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> For the company you are able to hire outside of competitive metro areas and you save money by that https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/

> For the company you are able to hire outside of competitive metro areas and you save money by that https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/ https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/ and on office costs. So, someone can change their mailing address to that of a friend living in a high income area and have a better pay? What about when moving, are employees' pays docked too? For example, I come from a low-income area and most of my family is poor. By working in tech., I'm able to provide a safety net for parents and close friends. My home address is in my hometown but I would spend time at my significant other's apartment during the week to be close to work. Why should my pay be less than that of a coworker that does the same exact same job as me simply because this is a remote company? What about someone that does a worst job or is less experienced? Unless that means that the only employees hired in high-pays area are senior and other employees are all junior or mid level and seen as cheaper labor, I don't see the reason... except as sour way to save company's operating cost. Does that also mean that you believe someone in this situation should never have the resources to move to a high income area? Someone from a high-income area could live in a shared rental, save a big cushion of money and then move to a lower income area for less stress while knowing they will be able to retire. Someone from a low paying area wouldn't be able to do that. Compensation should be based on output performance and the difficulties and complexity of the work being done.

enraged_camel 7y ago
>>Compensation should be based on output performance and the difficulties and complexity of the work being done. That should be a factor for sure, but not the only factor. The price of something is not based on simply how valuable that thing is in and of itself. It is also based on the price of alternatives. This should be self-evident everywhere you look.
lotsofpulp 7y ago
>Compensation should be based on output performance and the difficulties and complexity of the work being done. The price of something (compensation) will trend towards however much the opportunity cost is (the second best option). If it doesn't, then (assuming no giant moat) another business will spend less on compensation, be able to sell their product/service for less, and end up with your customers.
sytse 7y ago
1. "change their mailing address to that of a friend living in a high income area and have a better pay" => that would be fraudulent 2. "What about when moving, are employees' pays docked too?" => Please see https://about.gitlab.com/handbook/people-operations/global-compensation/#relocating https://about.gitlab.com/handbook/people-operations/global-c... 3. "Compensation should be based on output performance and the difficulties and complexity of the work being done." => Opinions differ about this across companies and some of them like Basecamp use your method. For our take Please see the section "Standard pay eats away at production and personnel" in https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/ https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/
- coryfklein 7y ago
  Re: relocation The justification in the link essentially sounds to me like, "If you worked in the office at another company and moved to a lower cost of living city you'd also get your pay docked. We do the same because we're following the precedent and because you don't have other options." This fails to mention the flip side - we developers do have other options. There are certainly SF companies I'm aware of that will be happy to outbid Gitlab's desire to pay a software engineer $75k because they moved to rural Nebraska.
  - sytse 7y ago
    I agree that more and more companies will start hiring remotely and the market will get more competitive. As I said in the blog post: "I hope the distance between those stances becomes smaller as more companies offer remote work opportunities."
    - txcwpalpha 7y ago
      In other words: "we pay less because we feel that's what we can get away with. if we face more competition in the future, we might have to pay more, but right now we don't see that competition". Interesting, but admittedly honest perspective from a CEO.
    - 7y ago
granshaw 7y ago
Same reason why the exact same drug or tech product is sold cheaper in developing markets than in the US - because it maximizes profitability. Since everyone is paying according to geographic location, companies who don't will be at a cost disadvantage to their competitors - now they can play arbitrage, and pay just slightly more than market rate in hope of attracting the best Engineers, and some do, but mostly businesses are conservative and just want to pay market-rate for their various functions, and save their "innovation energy" for their main product. IMO asking this question is akin to asking something like "why aren't developers paid as much as doctors?", or, "why do realtors take a 3% cut instead of 2 or 4?"
- Raphmedia 7y ago
  The upside of hiring remote workers should be to allow you to get the best workers no matters where your company is located. Good employees (those that would be able to get a job in Silicon Valley) will bring profit to your company no matter where they are located. To pay a worker less because they chose to, say, move back to their hometown to take care of their relatives puts a sour taste in my mouth. Reducing people's pay because they moved to another location makes no sense to me. Gitlab's pricing is the same no matter what city the client is located. If the employee is able to provide the resources needed charge this price to the customers then the employees should get the same pay as any other employee. Imagine busting your chops to close a complicated project on time only to learn that the junior two postal codes over is paid more than you to do simple tasks. I would change employer. In fact, have been in such a situation before. The home office was outside of the city and they later opened an office there. The new city hires were paid more than everyone else at the company. The result was that the company lost all their strong players. I am now working even further from the city for that same salary they gave the city employees.
  - granshaw 7y ago
    A lot of what you say is not false, and it can be frustrating for employees (though it goes both ways - imagine a company headquartered in, say, Chicago, and you lived in SF or NYC - you'd be better off than if you were getting Chicago market-rate) Hiring full-time remotes in a major way is still a relatively new practice, so we'll see how it all shakes out. It may very well be that actual pay-by-value takes root, but I wouldn't hold my breath. Pricing and markets are curious things, and there is huge inertia.
esoterica 7y ago
Compensation is based on supply and demand, not some arbitrary rules you made up. In a tech hub there are a lot of high paying employers competing for workers and employers have to offer higher salaries to lure candidates away from other companies. In a cheap area all the local companies pay garbage so you don’t have to pay as much to beat all the other offers.
- jaggederest 7y ago
  Except by definition if I'm working remotely the hiring pool is every remote company, plus the local companies. That means the floor on salary is the greater of remote or local. So in cheap areas you have to pay globally competitive, and in expensive areas you have to beat the locals. Thus, it never makes sense to reduce pay for someone moving. Your goal should be to keep salaries above that floor, not pay as little as possible.
  - esoterica 7y ago
    The remote companies tend not to pay as well as some of the SF and valley firms. It costs less to beat the remote firms than to beat the local competition in the Bay Area.
    - jaggederest 7y ago
      Yes, but if you're living in e.g. Laredo TX, that floor is a TON higher than the "adjusted cost of living difference" between SF and Laredo. It's much closer to a 20-30% discount on SF than the 70% difference a raw cost of living comparison would conclude. ( https://www.bestplaces.net/cost-of-living/san-francisco-ca/laredo-tx/200000 https://www.bestplaces.net/cost-of-living/san-francisco-ca/l... )
ThrustVectoring 7y ago
>Compensation should be based on output performance and the difficulties and complexity of the work being done. The output monitoring and quantification necessary for this is practically impossible - the output of programmers is deeply creative and subjective work. At best you can rank-order programmer output and award promotions. This all leads to getting paid efficiency wages and incentives under tournament theory. In short, a good chunk of your pay is a reward above unemployment or your next-best option, so that you are incentivized to work hard and your competitors are incentivized to compete for your slot. It's as economically efficient as piece work if employees aren't risk-averse, so mostly which system to use is based off of whether it's easier to monitor and quantify output versus rank-order and pay to overcome employee risk aversion. https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Tournament_theory https://en.wikipedia.org/wiki/Tournament_theory >Why should my pay be less than that of a coworker that does the same exact same job as me simply because this is a remote company? For better or worse, software developer pay is negotiated. Negotiation results are driven by BATNA - best alternative to negotiated agreement. For coworkers that are approximately as valuable to the company, they should get offered approximately the same efficiency wage above their BATNA. Workers in areas with fewer options available to them necessarily have a worse BATNA, so it remains fair that they get paid less. Furthermore, although your entire salary gets paid by your current employer, they're only really enriching you by the difference between the pay and your BATNA. It's arguably less fair for remote companies to excessively enrich workers outside of competitive metro areas.

