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What’s the Future of Compensation in Remote Teams? 

Setting compensation is something every employer has to consider and the decisions they make ultimately affect everyone they will go on to hire. This makes deciding how to approach compensation complicated no matter the makeup of your team, but with more companies embracing remote-friendly policies and expanding their hiring pool internationally, the layers of complexity naturally increase. In an effort to unpack all the competing arguments and intersecting elements, our Journalist, Bree Caggiati, is sharing a seven-part article series on Compensation for Global Teams.

As we finish up our article series unpacking international compensation, I want to talk about what the future holds. Where are we heading? Will distributed companies embrace global rates, or is it more likely they’ll continue to fall into both camps? 

And having done all of this research and sharing these arguments — where do I stand? What makes the most sense to me? And, has it changed as I’ve been writing? 

The need for accurate and accessible market data

No matter the compensation style or strategy you choose to implement, data is undoubtedly one of the most essential tools in your arsenal. Even if you aren’t planning to tie your compensation offers to all the local markets you hire in, it’s still imperative to do your research. Information gives you context and valuable insight into what’s necessary to compete in this market, what minimum wage rates exist (including the cost of living), and what ranges will make the most sense. Companies that choose to set one global rate will still often tie their metrics to a specific location, for example, Boston for Help Scout, so accurate data is always crucial. 

Unfortunately, accurate and helpful data isn’t always easy to come by, particularly when you’re hiring across many countries. It’s often expensive and, due to the nature of job titles across companies, can be skewed or lacking the necessary context. 

In our first article in the series, both Shield GEO co-founder Tim Burgess and CEO and Founder of CultivatePeople, Lola Han, discussed the current limitations of compensation data. 

“Unfortunately, market data doesn’t seem very good for global data, and it’s really expensive,” Lola said. “Radford, for example, probably has the best tech industry global data, but it costs thousands and thousands of dollars.”

Tim agreed that the current offerings were catered to large-scale companies who could afford the cost and found that sorting by job title wasn’t always accurate. 

“There’s huge variation by industry. If you’re a tech person working in a tech company, like Facebook, you’re going to get paid more than if you’re a tech person working in a food and beverage company. And then there’s huge regional variation as well.”

Chris Danks, CEO at Launch Global, an international recruitment agency, confirms these struggles. 

“There’s a couple of gaps in what’s available in salary benchmarking in the world at the moment,” he says. 

“It can be misleading and be very dangerous if you’re looking to get approval for salaries. In my experience, data can be off about 75 percent of the time, to a reasonable degree.”

Job titles can mean different things in different companies or countries, making accurate comparisons extremely difficult. 

“A salesperson could benchmark maybe fifty thousand dollars for a basic salary, or it might be one hundred and fifty thousand, and you won’t necessarily get that from the macro data points.”

He also says some countries just don’t have enough data to make any responsible benchmarking decisions. 

To combat these inconsistencies, companies tend to gather data from more than one source. 

“Instead of using [just the rate index], what we do now is look at a number of different sources, usually four or five, to get market data for a city. Then we find the median of that, and use it as our benchmark,” said GitLab’s outgoing Chief Culture Officer Barbie Brewer in an article titled, Why Gitlab pays local rates. 

“That being said, you can’t do this in all cities. We have a lot of employees in jobs that aren’t typically available where they are located.”

While cross-referencing information is the responsible thing to do, paying for information from various sources isn’t always an option for smaller businesses or start-ups, and certainly not for individuals trying to educate themselves. 

While I don’t think this information should be entirely free for everyone, I do see that gatekeeping this kind of data behind thousand dollar fees is a barrier that makes fair compensation challenging to enforce. 

Of course, gathering this kind of data for every region in the world is complex and time-consuming. And we can certainly expect that the more popular remote work becomes, the more accessible this information will be. 

But still, I wonder if there is more we can do to provide access. 

Transparency around your compensation model

Hearing the word ‘transparency’ in the same sentence as compensation can understandably cause many people’s skin to crawl. 

We have traditionally kept most talk about money, particularly our earnings, very much under wraps. Unfortunately, this topic’s taboo nature has kept many individuals in the dark about how much they should and could be earning (in terms of the market rate). In some cases, this has led to discriminatory practices such as pay discrepancies among colleagues in the same roles. 

While there has been some movement towards total transparency (see: Buffer), for the most part, transparency advocation is more closely tied to a company’s compensation philosophy, structure and framework rather than any specific numbers. 

“Pay transparency, by definition, does not mean sharing everybody’s salary on the blog. What it means is that everybody knows why they make what they make and how they can make more. That’s what pay transparency really is,”  says bethanye McKinney Blount, the Founder, and CEO of Compaas.

“Everybody has some [transparency already] because you know how much you get paid. The question is, how much do you know about why that’s what you make? How much do you know about what it looks like for you to get to the next level? That’s what pay transparency is really about. You understand where you are and how you’re going to move through the process.”

Even by talking about compensation philosophies in this article series, I’m assuming that companies are moving towards more transparency. Simply deciding on a model (be that local, global, or an individualized hybrid approach) means you’re solidifying a compensation structure and pathway for your employees. 

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Now, how much of that structure, philosophy and planned pathway you disclose to your internal team is entirely individual. Although, the more accessible this information is, the more likely new recruits will already be aligned, making team dynamics much easier to navigate. 

“We’ve been pretty transparent from the get-go, at least around the way we calculate it,” says Julie Menge, Help Scouts HR Operations Lead. “So everybody knows, here’s the engineering path, and here’s marketing, but we don’t know individual salaries.”

Julie sees this level of transparency as really important for their company culture and ties to their values around equity. 

