5 ms·

Ask HN: Should remote worker salaries be based on location?

• kostarelo 6y ago
  I haven't made my mind on this yet tbh. I tend to not agree with the argument that workers are bringing the same value to the company no matter their location. What about doctors that live outside major cities. Should they be compensated the same as the doctors in the centre of NY? I think that's a utopian state where it just can't co-exist with the current way of how markets work. On the other hand, I totally agree with Sid (from GitLab)[1]: > "If we pay everyone the San Francisco wage for their respective roles, our compensation costs would increase greatly, and we would be forced to hire a lot fewer people. Then we wouldn’t be able to produce as much as we would like," Sid explains. "And if we started paying everyone the lowest rate possible, we would not be able to retain the people we want to keep. > "So you end up in a place where the compensation is somewhere in between. And that would cause us to have a concentration of team members in low-wage regions because it’s a better deal for them. They’re getting more than the market rate, so they’re more likely to apply and accept an offer. And they’re more likely to stay regardless of how happy they are, which is not healthy for them or the company." That makes sense! Both company and the employees are equally happy. I don't find anything wrong with that. I think choosing an "above the local rate" rate to pay your employees is the way to go. Rate them based on the criteria you think it's best and put that in perspective against their local rate and the rate ofc that they want. They are going to be some that live in Greece and want to be compensated with SF rates. That's fine and they are probably able to do it. But that shouldn't affect your own strategy. 1: https://about.gitlab.com/blog/2019/02/28/why-we-pay-local-rates/ https://about.gitlab.com/blog/2019/02/28/why-we-pay-local-ra...
  • dennisy 6y ago
    Thanks for the reply. This makes sense, however it does mean you will end up hiring mostly from low wage regions. Which may not be a bad thing for the company, however it will be for people in higher wage regions.
    • kostarelo 6y ago
      If you can afford to pay above the rate for those, then go for it. If not, I don't see a reason why worrying about them. That's like saying a company that primarily works on a smaller countrys' market, thus their revenue is much smaller, cannot afford to hire engineers from SF and that's hurting those engineers for some reason?
    • verganileonardo 6y ago
      This sounds like a positive consequence of that policy. People move to lower rage regions, they spend less time commuting, the have more money available for other expenses (as rent is not a big chunk of their income). In the end, this pushes to a decentralized workforce and may reduce the cost of living on highly populated areas (NYC or SF)
• deleted 6y ago
  [deleted]
• ManlyBread 6y ago
  It should be of no concern to the employer where I live; that's my decision and deciding my salary based on that is nothing but pure discrimination, no better than discriminating based on race or ethnicity. If you can afford to pay a certain amount of money to someone living near you then you can afford to pay the same amount of money to someone living in Romania. There's also the issue of calculating the cost of living - why should I trust a US based employer to be able to correctly calculate my cost of living if I live in Saudi Arabia?
  • haakonhr 6y ago
    Except for legal reasons I agree that it shouldn't matter. However, where you live defines the frames around any salary negotiation, both because it affects what you are willing to accept, but also because it affects your opportunity cost. If my prospective employer knows that I live in Romania they probably wouldn't offer me a bay area salary, even if I am equally valuable for the company, since they can be pretty sure that I would accept something lower (that's not to say that you cannot negotiate a similar salary if you are able to prove your value somehow). If I live in the Bay Area I have plenty of options around me so they know that I probably wouldn't be willing to accept the same salary that I would if I lived in Romania.
  • kostarelo 6y ago
    Discrimination would be to treat those employees in a worse manner that others. Paying them the above the local rate salary is not treating them "worse". Not providing them with equal opportunities to grow on the company, that would be discrimination. Apple is making products that the majority of the country that they operate in, simply cannot afford. Let alone the rest of the planet. Are we considering that to be discrimination?
  • giantg2 6y ago
    This is not the same as discrimination on race or ethnicity. Most of the legally protected attributes are not something you choose to be or can change. Even religion, while being a choice, is protected because a person's religion is regarded as a strong moral conviction and is widely accepted as a concept. Within the United States, the choice to live in a low cost of living area could easily be changed by moving. Millions of people move each year in the US, many of them due to work. In fact, I had to move from a low-cost area that is considered depressed in order to find a job. Now I can see that living outside the US can bring challenges to moving, like visas, and national origin is a protected trait. But if their policy is to pay local rates, then that does not discriminate based on anyone's individual traits and is wholly based on the market. Does it suck? Sometimes. I would have gladly stayed in my low-cost depressed area if there was a job for me there. The best play for me would be to move to an expensive area (done), make a lot of money (I wish), and move back to the cheap area to retire early. But my wife doesn't want to ever move.
• poushkar 6y ago
  I think paying less than you would pay locally based on the location is kind of a discrimination. In fact, simply paying your local salary to remote workers opens a pool of really experienced people from all over the world for you. In many cases probably even superior in experience than you would be able to find locally with your local average salary. So you are already winning big here, why would you want to screw that by assuming their worth based on where they live? How can one even calculate that? For example, cheaper/poorer countries might have a worse healthcare system without insurance, so people would need additional money saved aside for health emergencies (like cancer or similar) for themselves and their family. And this is just one example.
• cercatrova 6y ago
  Why should it be? The work I do and the value I provide is the same regardless of location. Oftentimes, remote work is even more valuable in terms of productivity gains so they should be paying me even more than locally.