enraged_camel 7y ago

>>Compensation should be based on output performance and the difficulties and complexity of the work being done. That should be a factor for sure, but not the only factor. The price of something is not based on simply how valuable that thing is in and of itself. It is also based on the price of alternatives. This should be self-evident everywhere you look.

lotsofpulp 7y ago

>Compensation should be based on output performance and the difficulties and complexity of the work being done. The price of something (compensation) will trend towards however much the opportunity cost is (the second best option). If it doesn't, then (assuming no giant moat) another business will spend less on compensation, be able to sell their product/service for less, and end up with your customers.

sytse 7y ago

1. "change their mailing address to that of a friend living in a high income area and have a better pay" => that would be fraudulent 2. "What about when moving, are employees' pays docked too?" => Please see https://about.gitlab.com/handbook/people-operations/global-compensation/#relocating https://about.gitlab.com/handbook/people-operations/global-c... 3. "Compensation should be based on output performance and the difficulties and complexity of the work being done." => Opinions differ about this across companies and some of them like Basecamp use your method. For our take Please see the section "Standard pay eats away at production and personnel" in https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/ https://about.gitlab.com/2019/02/28/why-we-pay-local-rates/

coryfklein 7y ago
Re: relocation The justification in the link essentially sounds to me like, "If you worked in the office at another company and moved to a lower cost of living city you'd also get your pay docked. We do the same because we're following the precedent and because you don't have other options." This fails to mention the flip side - we developers do have other options. There are certainly SF companies I'm aware of that will be happy to outbid Gitlab's desire to pay a software engineer $75k because they moved to rural Nebraska.
- sytse 7y ago
  I agree that more and more companies will start hiring remotely and the market will get more competitive. As I said in the blog post: "I hope the distance between those stances becomes smaller as more companies offer remote work opportunities."
  - txcwpalpha 7y ago
    In other words: "we pay less because we feel that's what we can get away with. if we face more competition in the future, we might have to pay more, but right now we don't see that competition". Interesting, but admittedly honest perspective from a CEO.
  - 7y ago

