> startups should implement levels once you hire 2 engineers

I think OP is cracking a joke about a $600k company having six levels of hierarchy.

Here's my experience:

- When you hire, you implicitly put people in a level which dictates what you're willing to pay them.

- People will always feel underpaid, and demand more $$. Without a system, you give them out arbitrarily.

- You now have enough people to add structure to the process. Do you base people's levels on their current salary? On their skill?

- What happens when people notice the discrepancy in pay or skill among a level? Especially if it's skewed by race, gender, etc?

I think you should have as many levels as pay-bands in your startup, which might be 6.

Nobody wants to be a level 1. So the real level 1 was probably L4.

L1 is junior data center tech and junior helpdesk.

There weren't necessarily 6 levels of hierarchy (below the L6 staff). It's almost certainly for hiring purposes - to tell hires that their role is similar to that of a Staff Software Engineer at Google (i.e., L6). Like many things in tech, other companies tend to base their leveling system after Google, and you can literally put companies side by side on https://levels.fyi to compare per-level compensation at different companies.