Grade: Reinventing Payroll for Performance Pay

In an era where work is increasingly flexible, global, and outcome-driven, a new startup called Grade is challenging one of the oldest assumptions in business: that people should be paid for time rather than results. Founded in 2025 and part of Y Combinator’s Winter 2026 batch, Grade is building what it calls “payroll for performance,” a system designed to help companies compensate workers based on measurable output instead of hours logged.

Headquartered in San Francisco and led by co-founders Lotanna Ezeike and James Heaney, the two-person team is tackling a massive market. Payroll represents roughly $50 trillion in annual payments worldwide, yet most systems still operate on a time-based model developed during the industrial era. Grade argues that this approach no longer reflects how modern work actually happens—especially in fields like marketing, content creation, sales, and other performance-driven roles.

The startup’s premise is simple but radical: if companies already evaluate success based on results, why is compensation still tied to time? By aligning pay with performance, Grade aims to reshape incentives, reduce administrative complexity, and unlock new forms of scalable collaboration between businesses and contractors.

Why Is Traditional Payroll Misaligned With Modern Work?

Traditional payroll systems were built for predictable schedules, fixed roles, and long-term employment relationships. In factories and offices alike, time served as a convenient proxy for productivity. But in the digital economy, output often varies dramatically regardless of hours worked.

A marketer might produce a campaign in a single day that generates millions in revenue. A content creator could spend weeks on a video that fails to gain traction—or publish a clip in minutes that goes viral. Software engineers, designers, and consultants frequently deliver value that cannot be measured by time alone.

Companies that attempt to implement performance-based pay quickly encounter operational chaos. Compensation rules end up buried in spreadsheets. Managers must manually approve calculations. Payments are delayed while teams verify results. Errors become common, eroding trust between companies and workers.

Grade’s founders observed that many organizations want to reward outcomes but lack the infrastructure to do so reliably. Without a system designed for performance pay, businesses either revert to hourly models or struggle through inefficient manual processes.

How Did the Founders Discover the Problem Firsthand?

Grade’s origins lie in the founders’ previous ventures in the mobile app ecosystem. Before launching the startup, Lotanna Ezeike and James Heaney built, scaled, and exited multiple consumer applications, relying heavily on creators as their primary growth channel.

At first, they paid creators upfront flat fees to produce promotional content. The approach was risky: companies spent money before knowing whether a video would succeed. When they shifted to paying creators based on views and engagement, scaling became easier because incentives aligned with results. Successful creators earned more, while companies paid only for performance.

However, implementing this model exposed a glaring gap. There was no dedicated payroll infrastructure for performance compensation. The founders managed payments through spreadsheets, manual calculations, and ad-hoc processes—an approach that quickly became unsustainable as their creator network grew.

This experience revealed a broader opportunity. If a structured system existed to handle performance pay, it could transform not only creator marketing but also many other industries where outcomes matter more than hours.

What Exactly Does Grade Offer as a Solution?

Grade positions itself as a full payroll platform designed specifically for performance-based compensation. Instead of replacing traditional payroll entirely, it introduces a parallel system optimized for results-driven work.

The platform allows companies to pay workers in multiple ways, including flat fees, performance incentives, and bonuses—all within a single framework. It tracks performance metrics automatically, calculates payouts based on predefined rules, and generates payments in bulk. By integrating compliance features such as invoicing and tax documentation, Grade aims to remove the administrative burden that typically accompanies contractor payments.

One of the startup’s initial focus areas is the creator economy, where performance metrics like views, clicks, conversions, and sales are readily measurable. Companies can define compensation structures—such as paying per thousand views or per conversion—and Grade handles the rest.

The system effectively turns performance pay into something as streamlined as traditional payroll, enabling organizations to scale outcome-based compensation without additional overhead.

Why Start With Creators and Marketers?

The creator economy provides a natural proving ground for performance payroll. Brands increasingly rely on user-generated content (UGC) to reach audiences, but managing payments across hundreds or thousands of creators can be overwhelming.

Marketers often face a dilemma: paying upfront reduces risk for creators but increases risk for companies, while performance pay requires complex tracking and accounting. Grade attempts to eliminate this trade-off by making performance compensation operationally simple.

For creators, the model can be empowering. High performers earn more when their work succeeds, and payment transparency improves trust. For companies, the system reduces wasted spending on ineffective campaigns and encourages long-term partnerships with top talent.

By solving a pressing pain point in a rapidly growing sector, Grade hopes to establish a foundation before expanding into other performance-oriented fields.

What Traction Has the Startup Achieved So Far?

Despite its small team, Grade has reported early momentum. In a single recent month, companies used the platform to distribute more than $380,000 to creators, representing 120% month-over-month growth. These figures suggest strong demand for tools that simplify performance compensation.

Such traction is particularly notable given the startup’s stage. Early adoption indicates that businesses are actively seeking alternatives to traditional payroll models, especially as remote work and freelance collaboration continue to expand.

Investors and industry observers often look for evidence that a startup addresses a real operational bottleneck. Grade’s initial usage data points to a widespread need that existing payroll providers have largely overlooked.

Could Performance Payroll Expand Beyond the Creator Economy?

While creators serve as the starting point, the concept has far broader implications. Many sectors rely on measurable outcomes, from sales teams and affiliate marketers to customer success representatives and gig workers.

Imagine a future where freelance developers are paid based on feature adoption, consultants on measurable business impact, or support teams on customer satisfaction metrics. Performance payroll could enable entirely new compensation models aligned with value creation rather than time spent.

However, scaling into these areas will require solving complex challenges. Not all outputs are easily quantifiable, and performance metrics can sometimes encourage unintended behavior if poorly designed. Grade will need to ensure that its platform supports fair and transparent evaluation methods across diverse industries.

What Challenges Might Grade Face?

Transforming payroll is no small task. The industry is heavily regulated, deeply entrenched, and dominated by established providers. Convincing companies to adopt a new compensation model may require significant education and trust-building.

Additionally, performance pay introduces philosophical questions about fairness and stability. Workers often value predictable income, and tying earnings to outcomes could create volatility. Grade must demonstrate that its approach benefits both companies and workers, not just employers seeking efficiency.

Competition may also intensify as other startups recognize the opportunity. Large payroll providers could integrate performance features into their existing platforms, leveraging their scale and customer base.

Why Does the Concept Reflect a Broader Shift in Work?

Grade’s vision aligns with a larger transformation in how work is organized. The rise of remote collaboration, freelance platforms, and digital distribution has decoupled productivity from physical presence and fixed schedules.

Companies increasingly measure success through data—engagement metrics, revenue impact, user growth—yet compensation systems have lagged behind. Performance payroll represents an attempt to bring pay structures into alignment with modern performance analytics.

If successful, Grade could contribute to a new labor paradigm where incentives are tightly connected to results, potentially increasing efficiency and accountability across industries.

What Is the Long-Term Vision for Grade?

The founders envision a world where paying for performance is as routine as issuing a paycheck. Their goal is not merely to build a tool for creators but to redefine payroll itself as a dynamic system responsive to outcomes.

Such a shift could influence how companies hire, manage, and motivate talent. Organizations might experiment with more flexible roles, knowing compensation can scale with impact. Workers could gain greater autonomy, choosing projects where their contributions translate directly into earnings.

Ultimately, Grade’s success will depend on whether businesses and workers embrace the idea that results—not hours—should define value. If the startup can deliver reliable infrastructure for this new model, it may play a pivotal role in shaping the future of work.