granshaw 7y ago

Same reason why the exact same drug or tech product is sold cheaper in developing markets than in the US - because it maximizes profitability. Since everyone is paying according to geographic location, companies who don't will be at a cost disadvantage to their competitors - now they can play arbitrage, and pay just slightly more than market rate in hope of attracting the best Engineers, and some do, but mostly businesses are conservative and just want to pay market-rate for their various functions, and save their "innovation energy" for their main product. IMO asking this question is akin to asking something like "why aren't developers paid as much as doctors?", or, "why do realtors take a 3% cut instead of 2 or 4?"

Raphmedia 7y ago
The upside of hiring remote workers should be to allow you to get the best workers no matters where your company is located. Good employees (those that would be able to get a job in Silicon Valley) will bring profit to your company no matter where they are located. To pay a worker less because they chose to, say, move back to their hometown to take care of their relatives puts a sour taste in my mouth. Reducing people's pay because they moved to another location makes no sense to me. Gitlab's pricing is the same no matter what city the client is located. If the employee is able to provide the resources needed charge this price to the customers then the employees should get the same pay as any other employee. Imagine busting your chops to close a complicated project on time only to learn that the junior two postal codes over is paid more than you to do simple tasks. I would change employer. In fact, have been in such a situation before. The home office was outside of the city and they later opened an office there. The new city hires were paid more than everyone else at the company. The result was that the company lost all their strong players. I am now working even further from the city for that same salary they gave the city employees.
- granshaw 7y ago
  A lot of what you say is not false, and it can be frustrating for employees (though it goes both ways - imagine a company headquartered in, say, Chicago, and you lived in SF or NYC - you'd be better off than if you were getting Chicago market-rate) Hiring full-time remotes in a major way is still a relatively new practice, so we'll see how it all shakes out. It may very well be that actual pay-by-value takes root, but I wouldn't hold my breath. Pricing and markets are curious things, and there is huge inertia.

esoterica 7y ago

Compensation is based on supply and demand, not some arbitrary rules you made up. In a tech hub there are a lot of high paying employers competing for workers and employers have to offer higher salaries to lure candidates away from other companies. In a cheap area all the local companies pay garbage so you don’t have to pay as much to beat all the other offers.

jaggederest 7y ago
Except by definition if I'm working remotely the hiring pool is every remote company, plus the local companies. That means the floor on salary is the greater of remote or local. So in cheap areas you have to pay globally competitive, and in expensive areas you have to beat the locals. Thus, it never makes sense to reduce pay for someone moving. Your goal should be to keep salaries above that floor, not pay as little as possible.
- esoterica 7y ago
  The remote companies tend not to pay as well as some of the SF and valley firms. It costs less to beat the remote firms than to beat the local competition in the Bay Area.
  - jaggederest 7y ago
    Yes, but if you're living in e.g. Laredo TX, that floor is a TON higher than the "adjusted cost of living difference" between SF and Laredo. It's much closer to a 20-30% discount on SF than the 70% difference a raw cost of living comparison would conclude. ( https://www.bestplaces.net/cost-of-living/san-francisco-ca/laredo-tx/200000 https://www.bestplaces.net/cost-of-living/san-francisco-ca/l... )

ThrustVectoring 7y ago

>Compensation should be based on output performance and the difficulties and complexity of the work being done. The output monitoring and quantification necessary for this is practically impossible - the output of programmers is deeply creative and subjective work. At best you can rank-order programmer output and award promotions. This all leads to getting paid efficiency wages and incentives under tournament theory. In short, a good chunk of your pay is a reward above unemployment or your next-best option, so that you are incentivized to work hard and your competitors are incentivized to compete for your slot. It's as economically efficient as piece work if employees aren't risk-averse, so mostly which system to use is based off of whether it's easier to monitor and quantify output versus rank-order and pay to overcome employee risk aversion. https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Tournament_theory https://en.wikipedia.org/wiki/Tournament_theory >Why should my pay be less than that of a coworker that does the same exact same job as me simply because this is a remote company? For better or worse, software developer pay is negotiated. Negotiation results are driven by BATNA - best alternative to negotiated agreement. For coworkers that are approximately as valuable to the company, they should get offered approximately the same efficiency wage above their BATNA. Workers in areas with fewer options available to them necessarily have a worse BATNA, so it remains fair that they get paid less. Furthermore, although your entire salary gets paid by your current employer, they're only really enriching you by the difference between the pay and your BATNA. It's arguably less fair for remote companies to excessively enrich workers outside of competitive metro areas.