The Issue With Buffer’s Salary Formula
You may or may not have heard of Buffer, the social media tool that lets you queue up your broadcasts for distribution at proper times, among other features. They’re a relatively small startup, but successful, and they’ve built up a dedicated user-base that’s helped them reach profitability and continue to grow. In a time when the bulk of startups large and small burn far more than they make and run on dreams of future potential, that’s refreshing. Even more refreshing: their open salary model. That’s right, you can see what everyone at Buffer makes, at any time, and even use their model to figure out what they’d pay you if you were hired there.
So as to be clear here: I have nothing against Buffer. I think they’ve got a nice product (I tried it out a couple years ago, didn’t find it that useful for my social media needs, but still fire it up occasionally when I want to schedule a specific tweet). I think their CEO seems like a great guy who is genuinely invested in both his users and his employees, rather than simply in trying to be a rich tech dude. I think the open salary model is absolutely fantastic conceptually, and I respect the courage it takes to put it out there for scrutiny. All that stuff is great.
What I find less great is the way the salaries are determined, and I want to address it here because it reflects a common mindset that I find frankly baffling for distributed companies. That mindset is that where a person lives should somehow have an impact on what they make.
Let’s talk about location-based salaries: traditionally speaking, if you locate your business in Kansas, you are likely to make less than a business located in New York or San Francisco, but you also have to pay your employees far less, because the local cost of living is dramatically lower (take it from someone who’s lived in both Manhattan and Indianapolis). This concept makes sense for physical businesses with physical products, but breaks down rapidly for internet companies with distributed teams; the question is relevancy. In a company with no physical product or location, customers can come from anywhere and employees can work from anywhere. Buffer’s formula explicitly acknowledges this freedom, and takes your chosen location into account. As a result, they will pay you more for the same job if you live in New York than if you live in Oklahoma City.
Their blog update about the new salary calculator attempts to explain that they not only adjust for location, but they adjust for a general happiness index. They do this because otherwise people working in places where the average living wage is tremendously low (say, the Philippines) would be penalized by raw math into living a less comfortable lifestyle than those in an American city, even a cheap one. That makes sense — they’re basically normalizing not only for cost of living but for standard of living, and I appreciate that. I just don’t think it’s necessary. In fact, I think it’s correcting for an inherent flaw in the formula.
Part of the value of distributed workplaces, for the employee, is that they get to live and work where they want. But this salary system effectively assumes that all employees want the same level of comfort, size, and opportunity from their surroundings. If you make $130,000 in San Francisco, congrats, you might be able to afford a one bedroom apartment without having a roommate. But if you’ve chosen to live in a less expensive city, why should your salary be downsized so that you can only afford a comparable living situation? The whole point of living in a less-expensive city is that it’s less expensive.
That is to say: if the salary is $130k/yr either way, it makes the choice much more significant to the employee. Live in SF and make $130k, and you get a small apartment but all of the benefits that come with that city: access to a tremendous amount of culture, amazing food, the ocean, easy access to tech training and conferences, a massive potential professional network, and a million other perks. Live in Buffalo and make $130k, you get different benefits: a much bigger, much nicer house. A yard. Probably a boat, if that’s your thing. A car. A snowblower or six. These things matter to people, too; it’s not just a question of “can I afford housing?”
If you live in a suburb of Manila on that salary, well … you can probably afford a full-time maid and driver. But why is that a problem?
As an example of what I’m talking about, several years ago my wife was given a choice: move to Dallas, Texas or quit her job. At the time we were living in Brooklyn, paying $2,600/month for a 2-bedroom apartment (which was 1.5x the size of the $3,100/month 2-bed we’d moved out of in Manhattan). The Texas position came with a salary increase and a path to promotion — they very much wanted her to take it. Living there on both of our salaries, we could have easily owned a five bedroom house, two cars, a pool, a boat, and more.
She chose to quit her job, a decision which I strongly favored. Why? Because we’ve both been to Dallas several times … and neither of us has any interest in living there. It doesn’t fit with us. That doesn’t mean it doesn’t fit with others, though, which is why it’s one of the largest cities in the country. I know many people in Dallas who’d think our decision was insane. They’d look at their quiet, comfortable, 3,000 square foot palace on one acre of property, and then at our 800 square foot apartment next to a fire station and two bus stops that cost twice as much, and wonder what the hell we were thinking. The thing is: both sides are right, because both sides are doing what makes them happy.
There are people who would happily choose Buffalo over San Francisco. But if you normalize down so that your employee in Buffalo is only making about $80k — a $50,000 per year salary reduction — all of a sudden they’re less capable of taking advantage of the things that drew them to that area. Now your Buffalo employee has to live in a similar housing situation to whatever your San Francisco employee is dealing with, but without the fringe benefits that make people accept living in such circumstances in San Francisco. This is not a slight on the city of Buffalo, it’s just the reality: people put up with living in shoeboxes in San Francisco, New York, LA, and a few other major cities because those cities offer benefits that places like St. Louis, Kansas City, Tacoma, and Tampa Bay don’t. To some, those benefits are worth it. To others, they’re not. In some cases, what one person considers a benefit (for example, the huge number of people) might well be a strong deterrent to someone else.
I like and appreciate much of what Buffer is doing with their salary system, but I think they’re misguided here. It feels too much like they’re punishing those who value space and comfort over those who value other factors. It’s not necessary to adjust to make things fair if you just pay what you think the position deserves in the first place. If your senior engineer’s worth $130k, pay her $130k. Where and how she chooses to spend that $130k is not, at this point in the 21st century, really relevant anymore.
Christopher Buecheler, a front-end web developer/designer currently moving to full-stack, was an integral early hire for startups GameSpy Industries, OkCupid, Crispy Gamer, and GoldenSpear. He has also freelanced for many clients, including current gigs with startups Volt Server and Tizra. He’s lived in Syracuse, Buffalo, Costa Mesa/Irvine, Philadelphia, Manhattan/Brooklyn, Indianapolis, Providence, and Paris. When he’s not writing code, he writes Sci-Fi and Fantasy novels.