Late night thoughts about compensation in a remote world

7 min readJul 25, 2022

Something that has been on my mind for ages now is structuring the compensation in an ever-increasing remote world. I have decided to put these thoughts in writing after reading multiple approaches from remote companies and having multiple discussions with my friends and other People leaders.

Hundreds of thousands of people have spent the past 2,5 years working remotely. Staring at our laptop screens from home, nomading or working in the office, our work lives have become location-independent. With this, many, including myself, have started to question and re-evaluate the compensation philosophy of remote companies.

What is the compensation philosophy?

In my point of view, compensation philosophy allows companies to make decisions on how they approach setting up salaries and communicating about this to their employees. Covering the level of the market (50th percentile? 75th percentile?), the market to base the data on (local? the whole world?), its fairness, transparency, fighting the gender pay gap, and outlines appropriate times and areas for negotiation. Lastly, there should be a clear plan on how to communicate the logic behind our compensation philosophy.

Remote work compensation

Over the past couple of months, I have seen several approaches to remote work compensation philosophy, and I could not stop thinking about all conversations I had with people around me.

Thinking of it as a person, why should it matter from where I perform my job, as I am performing the same tasks and having the same skills as someone who happens to live in a more “expensive” area? Is it fair to be paid less than a junior colleague just because they live in a higher-cost country? If one moves from a low-cost country to a high-cost country, do their skills suddenly become more valuable?

The obvious solution to all the questions above would be to pay everyone a location-independent salary. And to be able to attract the best talent, one would want to pay the top the world salary.

IDEA 1: Pay at top market world salaries (e.g. San Francisco) & make some small adjustments to the cost of living

Companies have chosen to pay top market world salaries, such as San Francisco while making some adjustments to the cost of living. For example, Buffer benchmarks a position at the 50th percentile of San Francisco and pays out 90% of it to everyone who does not live in a high-cost city (SF, London, New York). Similarly, PostHog chose San Francisco as their benchmark and lower-cost locations are at a 0.5 multiplier. Still, multiplying the SF salary by 0.5 in most locations still returns an enormous salary for the local market.

While it allows the company to attract the top talent in the world and makes it easy to plan the salary costs, it also creates a huge commitment to the company. Many who have commented on why they don't pay top-of-the-market salaries stated that they want to keep their salary costs sustainable over the long term.

Secondly, while this may sound like the ultimate capitalism, there might be something to it. While companies may be able to attract great talent, it may not be the best strategy to retain it. If people were able to make enough money to sustain their lifestyle for several years while only working for a short period of time, would they have enough motivation to stay in the company long-term? And would it even attract the right people?

Moreover, I believe that it creates issues in the local economy.

People could be paid several times more than what people in the local economy are paid. Such people are therefore driving the prices up (for example by living in cities which fewer and fewer people can afford) or spending this money in other economies (house abroad by the sea). On the other hand, they may create more jobs in the local economy (hiring help for home).

It makes it impossible for local companies to compete for talent in the country. Local companies cannot thrive, as they are not able to afford the top talent, and the economy is suffering more and more, widening the spread between the well-paid individuals and the rest of the country.

And while the primary purpose of companies is to be the best in the world and make more money, is the company able to argue its socio-economic impact on society?

Anyway, if companies don't pay top-of-the-world salaries, why not to chose some competitive salary for their region? Surely it should not be that people who live in for example Bratislava are paid half of what are people living and working in Vienna (just 1 hour away) paid?

IDEA 2: Pay at top market salaries of the region (e.g. London for Europe)

Some companies have chosen to identify a top market where they want to attract talent and are benchmarking their salary to it. For example, Whereby has identified London as their desirable market for talent in Europe (and ROW for accuracy) and is paying everyone in the area a London salary.

While it allows the company to compete for their desired talent, without the cost of the top global salary, it still creates inequalities in the local regions. Paying a London salary to someone living in South East Europe could be tripling their local salary.

It also makes it harder for remote companies in the regional market to compete for talent. For example, a company paying a top Czech salary won’t be able to compete for talent in Romania, where companies could be paying a top UK salary.

To eliminate the high cost to the company and the socio-economic impact, some companies have decided to argue that the fair approach is to pay at the top-of-the-local market.

IDEA 3: Pay at top market local salaries (e.g. Prague for the Czech Republic)

Some companies, such as Slite, have decided to pay top-of-market local salaries, so Prague salary for everyone who lives in the Czech Republic, London for everyone who lives in the UK, etc.

While this won't probably allow the company to compete for the top talent in the world, it makes a lot of sense from the socio-economic point of view, as Slite argues. By paying people top of the market in their local economy, they are not restricted to living in cities (where the top jobs would be located in a non-remote world). They can choose whatever works best for them, be it the city, or the countryside.

Many countries are currently battling struggling rural areas. A lack of high-paid jobs or the need to commute often discourages people to live in villages. But what if your job is in your home, and you don't need to commute? Would you still want to live in the city centre, if you could live close to nature and enjoy the outdoors when you are not staring at your laptop? Wouldn't you want your children to grow up outside in fresh air, rather than in a jungle of skyscrapers?

Closing thoughts

In my point of view, none of the remote-compensation philosophies is perfect. While one allows companies to attract the best talent in the world, the other makes you more aware of the social responsibilities companies hold.

What I have seen over and over is that employees appreciate the transparency of the compensation philosophy. Each company is unique and its reasons for choosing one or the other approach. Communication is the key to helping the employees understand why they are being paid the way they are paid. Here is where the compensation philosophy with a clear communication plan comes into place.

As for individuals, I hope that these thoughts will help you understand all the challenges of compensation in a remote world. While it's natural for people to want to maximize their income, is it worth striving for the top money? After all, if you are reading this article and working remotely, I am almost certain you are on Level 4 of Hans Rosling's developing/developed world scale. In fact, it is probable you may also be on the additional Level 5 stage, and then more money in your own pocket might not be what will make you happier.