
Remote First at Brex - bfelbo
https://medium.com/building-brex/remote-first-at-brex-1252cb30e347
======
nrmitchi
> What happens to my compensation if I move? Brex pays by geographic market,
> so we will ultimately adjust an employee’s Total Compensation Value (TCV) if
> they relocate to where pay rates are different. However, for current Brex
> employees who relocate before Sep 1, 2021, Brex will not make any
> compensation adjustments until Sep 1, 2024 to help each of us manage through
> the unusual circumstances associated with COVID-19. Standard relocation
> compensation adjustments will apply immediately for all employees who start
> at Brex after Sep 1, 2020.

There are many different thoughts around the "right way" to do compensation
adjustments in a remote-first world, but 4 years feels like way to long to
have to deal with an SF->local pay discrepancy existing within teams.

If someone was to join Brex in 2022, it would feel very weird to learn that
their peer on the same team, in the same geographic region, is still getting
their SF based comp package, but hasn't lived there in 2 years.

~~~
kag0
Can someone explain the rationale behind geographically based pay in remote-
first companies?

I don't necessarily disagree with it, but I don't know what aspects of the
issue companies are actually looking at to decide that geo-based pay is the
way to go.

~~~
ryanSrich
It's a relic, and a bad one.

I run a remote-first, remote-only company and we pay everyone based on
experience and merit. Not location. If you want to stretch $150k in San
Francisco go for it. Good luck having to live with 3 other roommates.

However, if you want to take that same $150k and live like a king in the
middle of Kansas that's an option as well. Adjusting someones pay simply
because they're logging onto their computer from a different location is
perplexingly stupid in a world where people can work from wherever.

~~~
121789
It's not a relic, it's a way to price labor effectively. You're not paying for
work, you're paying for the candidate to choose you over a competitor. If
you're competing against local Bay Area or high CoL companies that are local,
you will have a lower offer and will likely lose out on talent. That's OK as a
strategy, but you may just be selecting out of low-CoL areas and limiting your
pool of labor.

The alternative, which sounds like a relic, is offer your 150K and a
reasonable upward CoL adjustment certain areas. Small enough that someone from
a low CoL place wouldn't want to move, but high enough to keep your company
competitive in high CoL places. If you have enough labor supply, you many not
have an issue, but if you are having trouble finding skilled people and assume
that skilled people are unevenly distributed in high-CoL places, it's a
reasonable path to go down.

~~~
valuearb
If you have to pay $200k to get talented engineers in the Bay Area, and find
out you can get equally talented people in the Midwest to work remotely for
you for $130K, obviously it makes sense to set waters geographically.

But what happens when your competitors realize this as well? Now you can no
longer get the same level of talent in Iowa for $130K, soon it’s $150k, then
it goes up again. You aren’t paying for work, you are competing for talent.

I think the market ends up being bifurcated, where working locally in-office
gets a premium when it’s worth a premium, but remote pays the same no matter
where you are outside of time zone issues.

------
mStreamTeam
Brex laid off a significant portion of their staff earlier this year. It
sounds like they are trying to save more money by getting rid of their
expensive office space in Manhattan and SF

[https://techcrunch.com/2020/05/29/brex-the-credit-card-
for-s...](https://techcrunch.com/2020/05/29/brex-the-credit-card-for-startups-
cuts-staff-amid-restructuring/)

~~~
Aperocky
Make sense.. offices are not being used while staff is as productive (probably
not as happy though? but that's case by case) at home. A lot of offices may go
bankrupt in the coming years, even when this whole thing is over.

~~~
mStreamTeam
Its just interesting to see all these layoffs and cost cutting measures right
after they raised a ton of money.

In case you are unaware, Brex's business model is to lend money to startups.
The kicker is they lend money to startups that banks and investors won't
touch. They advertise themselves as a tech company but in reality they are
closer to a high risk VC firm.

~~~
Aperocky
At this current time that doesn't feel like a sound business model.. but I
could be wrong. It also seems that they won't need so many people? The VC
firms I know are all capital heavy and very light on staff.

~~~
mStreamTeam
They were able to raise money from investors selling themselves as a tech
company. Now that they have the money, they dont need the engineers anymore
which explains the layoffs and downsizing.

Brex feels like an attempt to gamble with someone else's money. They raised a
ton of capital and now they are going to use it to invest in high risk
startups.

~~~
devmunchies
> selling themselves as a tech company

They built a lot of the underlining infra for their Brex Cash product.

> use it to invest in high risk startups

Don't they require you to pay back the balance at the end of every month? And
you're not aloud to go over a percentage of whats in your bank account. These
restrictions limit the risk.

~~~
mStreamTeam
Every bank builds their own infrastructure, yet I've never heard a bank
advertise themselves as a tech company...

~~~
cercatrova
Capital One does, to my knowledge.

------
daavable
Companies don't pay employees based on "what they're worth to the company".
Just like with other goods and services, the market dictates the price.

So, companies pay what they can to compete for talent in the market. This
meant that in high-competition markets like SV, the price (for engineering
talent) was very high.

If now the market dynamics have shifted by not limiting supply to the SV area,
then you would SV companies to pay LESS for the same engineering talent. So,
if you argue that people should be paid the same no matter where they live,
then you should also be prepared for salaries for many engineers to fall.

