
Ask HN: Should remote worker salaries be based on location? - dennisy
I am hiring remote at the moment and finding it very difficult to decide what I should be paying for a specific role - experience combination.<p>Some people argue; why does it matter where I live?<p>If this is true, what is the global remote rate?
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kostarelo
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-
ra...](https://about.gitlab.com/blog/2019/02/28/why-we-pay-local-rates/)

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dennisy
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.

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verganileonardo
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)

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ManlyBread
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?

~~~
giantg2
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.

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codegeek
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
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
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.

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poushkar
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.

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protonimitate
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?

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monkin
> 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...

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davismwfl
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.

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zerr
From the opposite PoV: you bill Bay Area clients with Bay Area rates.

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davismwfl
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
OK, but now imagine if a Bay Area client tells you to lower your rate by 20%
since you're based in Oklahoma and it should be more than enough for you...

~~~
davismwfl
I see your point and respect your position but disagree with the logic.

In one example you are an employee, in the other you should be running a
business and the two are not equivalent in pay, process or responsibility, so
trying to treat them as they are is improper.

IMO freelancer is just a label for an employee with no benefits, no
protections and full tax liability. Consultants (or dev shops etc) generally
build real businesses and are treated considerably different.

~~~
zerr
Those (including 400K employment) are just different names for what is
essentially a business deal between two parties - as long as you provide the
value satisfying the second party, and as long as the second party pays the
agreed amount - it shouldn't matter whether any of you live in Thailand or
rent a duplex on Manhattan.

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cercatrova
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.

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probinso
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.

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anotheryou
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.

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zerr
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.

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comprev
It's all about base living costs and how much change is left over as an
approximate percentage of income.

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seanwilson
Are you going to pay them more later if they then choose to move somewhere
more expensive?