• codegeek 6y ago
  Don't listen to what others think. As the hiring manager or business owner, you ultimately decide what's it worth to you. Also, not all candidates are equal. Just because someone is remote doesn't automatically make them special and vice versa. Decide based on merit of the candidate. If they are remote BUT are worth paying $x/Year, pay them. If they are not worth paying, their location doesn't matter. If that $x/Year s good enough for both parties, who cares what the number is compared to say US salary or Silicon Valley.
  • dennisy 6y ago
    I agree completely, but a benchmark is needed, as a business owner with (currently) small reserves and no revenue you always want to pay low. You need a frame of reference.
    • codegeek 6y ago
      I should have worded my 1st sentence better. I agree with you. But my point remains. You decide how much you want to pay and if you want to use local market/areas in your consideration, go for it. Let's say you are hiring a developer in Poland. Do research on average developer salaries there and also check based on areas. Then, make an offer that you are comfortable with. Ideally you should pay at least the average salary in Poland for that role/level of experience but pay more if you want to. As long as that developer is happy and you are happy, who cares. Bottomline is: Don't let the candidate dictate what you should and should not do. If they don't like the offer and you don't think they are worth more than that, capitalism baby. You move on. Until then, keep negotiating.
• protonimitate 6y ago
  Selfishly, no, you should offer to pay what you think is fair for the exchange of service you receive. If you get the same quality work from a person who lives in NYC as a person who lives in Ohio, the pay should be equal. But, as a business person, you should pay the lowest amount you possibly can while maintaining the level of quality you require. People who live in LCOL areas are more likely to accept a lower bid to do the same amount of work, which opens the pool of labor up enormously for a lower price point. What you absolutely shouldn't do imo, is set up a job req for a price point, then negotiate a candidate down because of where they live. If you can only pay 80k / year, then offer 80k. If you get a candidate from somewhere that 80k is above average, isn't that just a win/win?
  • monkin 6y ago
    > But, as a business person, you should pay the lowest amount you possibly can while maintaining the level of quality you require. People who live in LCOL areas are more likely to accept a lower bid to do the same amount of work, which opens the pool of labor up enormously for a lower price point. Wow, that hurts. You treat all your employees as slaves? What about investing in people to produce better quality and commitment? I always thought that it is better to have one Gilfoyle who can afford a new Lamborghini every month no matter where he lives, than having 50 miserable copies, because someone wants to save a few pennies. And guess what? At the end they cost you more...
• davismwfl 6y ago
  Pay based on location & candidate, I have been doing it this way for years, it works and is the most fair and proper method. That doesn't mean you lowball people or that you don't pay fair wages or that you overpay, it simply means that you are taking into consideration the local economy and cost of living differences in areas. It is an unrealistic notion to say everyone gets the same pay regardless of location. Basic economics tells you this is not a sustainable model. Buffer and Gitlab are pretty open about their methodologies, where they use pay bands for a position and then the do a location & experience adjustment. Essentially this is how I have done it in the past (typically as the team gets larger), you set pay bands per country per position, then do location & experience based adjustments. You can see how gitlab does it if you check out one of their open positions there is a salary calculator and it shows you the basics (they even show how options work). That said, you shouldn't rule someone out just because their pay request exceeds your defined band/location/experience calculation if their experience/expertise justifies their ask. To me the banding is there to set a starting point and make things open and transparent to the best of your abilities without publishing peoples individual pay rates.
  • zerr 6y ago
    From the opposite PoV: you bill Bay Area clients with Bay Area rates.
    • davismwfl 6y ago
      Not sure I agree. When I ran my consultancies I priced my contracts as either a fixed weekly rate or a value price. So it didn't matter where the client was located or my employee(s). When we billed weekly rates it was a specified rate for a specific project role regardless of who the client was. When it was value based deal I didn't care if the client was in SF or Kansas, I based the price on the value it brought to the client and what I thought was fair but lucrative enough to take the project. I do know there are freelancers that change their rate based on the client but I honestly don't agree with it, typically to me it means you rate is too low or you are pricing improperly. Your rate should be moving up as you gain experience but it shouldn't vary much by client, unless you start value pricing or when you start dealing with enterprises who demand insane support and hand holding.
• zerr 6y ago
  Compare not absolute numbers but the quality of life - aim for the equality of it. E.g. if you pay local market rates for someone based in Seattle and another one based in Zimbabwe - I'm pretty sure that former's quality of life will be much better.
• probinso 6y ago
  this is obviously a divided topic. I think that the most important things that you ensure you are paying a fair wage. one advantage to location-based income is that you can provide a more than fair wage in lower income areas. it's hard to know how much to pay if you do this, I have been musing about better understanding living expenses with respect to region. I think finding a stable location under the currency of your employment is an interesting way to look at this. living expenses under the US dollar for Delaware grow very slowly and steadily. you can fix an income and a raise rate to that area, then determine projections to other areas by your preferred method. this may mean that certain regions become prohibitive. The major downside, is that this is considered an invasion of privacy. many of the remote workforce don't want to have to ask their employer before moving. you will have to change their wage when they move if you adopt thes sorts of method.
• seanwilson 6y ago
  Are you going to pay them more later if they then choose to move somewhere more expensive?
• anotheryou 6y ago
  I think the first question is: - Do you want to pay fair - do you want to maximize value for your money - or do you want to hire from the pool of the top 10% world wide? max value: you hire for little money from poorer nations top 10%: you adjust to local rates fair: here it gets philosophical... I'll probably go with you pay everyone the same, which probably again means you'll not hire from rich countries.
• comprev 6y ago
  It's all about base living costs and how much change is left over as an approximate percentage of income.