~~~
alexeys
It will take years for markets to even out. Think SV vs rural Alabama. Paying
market rate for the talent is table stakes. And I do agree, there will be less
incentive to pay SV rates, so engineers living in SV will have to work even
harder to demonstrate in the interviews that they are worth the money.
Interesting times are coming.

------
nhumrich
I disagree. I think its actually correct to adjust based on location. Everyone
is only looking at it from a "I am smart by living somewhere cheaper, dont doc
my pay", but not seeing it the other way around as well. If you worked at a
company based out of, say, detroit, but lived in SF, you would demand SF
income, because otherwise you wouldn't be able to afford a living.

This policy protects you, even if you do work at a SF place. Lets say, in
theory, you move to some place cheaper, and that place starts becoming more
expensive. Likewise, SF becomes cheaper over time (or, the company just moves
HQ to somewhere cheap). By doing location based pay, your pay continues to go
up, in line with your local area cost of living. Otherwise, if you were still
getting paid based on SF cost of living, you would be loosing money every
year. Eventually forcing you to move, which, you might not be able to do
because of family, house, etc.

Second, its ethical. "Salary" represents a quality of life, i.e. Purchasing
power, not a raw number of dollars. If you were paid SF wages while you lived
in a third world country, you could very well be the richest man in the
country. This does not make sense. Nor is it ethical, think of the raw damage
you could do to that economy. For a more common scenario, do you really feel
that a mediocre software dev working for a SF company should be paid more than
the local best ER doctor? Many professions simply cant be done "remote"

Third, it makes all companies "equal". In a "remote first" company, the
location of the HQ shouldn't matter. Maybe, not even exist. Most companies are
actually "Delaware companies". Should they pay delaware salaries?

And lastly, its just economics. The reason salaries are so high in SF is
because no one wants to live in SF, because cost of living is so high. Its
supply and demand. The cost of finding good talent in SF is astronomically
high. As soon as you go "world wide", then you can attract great talent at a
cheaper price. AKA, if you are going to demand a SF salary, they can certainly
find someone cheaper and better (fire your ass). Frankly, _still_ getting paid
a SF salary while in SF at a remote company is just incredibly generous of the
company. At remote first companies, salaries will have a downward force. Over
time, you will get paid less working remote.

~~~
ptkd
I think it just sets up some pretty weird incentives for employees, especially
when you consider that cost-of-living calculators are often wrong. I don't
think this model will work in the future.

Let's fast-forward 5 years and assume many companies have taken on this model
and are now remote first. COL adjustments will have occurred, and COL is a
very reasonable proxy to "desirability of living location", because as you
mention these cities are based on supply and demand. When there's a high
demand, COL goes up and as such so do the salaries of the folks living there.

So now employees are basically at a junction where they can live wherever they
want. However, their employer will cover the expenses of living somewhere
better (if we take this high COL = desirable line of thinking). So employees
will go to these places, effectively costing the employer money!

The fundamental outcome of this change is employers are offering a giant "live
somewhere expensive" stipend that can only be cashed if you choose to live
somewhere expensive. It's just odd. I know for a fact if I was at one of these
companies I'd move to wherever I could get the most money, because I think COL
often overrates how expensive cities are.

~~~
nhumrich
Whats to follow is completely anecdotal. I had a job at a decent/high salary
in an expensive city. I moved and took a pay cut, to about an average salary
in a much cheaper city. I feel significantly "richer" then before. I think the
"more money is always better" is simply false. Its ultimately about how much
money you make _after_ rent/mortgage. where rent should be equalized for
equivalent housing. My $300k 5 bedroom house would be > 2mil in SF. A 2x or
even 3x salary doesn't even begin to bridge the gap.

------
whalesalad
I remember interviewing here and being bummed when they were 110% strictly no
remote. Not surprised to see the about face here based on current events, but
based on my experience it is a little surprising.

Without saying anything disparaging I do not imagine it is a pleasant place to
work.

------
xyzzy_plugh
> Henrique used to play an online game called Ragnarök

I feel like this was a rite of passage for an era of Brazilians.

~~~
sergiotapia
In my day Polaks and Brazilians played Tibia.

------
tallgiraffe
There are some good pro's and con's to this strategy, but given market forces
I can imagine the future where everyone "works" from the same address in the
Bay Area, while being based elsewhere. Maybe I am hoping to see this as a hack
:)

~~~
momokoko
You laugh but that already happens where “former” Bay Area employees relocate
to a cheaper region but maintain a Bay Area address for their cost of living
adjustment.

