8/1/2023 0 Comments Compare cities based on salaryWe love to say you can work from anywhere - we have no borders, no “market,” and yet market rate remains a compensation factor. Remote companies are decidedly, proudly indifferent to geography. Code written in Thailand has the same value as code written in San Francisco it works the exact same for end users, and it’s just as easy for teammates to read/review. In a software business, geography plays no role whatsoever in determining the intrinsic value of the work. I’m borrowing a phrase typically used to describe the pay gap associated with underrepresented groups, but the same principle applies here.Īll of the remote companies mentioned above - Help Scout included - are software companies. I’d like to posit another option, which is also grounded in fairness: Equal pay for equal work. A different approach: equal pay for equal work My goal is not to criticize anyone - it is to ask an honest question: Is this the right approach? Because it doesn’t feel right to me. These examples are how most remote companies operate, and to repeat, they have the best of intentions and aim to be fair to employees. “We remain efficient financially if we are hiring globally, working asynchronously, and hiring great people in low-cost regions where we pay market rates.” They go on to say as much elsewhere in their handbook: Each division and department in the company has a “target” location factor they are looking to achieve, I’m assuming for budgetary purposes. Gitlab’s average location factor across all teams is 0.679, which means the average employee compensation is 67.9% of what an employee in San Francisco would be paid. This is not a cost of living analysis, but instead a cost of market evaluation compared to San Francisco.” “Location Factor is calculated using multiple data sources to conduct a market analysis of compensation rates globally: Economic Research Institute (ERI), Numbeo, Comptryx, Radford, Robert Half, and Dice. Gitlab gets more scientific in the way they think about market rate: Our approach was similar to Buffer’s, who has a transparent salary calculator with three simple cost of living options for each role: low, average, and high. For several years, the formula included a cost of living variable to determine a “fair market rate.” People who lived in a city with a high cost of living would be paid more, and we used tools like this one from CNN and this one from Numbeo to make the determination. Like many remote-first companies, Help Scout employees are paid based on a salary formula that’s transparent to everyone in the company. But regardless of the intention, I believe it’s the wrong approach. It’s logical, rooted in good intentions, designed for transparency, and optimized for fairness. A best practice has emerged among remote companies: variable pay based on the employee’s geographic location.
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