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Claire Snook

Getting Salaries Right When Remote Hiring

Nov 16, 2020 1:24:03 PM hiring remotely

Remote working has become the new norm for millions of people across the world and now is the time for savvy hiring managers to take advantage. The trend for hiring remote talent started long before the COVID-19 pandemic, but the outbreak accelerated this course. Now remote working is here to stay. Recruiting tech talent opens up the world to you and your company. You can attract talent with the skills you need at a rate you can afford. In this article, we will look at different methods to set salaries for global workers.

What is the right salary for your remote workers?

It’s often hard to set salaries for an international workforce, especially when you want to ensure you get the right person for the job. Salaries vary so much from country to country; a web designer in New York can attract a higher salary than a web designer in Lithuania, even though they deliver the same job at the same level of quality. Cost of living, country, experience, knowledge, etc all need to be factored in for your remote working team. Before we get into the nitty gritty of best hiring practices with salaries, remember that your remote worker is considered an employee in their place of residence, not where your company is based. They need to pay taxes, insurance and more for their registered location.

There are several ways to model your salary scheme and here are two that have become
typical recently:

  • A local salary pays people based on a calculation of local cost of living and the local
    labour market competition.
  • A global salary that pays everyone the same fixed amount for the role and
    experience level, wherever they are.

There are other salary models to consider, for example, Buffer uses a transparent salary formula. This has a cost-of-living multiplier, which is added to an employee’s base salary. It uses an employee’s location to determine whether they live in a high, average, or low cost-of-living area. For expensive areas, the multiplier is 1x, so Buffer pays 100% of the San Francisco rate at the 50th percentile. It then drops to an average, which is 85% of the San Francisco rate. And then a low rate of 75% of the original San Francisco salary.

Establishing a base city, such as San Francisco or London, then discounting the rates for  remote workers depending on their location is becoming a popular salary model. It benefits remote workers employed this way as they still tend to earn more money than working for local companies. The transparency of this method is also welcomed by staff.

Which salary model is right for attracting talent?

Benefits of remote working are good for the company and the employees, without a doubt. Remote workers generally earn more while companies get excellent, high-quality employees for less money. The local salary model works in for lots of businesses as they do not create golden handcuff scenarios, meaning the employee is invested in your company and their productivity will be high. While they earn more, it’s not hugely outside of the local economy and so disillusioned employees won’t be forced to stay in a role that doesn’t fit them. Facebook embraced the local salary method in 2020 when it announced remote working would continue for employees.

Our policy here has been for years — is already — that [compensation] varies by location,” Mark Zuckerberg said. “We pay a market rate, and that varies by location. We're going to continue that principle here.”

Facebook will allow senior employees and employees with good performance reviews to move away from Silicon Valley as long as they accept a pay cut. We will follow the transitions to see how this works in the long-term. The downsides of the local salary method are that employees may feel their skills are not adequately compensated compared to their colleagues, that they move around and so their salary will need adjusting according to their new location, and that local data available may not provide the best information on which to make a salary-based decision. Local salary can demoralise a team and have a knock-on effect on productivity when not implemented well. The global salary model is easier to work with. Employees generally think this is fair to everyone, and it takes away the anxiety that someone equally skilled is getting higher compensation. It’s also easier for managers, as they don’t have to tell employees a pay cut is due because they’ve moved cities or countries. Global salaries also appeal to top world talent, and suddenly your company is a lot more interesting to highly skilled and sought-after workers.

The downside is as an employer you could pay someone over the odds for their local area. If the employee isn’t a good fit in the long run for the business, it could affect productivity as they aren’t invested in the company. They may want to continue with you because they aren’t able to find a local job that pays as well. Highly skilled global workers usually search for jobs at a country level rather than a local level and this needs to be considered for best hiring practices.

Remember, when hiring remote workers, you’re competing with the global market, not just the local one. Unless your company has the kudos of a behemoth like Facebook, then financial compensation will be a large part of why someone will want to work with your company.

Next steps for recruiting tech talent

So, you know the main salary models in use, what would be the best method for your company? Start at the beginning, let’s carve out what you want the role to be:

  • What are their responsibilities?
  • What experience do they need to have?
  • Will you base their salary according to their country or yours?
  • Will they require specialist equipment or programmes?
  • Do you want them to work during your time zone?
  • How important is their location versus skillset?

Once you have decided what the necessities of the role are and how you want it to run, then you can start searching for remote workers who will best fit this position. For example, a US-based company might require a developer to working during their office hours and so could seek out a remote worker from Latin America.

Attracting talent from across the world

Whatever approach you take, it’s best to have open and honest discussions with the potential employee to make the right decisions for you both. Choosing a remote worker can be a challenge for a company that values in-office presence. Change perception from being in the office to the worker’s output. A survey by Global Workplace Analytics found employees are productive 75 percent of the time they are working from home compared to 63 percent of the time in the office.

Look at the results the remote workers have achieved, and understand what they can do for you. Productivity isn’t the number of people in the office, but the results of their work. Are they getting the ones you want? If you need help attracting talent for your company, talk to us about the Nixa.io service. Learn how we can take the stress out of hiring with our recruiting process.