How much should you pay remote employees?

Hiring
how-much-should-you-pay-remote-employees

Setting salaries for remote employees can be hard. You could pay them as much as in your HQ or (if no HQ is established), a global default. But then, people in cheap countries have an advantage over people in expensive countries. If you're paying local market standards, a senior employee in a cheap country, may be earning just as much as a junior in an expensive country, which can lead to odd dynamics. What can you do?

The case for a global / HQ standard

In one of our surveys, a collective 32% of remote employees/founders said that their company is paying a global standard, either focused on a HQ location, or just a globally fair value that is equal for everyone.

Doing so can be a good idea–it gives your employees the possbility to work from anywhere, and doesn't involve any of the pain of re-calculating salaries on a monthly basis. There are no odd dynamics forming because of unfair salaries–everyone gets the same level of salary, only dependent on role and seniority level.

This may be attractive for companies that hire in a local or semi-local market (e.g. US-only), as it can lead to a competitive advantage when hiring people from cheaper areas. On the other hand, it may not be as effective if the global standard is based on a cheap area.

The case for paying local salaries

The most popular option, with 39% of the votes, is to simply pay the local salary. This makes sense–you're paying people what they'd usually earn in their home country, with the added benefit of being remote and their other benefits.

This can make payroll a little difficult, especially if people are moving around frequently, but creates a fair environment for everyone.

Just one caveat: Employers who do this, need to be informed about local salary levels of somebody they want to hire. If not, they're running into danger of overpaying good negotiators and underpaying humble people / soft negotiators.

The case for a location modifier

The big downside of local salaries? You're not creating a public, competitive advantage for your company (at least not in terms of compensation). A strategy that a lof of companies apply is to set a base salary for roles and seniority levels, and multiply that with a location modifier, based on the persons home country.

A popular example of this is Buffer, with their Transparent Salary Calculator. Based on the cost of living (in this case low, average and high), they apply a multiplier to the base salary. Cost of living in this case may be either location, living arrangements etc., but it's the same principle.

The big advantage of this: You can implement this rather publicly, giving a good signal to candidates. You are also somewhat resistant to brilliant negotiatiors, and can help a bit with bridging the pay gap.

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