TLRD: There is no perfect set for small teams, but here is a try.

* $ Compensation Paying 5% of the hours for the on-call time, being paid or taking time off, with time off that can be accumulated to be used for longer periods. 24 hours * 5% * 7 days = 8.4 hours.

* On-call shifts frequency and time to react requirements With two people, one can be on call every other week and take two days off monthly to compensate. For example, one could take every other Friday or one Friday and one Monday off. 52 weeks / 2 (every other week) = 26 weeks on call an year. Time off is fine for on-call Time but not for time in action; Time during outages is much more stressful than normal working hours. Offering time off in exchange for working in outages is not fair. Therefore, for those cases, I think paying for the normal working hours will be the right thing to do, of course, more time off is fine too. If the team grows to four people, one can be on call once a month and have a day off a month, too. The cost stays the same, but it delivers an easier-to-handle situation for the team

What do you guys think?

Oncall for small engineering teams is not easy. With less than 6 people on a rotation, I think one just has to accept some lower guaranteed uptime, by having hours when there is no oncall coverage, at the time when the system sees the least customer usage.

To make oncall scheduling work better for everybody, once you have at least 4 oncall engineers for a rotation, check out https://oncallscheduler.com. it doesn't solve Oncall compensation, but it makes planning for vacations, fairness about who works Oncall on holidays, and such, work well.