“It holds us really accountable when it’s transparent. There’s no worrying if somebody gets a promotion or an increase whether you got the same as the person next to you,” she says. 

“We even have a no negotiation stance whenever we make offers because our thoughts are, we’ve done a lot of research to back this up. It ties to our career leveling internally. And we want to have equity. Everybody in the same role gets paid the same. We don’t reward better negotiators.”

Julie says she’s thankful this has been a part of Help Scout’s culture, more or less from the beginning, as she doesn’t know how easy it would be to integrate later down the line. 

“There are all kinds of feelings and internal things around compensation that can be hard to navigate later on,” she says. 

Having just recently formalized our internal compensation framework, Tim agrees. 

“If there’s one regret that I have, it’s that we didn’t think about it more earlier on and that we didn’t communicate it as well as we could have,” he says. 

“When people accept a job or a salary, they’re making a whole lot of decisions around that. It affects where they’re going to live, the sort of lifestyle they have, the planning that they can do. It’s huge.”

He sees it as an employers responsibility to communicate clearly so that none of these decisions are being made from assumptions. 

“If you aren’t clear about it, or if you don’t really know what your approach is, or how you’re going to deal with things in the future, then they might come in and think, ‘Well, this is just going to be like my previous job or the jobs I’ve had before,’” he says. “If they’re making decisions based on incomplete information or information that changes, then you’re doing them a disservice.”

New legislation and potential compliance issues

Shifts in legislation may make transparency more necessary in the coming years, which may impact the direction distributed companies take in the future. 

“The California compensation law says that you can’t ask someone how much they used to make. You can’t ask someone how much they’re making now. If they tell you, you cannot use that to decide how you’re going to pay them in the future,” bethanye says. “That’s great, but even better — a candidate has the right to ask how much does this job pay, and you have to tell them! And that’s huge.”

This isn’t just happening in the US either. 

“There’s a Norwegian labor law that prohibits people from advertising jobs without salaries mentioned,” says Bhagyashree Pancholy, Lawyer and Founder of All Remotely

“Even the ILO [International Labor Organization] also states that if you are advertising for a job and that is international, you will have to mention the salary. You would have to mention what all perks and benefits they get.”

Rodolphe Dutel, the founder of Remotive.io, a remote job board, and community, thinks we may even see shifts in how remote workers are defined. 

“In California, we’ve seen that Uber drivers have been requalified as employees and not contractors. And I think that maybe the legal implication of having remote workers may change in the future,” he says. “And if a major conservative European country, such as France, or Germany is starting to pound the fist on the table and demanding certain compensation banned for remote workers, that certainly is going to change the discussion as well.”

He doesn’t seem afraid of more legislation around remote work in the future, seeing it as an opportunity for further protection of the individual. 

“I’d love to see some threshold being met for compensation,” he says. “I also think minimum wage [should] be taken into consideration in various countries.”

Will remote work affect global rates?

With more legislation around remote work and distributed companies becoming far more common after 2020’s work from home shift, some people predict changes in global market rates.

“I think that there will be a flattening,” bethanye say.  “But that flattening is going to be driven less by my small reduction in the expensive markets and more of an escalation everywhere else.”

Though she does think some form of a gap will always exist.  

“In particular, places like the Bay Area aren’t going anywhere because this is where the VCs are, which means this is where the investors are, and I think that’s going to be true for a while.”

Tim wonders if even the structure of compensation packages will change over time. 

“I think that companies have become a lot more aware that compensation goes beyond salary and that engagement and happiness is a multifaceted thing,” he says. “You can’t just throw money — well, you can, but you’re never going to get as good a result as if you try and look at the holistic point of view.”

He argues that even large tech companies like Google and Facebook, who offer high salaries, know this isn’t enough. 

“They’re trying to make everything that they can as smooth as possible for people and engage them in every facet because they realize that money alone isn’t going to drive great performance.”

Which compensation strategy is best?

After slowly unpacking the critical facets of international compensation over seven articles, you may wonder if I’ve drawn any conclusions on the best way to compensate your overseas employees. 

The truth is, I don’t know that there is one single best way. 

After interviewing experts, reading countless articles, research papers, and think pieces, having lengthy discussions with my team (and frankly anyone who would listen), I’ve come to rest on the fact that there isn’t one way to do anything. 

There isn’t one way to be ethical or thoughtful, one way to run a business profitably, one way to enter new markets, and certainly no one way to compensate. 

And while grey zones and fluid concepts can feel risky, uncertain, and difficult to plan for, they also give you a chance to imbed your personal values and make space for your outlook to grow and change as your company does. 

I see companies who desire equality for their employees on both ends of the compensation spectrum. I also see the desire for profit, a positive public image, and ways to attract and retain talent. No one strategy holds the monopoly on ethics, nor are you guaranteed success by choosing a certain model. 

While I don’t feel strongly that one model is better than another, I do have some caveats that I think are important to consider. 

  • Make your decision based on your company values, but try to consider as many different ways of thinking as possible before settling. 
  • Being transparent about your compensation strategy empowers individuals to make decisions based on their own values.
  • Market data accessibility means more people can make more informed decisions, including smaller businesses and individuals.
  • Compensation should always cover the cost of living, which may be above the market rate or even minimum wage in that locale. 
  • Equal pay isn’t always equal when you consider local taxes, social contributions, and other requirements.
  • Deciding how to pay someone is oftentimes deciding the kind of life they will lead — do it thoughtfully! 
  • Finally, while this is ultimately your decision to make, there is support available. 

I covered these points at length throughout this series, as well as many more intersecting issues. While I may not have come to any definitive opinion on how you should compensate your employees, I do hope this compensation series has helped you consider, theorize, and ask questions. 

 

— Bree Caggiati

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