6 ms·

Prorating salary based on your location always seemed unfair to me. According to it the value of the work I produce would change if I travel to another location

by nnd 10y ago

Prorating salary based on your location always seemed unfair to me. According to it the value of the work I produce would change if I travel to another location, which doesn't make any sense to me.

michaelmior 10y ago
That depends on how you measure value. If you're talking about the sheer number of dollars, then obviously this amount is changing. But money is not particularly useful on its own so I believe the idea is to normalize the effective value of money based on location.
x1798DE 10y ago
I think it basically comes down to practicality. If you don't adjust pay for location in a remote company, you either pay the market rate for the most expensive market or you price yourself out of that market. If you pay the rates of the most expensive market everywhere, you are essentially leaving money on the table, since your competitors can potentially hire two people in Nashville, TN for every 1 person you hire (though you obviously get your pick of the litter by paying above-market rates) - or they can afford a bigger advertising buy, or any of the other competitive advantages you get by saving money. Not only that, but if you're not a remote-only company and are actually based in one of the expensive locations, you're basically offering your in-person staff a huge bonus if they leave and become remote. Honestly, anything other than paying market salaries +/- some relatively small error term is probably not sustainable in the long run.
- imsofuture 10y ago
  And like every other time people say this, it just breezes by the fact your remote employees can get other remote jobs. The market is not you-the-one-company-in-the-world-that-hires-remotely vs their-local-market.
  - ghaff 10y ago
    Although adjusting pay based on location isn't exactly rare. And I suspect that a lot of companies with remote work are OK with missing out on some talent in Little Rock because they won't pay Silicon Valley rates to someone living there. (And/or they make exceptions for people they really want on a case by case basis.)
  - x1798DE 10y ago
    True, but the fact of the matter is that even if you had no idea where your employees lived, the location adjustment would likely come out in a competitive market because people from other low-cost areas can bid down the price, and you'll only drop out of the bidding when it reaches below your cost-of-living adjusted salary. The only reason the expensive markets can compete at all is because a lot of the top talent is concentrated there.
- jscheel 10y ago
  You obviously haven't seen the Nashville real estate market lately. All joking aside, how does that factor into making local-market-based salary decisions for a remote company? Isn't it hard to estimate payroll when you run the risk of someone moving to a different market or the market substantially changing?
- webmaven 10y ago
  > you either pay the market rate for the most expensive market or you price yourself out of that market. There is absolutely nothing wrong with pricing yourself out of the most expensive market, unless attracting the most in-demand employees (who are concentrated in the most expensive markets) is an existential matter for your company. This actually would let you pay generously compared to tier-2 markets and attract employees that want to leave the most expensive market or who would not even consider relocating to that market. It is worth noting that the requirements for successfully working remotely preclude most of the lowest cost-of-living locations. eg. it is hard to get decent broadband in the boonies of the desert southwest, or in rural Appalachia.
the_watcher 10y ago
Even if most companies don't explicitly adjust for location, nearly all do. There was a post on here a while back about traditionally NYC-based banks opening offices in Jacksonville, where they can pay people substantially lower salaries than New York.
brightsize 10y ago
I feel the same way. Location is a lifestyle choice, one among many, whereas the market value of a widget that I make has little relation to where I make it. Should an employee's salary be lower if she makes the lifestyle choice to buy clothes at thrift stores and drive a 20-yo car? Higher if every meal is at a restaurant? Edit:typo
- x0x0 10y ago
  I say this as someone who has worked remotely and liked it, but remote workers in positions that require frequent coordination and interaction with their teams are somewhat less productive and more expensive when you add in regular travel to the company. We have to offer some advantage to the company, and reduced salary requirements are often the advantage.
  - greenyoda 10y ago
    But not having to pay for a remote worker's office space (rent, electricity, free food and drinks, cleaning services, etc.) is already a pretty big advantage to the company. Also, remote workers can be more productive, since the average office is full of distractions. (I work with some very productive remote co-workers.)
    - x0x0 10y ago
      Office space is almost never an advantage. There is virtually never any marginal savings, ie they have room for you in the office, you just don't use it. And offices aren't that expensive relative to salary anyway. Even sf office rents are $70/ft2. I see your point if you go remote-only, but that really isn't what we're discussing. Price for a week in the office in sf: $500-ish flight, 4 hotel nights $1100, $90 per diem $450, taxis/ubers $30/day = $2k - $2.5k. Throw in a $500 team lunch or two. I agree remote workers can be more productive; I certainly was. However, I used most of those productivity gains to work fewer hours.
    - ghaff 10y ago
      Cost is tricky because the big costs are a step function. So long as there's an empty seat in the office, it really doesn't cost much to have someone sit there every day. Yeah, there are some free drinks but it's really in the noise and might well be dwarfed by some additional travel for the remotee to come into the office now and then. However, at some point, having a significant number of remote workers may mean you don't take out a lease on an additional floor or move to a bigger building or construct a new campus, which can be huge costs. The productivity debate has been done to death and I won't repeat it here :-)
RestlessMind 10y ago
Then you are essentially negating the value in hiring remote workers. If I have to pay everyone the same as my employees in the most expensive markets, then why would I hire anyone remote? I would just hire the local talents and reap the benefits of being collocated in the same time/space as well as not having to comply with multiple tax/law jurisdictions.
- hluska 10y ago
  If you're the most attractive employer in your market, your idea is completely valid. But, it gets significantly more complicated when you're trying to compete for top engineering talent with all the hottest startups. If your company is opening to hiring remote workers, you get access to people who don't want to (or can't) move to your market.
  - RestlessMind 10y ago
    I see your point. But in that case, why not just pay somewhat more, but not SF-level, salaries to the top talent in remote locations? Its a win-win for both - the employer and the talented folks. Anecdotally, I heard this is what Google and Uber did in Pittsburgh.
    - ghaff 10y ago
      That's often the case in practice. In locations with low cost of living and relatively limited opportunities for tech employment, remote work for a distributed team can pay quite well relative to local options.
Game_Ender 10y ago
It's like getting a bonus for living somewhere more desirable.
clay_to_n 10y ago
Companies don't pay employees relative to the value provided, they pay them what they can win in negotiation. One of the most important pieces in that negotiation is the employee's opportunity cost. "What would companies in your city pay you?" is a very relevant question, especially when most good tech jobs are not remote friendly. If we see remote take off in a big way, I expect "you live in a cheap city, we'll give you less money" to stop working as remote companies do away with it to attract better talent. That is, unless the best talent stays in the most expensive cities, and like to use that as an excuse for "fairly" getting more salary :)

