Are equal pays for remote employees a good idea?

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Should remote employees be paid Silicon Valley salaries regardless of where they live?

Some big brands are considering (or rolling out) such policies, and others debate whether or not it makes sense.

I’ve recently had several conversations around this topic with engineers and managers, and there doesn’t seem to be a consensus for it.

Here are my personal notes and thoughts I wanted to share with you and start a discussion.

Should we adjust pays to a location or skill?

I believe it’s what you do, not where you do it, what matters, and equal pays make sense from this point of view.

Should their pay be different if a writer, UX expert, or engineer in Europe produces the same quality of work as their teammate in San Francisco?

Indeed, costs of living in San Francisco are higher than, for example, in Poland.

However, a person making a San Francisco salary has the financial capability to move to Poland. In contrast, their peer does not - even though they add the same value to the company.

The status quo is that if one says that an employee (or contractor) hired in a “cheaper” country should make less because of lower living expenses - almost no one objects.

On the other hand, it would be socially unacceptable to say to a person in San Francisco that they should lower their salary expectations because they can move to a less expensive country.

Will equal pays destroy startups?

Looking at this issue from a market point of view, startups will have an even harder time finding experienced talents (they already have).

Startups will not be able to compete (financially) for employees with big brands, and therefore they might not be able to develop their products further.

Unless they find a smart way to improve their employee brand, find creative ways to attract candidates, or convince investors to wire more funds, their fume date will happen sooner than they expected.

As a result, employees may have fewer companies to choose from if the biggest players on the market monopolize it.

The question is, what is the capacity of those leading companies.

What will happen to the salaries globally?

Equal pays may lead to a drop in salary rates eventually.

Consider this: if most businesses would offer, say, $500k to engineers (regardless of their location), then - all else constant - engineers in the Bay Area will face greater competition.

Consequently, I think they might have to lower their expectations, and the highest rates would decrease.

Will draining emerging markets’ talent lead to a Talent Tax?

Local brands will not stand a chance to compete for employees will companies like Facebook, simply because they won’t afford it.

The more talent becomes “exported” abroad, the less workforce will remain available locally.

Such events may force countries (governments) to suggest “knowledge-workers export” taxes to limit this practice.

Urban planning will change. But how?

Employees will decide where they live. Will they choose to live in more expensive and more developed countries (and cities) or move to less-developed and less costly countries?

Realistically speaking, how many people will move to cheaper countries (which, on average, may also have lower living standards)?

Paradoxically, this may mean that more people will cluster in more developed countries, creating a higher concentration.

Alternatively, people would spread more evenly around the world, but that requires investments in infrastructure.

Practical nuances of estimating geo-pay

However exciting and alluring equal pay may sound, I think they are less realistic than geographically adjusted ones in a mid-term.

How will we evaluate salaries, though? Let’s say I hire someone from Hungary. Should the rate be competitive but adjusted to the costs of living in Hungary? Can I assume that person must live where they currently do?

What if they travel often and want to spend some of their time in the USA, Norway, or Switzerland? Would pay policies to include a personal lifestyle?

What about vacations and non-financial benefits such as maternity, paternity leave? There are pretty substantial differences between countries. In the US, maternity leave is just three months, while it’s about a year in Poland.

Costs of remote vs. on-site workers

While remote work increases productivity, happiness, and work-life balance, it does have its challenges that - if we are fair about it - must be included in estimating the cost of working remotely.

Of course, such cost should then be compared to the cost of office & hybrid work models.

Remote costs include:

  • Decreased sense of belonging and added work related to training managers. Risk of decreased employee retention.

  • Mental health support cost.

  • An additional cost of communication tools and practices.

  • Potentially, additional security costs (it management solutions such as https://www.electric.ai/ and VPNs).

Office & hybrid:

  • Office space cost.

  • Cost of limiting candidate’s source to a single location.

  • The ecological and personal expense of commute.

  • Productivity decrease.

  • Increased stress compared to remote work.

  • Potentially more sick leaves due to a higher chance of getting infected while in the office.

  • Lower inclusivity cost.

Conclusion

While I believe pays should be fair, I also see many challenges related to the concept of making them equal.

On the one hand, it does sound justified, and on the other, there are economic, social, and possibly political issues one has to take into account before making such a decision.

Thank you for reading, and please feel free to join the debate in the comments. I’d be curious to read your salary policy and what you think will be the norm going forward?

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