------
tempsy
I blame FB for setting this bad precedent. Now that they've set the standard
for remote compensation every company now has cover to adjust compensation
using some flawed cost of living calculator.

~~~
nhumrich
I disagree. I think its actually correct to adjust based on location. Everyone
is only looking at it from a "I am smart by living somewhere cheaper, dont doc
my pay", but not seeing it the other way around as well. If you worked at a
company based out of, say, detroit, but lived in SF, you would demand SF
income, because otherwise you wouldn't be able to afford a living.

This policy protects you, even if you do work at a SF place. Lets say, in
theory, you move to some place cheaper, and that place starts becoming more
expensive. Likewise, SF becomes cheaper over time (or, the company just moves
HQ to somewhere cheap). By doing location based pay, your pay continues to go
up, in line with your local area cost of living. Otherwise, if you were still
getting paid based on SF cost of living, you would be loosing money every
year. Eventually forcing you to move, which, you might not be able to do
because of family, house, etc.

Second, its ethical. "Salary" represents a quality of life, i.e. Purchasing
power, not a raw number of dollars. If you were paid SF wages while you lived
in a third world country, you could very well be the richest man in the
country. This does not make sense. Nor is it ethical, think of the raw damage
you could do to that economy. For a more common scenario, do you really feel
that a mediocre software dev working for a SF company should be paid more than
the local best ER doctor? Many professions simply cant be done "remote"

Third, it makes all companies "equal". In a "remote first" company, the
location of the HQ shouldn't matter. Maybe, not even exist. Most companies are
actually "Delaware companies". Should they pay delaware salaries?

And lastly, its just economics. The reason salaries are so high in SF is
because no one wants to live in SF, because cost of living is so high. Its
supply and demand. The cost of finding good talent in SF is astronomically
high. As soon as you go "world wide", then you can attract great talent at a
cheaper price. AKA, if you are going to demand a SF salary, they can certainly
find someone cheaper and better (fire your ass). Frankly, _still_ getting paid
a SF salary while in SF at a remote company is just incredibly generous of the
company. At remote first companies, salaries will have a downward force. Over
time, you will get paid less working remote.

~~~
maxlamb
The other viewpoint is that you provide the same value to your company whether
you work in SF or in Kansas City (assuming WFH in both places). So basically
you are saying "Hey, if I move to a cheaper place, please take 40% of my
compensation and give it out to the C-Suite and shareholders, since I have no
other options in my new city". I guess that is the reality of capitalism, and
why ownership/equity is so important.

~~~
nhumrich
this is already messed up though. Salary _does not equal the value you provide
the company_. It represents the cost to extract the value. A quality senior
engineer provides 3-7x the value of a junior, but only gets paid 30-40% more.

------
gyulai
For a remote company to adjust pay to employee's geography: so not cool.

Offering remote and paying people based on what they're worth to the company:
Part of the solution! (The problem being: Structural deficits in certain
regions yield lack of adequately-compensated employment opportunities for the
highly-skilled. This makes the highly-skilled relocate. This makes it
difficult to overcome structural difficulties).

Offering remote and paying people based on where they are: Part of the
problem!

~~~
enra
So how do you imagine hiring people with similar experience/skill level SF if
they base salary offers are $200k and Europe people are happy with $100k since
their rent/mortgage/livingcost is about 5-10x less?

Pay everyone $200k or $100k (essentially stop hiring in high cost location)?

Until the markets/remote salaries align, you kind of have to pay based
salaries the people are able/need to receive in their respected market.

~~~
_AzMoo
If an employee is worth $200k to your company in SF, why are they not worth
$200k to your company in Europe?

~~~
ericd
Because, at least for the moment, it's unlikely that any company is going to
offer that European $200k. It's about BATNA, not perceived fairness.

That said, this might change if remote work becomes a lot more common, and we
might see a big flattening of salaries. Bad for SF real estate prices (and for
high earners in those companies in general), since people in those HCOL
markets will suddenly be competing a lot more directly with workers from
elsewhere, modulo language skills, ease of scheduling, cultural fit, etc.

~~~
_AzMoo
Right, it's about BATNA, but it stands to reason that especially in a time of
ubiquitous remote work, offering remote workers salary parity will attract the
highest talent from all regions, thereby providing a competitive advantage.

------
giacaglia
This seems like a big deal. More and more companies are transitioning to
Remote First....

------
saagarjha
This isn't really related at all, but I've always considered "Brex" to be a
strange name considering
[https://en.wikipedia.org/wiki/Bre-X](https://en.wikipedia.org/wiki/Bre-X)

~~~
Sebguer
I expect a lot less thought (and research) goes into most startup names than
you'd think.

------
carriganisms
A service that does planning and execution of off-site meetups for remote
companies is a great business idea. Essentially, travel agency/event planning
for remote first companies.

Once we're past COVID, a lot of companies are going to stick with remote first
and making the planning of off-sites easy seems like a must need service.

~~~
saadatq
I know that InVision (InVision app.com, a remote-first company) has an entire
team dedicated to planning their yearly offsite. I can imagine many other
companies choosing to hire a company to help plan offsites. Great idea :-)