by nnd 10y ago

Prorating salary based on your location always seemed unfair to me. According to it the value of the work I produce would change if I travel to another location, which doesn't make any sense to me.

michaelmior 10y ago

That depends on how you measure value. If you're talking about the sheer number of dollars, then obviously this amount is changing. But money is not particularly useful on its own so I believe the idea is to normalize the effective value of money based on location.

x1798DE 10y ago

I think it basically comes down to practicality. If you don't adjust pay for location in a remote company, you either pay the market rate for the most expensive market or you price yourself out of that market. If you pay the rates of the most expensive market everywhere, you are essentially leaving money on the table, since your competitors can potentially hire two people in Nashville, TN for every 1 person you hire (though you obviously get your pick of the litter by paying above-market rates) - or they can afford a bigger advertising buy, or any of the other competitive advantages you get by saving money. Not only that, but if you're not a remote-only company and are actually based in one of the expensive locations, you're basically offering your in-person staff a huge bonus if they leave and become remote. Honestly, anything other than paying market salaries +/- some relatively small error term is probably not sustainable in the long run.

imsofuture 10y ago
And like every other time people say this, it just breezes by the fact your remote employees can get other remote jobs. The market is not you-the-one-company-in-the-world-that-hires-remotely vs their-local-market.
- ghaff 10y ago
  Although adjusting pay based on location isn't exactly rare. And I suspect that a lot of companies with remote work are OK with missing out on some talent in Little Rock because they won't pay Silicon Valley rates to someone living there. (And/or they make exceptions for people they really want on a case by case basis.)
- x1798DE 10y ago
  True, but the fact of the matter is that even if you had no idea where your employees lived, the location adjustment would likely come out in a competitive market because people from other low-cost areas can bid down the price, and you'll only drop out of the bidding when it reaches below your cost-of-living adjusted salary. The only reason the expensive markets can compete at all is because a lot of the top talent is concentrated there.
jscheel 10y ago
You obviously haven't seen the Nashville real estate market lately. All joking aside, how does that factor into making local-market-based salary decisions for a remote company? Isn't it hard to estimate payroll when you run the risk of someone moving to a different market or the market substantially changing?
webmaven 10y ago
> you either pay the market rate for the most expensive market or you price yourself out of that market. There is absolutely nothing wrong with pricing yourself out of the most expensive market, unless attracting the most in-demand employees (who are concentrated in the most expensive markets) is an existential matter for your company. This actually would let you pay generously compared to tier-2 markets and attract employees that want to leave the most expensive market or who would not even consider relocating to that market. It is worth noting that the requirements for successfully working remotely preclude most of the lowest cost-of-living locations. eg. it is hard to get decent broadband in the boonies of the desert southwest, or in rural Appalachia.

