10% of profit was divided up and distributed by # of hours worked. So a full time employee would get a proportionately higher $ amount than a part time one.
Thus, the only way someone would increase their pay is by being promoted up a level, at their anniversary, or by working more hours so they got more profit sharing money. It was understood that we did not pay for performance, because we expected everyone to perform at their best, and if they weren't, this was a signal we needed to troubleshoot things, not a reason to pay someone less.
In salaried jobs, the final formula I’ve used is much the same but without profit sharing (because I was usually a tiny dept in a huge company):
Level: These were flat salary amounts like $90k, $94k, etc, based on industry standards and the company's philosophy (such as to pay at the 90th percentile).
Cost of living: a 4% increase per year anniversary (or more, depending on the city)
Prof Dev budget: also a flat amount based on level
Flat vacation days by level (and negotiable as mentioned above)
Stock options based on level as well (this was decided by HR usually, but I would advocate for all folks to get the same based on their level, no other factors, and to receive more stock options based on years with company, not any other factors).
Note: I originally also had a flat amount I would add for relevant cross-disciplinary experience (including leadership or management experience) and education level but I got rid of these. Relevant cross-disciplinary experience ended up being hiring criteria instead (so it would increase the chances someone would get hired) and educational level I flat out threw out, period, because I realized it was not relevant to their contribution nor potential, and only further entrenched the idea that college debt should be a requirement for employment, without any proof it creates superior work performance.
Let me know if you'd like more info on any of this :)