the_watcher 10y ago

Even if most companies don't explicitly adjust for location, nearly all do. There was a post on here a while back about traditionally NYC-based banks opening offices in Jacksonville, where they can pay people substantially lower salaries than New York.

brightsize 10y ago

I feel the same way. Location is a lifestyle choice, one among many, whereas the market value of a widget that I make has little relation to where I make it. Should an employee's salary be lower if she makes the lifestyle choice to buy clothes at thrift stores and drive a 20-yo car? Higher if every meal is at a restaurant? Edit:typo

x0x0 10y ago
I say this as someone who has worked remotely and liked it, but remote workers in positions that require frequent coordination and interaction with their teams are somewhat less productive and more expensive when you add in regular travel to the company. We have to offer some advantage to the company, and reduced salary requirements are often the advantage.
- greenyoda 10y ago
  But not having to pay for a remote worker's office space (rent, electricity, free food and drinks, cleaning services, etc.) is already a pretty big advantage to the company. Also, remote workers can be more productive, since the average office is full of distractions. (I work with some very productive remote co-workers.)
  - x0x0 10y ago
    Office space is almost never an advantage. There is virtually never any marginal savings, ie they have room for you in the office, you just don't use it. And offices aren't that expensive relative to salary anyway. Even sf office rents are $70/ft2. I see your point if you go remote-only, but that really isn't what we're discussing. Price for a week in the office in sf: $500-ish flight, 4 hotel nights $1100, $90 per diem $450, taxis/ubers $30/day = $2k - $2.5k. Throw in a $500 team lunch or two. I agree remote workers can be more productive; I certainly was. However, I used most of those productivity gains to work fewer hours.
  - ghaff 10y ago
    Cost is tricky because the big costs are a step function. So long as there's an empty seat in the office, it really doesn't cost much to have someone sit there every day. Yeah, there are some free drinks but it's really in the noise and might well be dwarfed by some additional travel for the remotee to come into the office now and then. However, at some point, having a significant number of remote workers may mean you don't take out a lease on an additional floor or move to a bigger building or construct a new campus, which can be huge costs. The productivity debate has been done to death and I won't repeat it here :-)

RestlessMind 10y ago

Then you are essentially negating the value in hiring remote workers. If I have to pay everyone the same as my employees in the most expensive markets, then why would I hire anyone remote? I would just hire the local talents and reap the benefits of being collocated in the same time/space as well as not having to comply with multiple tax/law jurisdictions.

hluska 10y ago
If you're the most attractive employer in your market, your idea is completely valid. But, it gets significantly more complicated when you're trying to compete for top engineering talent with all the hottest startups. If your company is opening to hiring remote workers, you get access to people who don't want to (or can't) move to your market.
- RestlessMind 10y ago
  I see your point. But in that case, why not just pay somewhat more, but not SF-level, salaries to the top talent in remote locations? Its a win-win for both - the employer and the talented folks. Anecdotally, I heard this is what Google and Uber did in Pittsburgh.
  - ghaff 10y ago
    That's often the case in practice. In locations with low cost of living and relatively limited opportunities for tech employment, remote work for a distributed team can pay quite well relative to local options.

Game_Ender 10y ago

It's like getting a bonus for living somewhere more desirable.

clay_to_n 10y ago

Companies don't pay employees relative to the value provided, they pay them what they can win in negotiation. One of the most important pieces in that negotiation is the employee's opportunity cost. "What would companies in your city pay you?" is a very relevant question, especially when most good tech jobs are not remote friendly. If we see remote take off in a big way, I expect "you live in a cheap city, we'll give you less money" to stop working as remote companies do away with it to attract better talent. That is, unless the best talent stays in the most expensive cities, and like to use that as an excuse for "fairly" getting more salary :)