What Salary to Offer to Remote Employees | Teami

How to Figure Out What Salary to Offer to Remote Employees

Expert guide on how to determine fair, competitive salaries when hiring remote employees across locations and roles.

Determining fair and competitive salaries for remote staff is crucial yet challenging. With distributed teams becoming the norm, traditional pay models strain to attract top talent globally. Salary-setting must balance employee needs, business spend, and market rates across locations. This article provides HR leaders the insights needed to optimize compensation for today's dynamic work environment. Learn how to benchmark roles based on skills, responsibilities, and geography. Discover what tools enable localized salary analysis and ethics audits. Gain strategies for smooth negotiation and adaptation. With the right frameworks, you can ethically align pay and incentives to acquire and retain the best remote talent within budget.

Key Determinants of Remote Employee Salaries

Employee Skills and Experience

A remote worker's specific skills and experience should significantly influence their salary. Those with niche expertise or greater proficiency warrant higher pay. Consider the employee's skill level for the role, programming languages mastered, systems understood, and tools utilized. Beyond skills, evaluate their experience. Seasoned professionals who can hit the ground running bring more value. For example, a Python developer with 5 years of experience deserves more than a junior developer.

When evaluating skills and experience, focus on the requirements for the role rather than general capabilities. A talented developer may command a high salary, but if your needs only require HTML, CSS, and JavaScript skills, base pay on meeting those needs. Consider both depth and breadth of proficiency for the job.

Job Responsibilities and Role

The responsibilities, complexity, and importance of the remote role help determine appropriate pay. More demanding positions requiring advanced capabilities, deep analysis, and significant impact warrant higher salaries. For example, a visual designer simply executing existing creative warrants less than a UX designer conducting user research, testing concepts, and driving digital experiences.

Evaluate if the role is a technical expert position or a management position overseeing people and operations. Consider the scope and scale of decisions and deliverables required. Confirm the impact of the role, such as directly driving revenue and growth vs. providing secondary support. Weigh factors like the level of problem solving, subject matter mastery, and communication skills needed.

Industry Benchmarks

Leveraging industry salary data provides guidance on benchmarking pay for remote roles. Review typical salary ranges reported for the position within your sector. For example, data science salaries in tech far exceed those in retail. Consider the pay bands at competitors hiring for similar remote roles. Besides reviewing industry reports, speak with other companies to determine market rates.

Remember that cost of living varies globally, so account for geographic differences when establishing pay. Normalize salaries relative to local standards rather than simply converting to USD. Keep pay competitive within a remote employee's regional market. Also confirm salaries align with local labor laws and regulations.

Remember to implement your company's compensation philosophy when determining benchmarks. Consider whether your strategy aims to lead, match or trail industry averages for talent acquisition and retention.

Geographical Location and Its Impact

Advantages of Location-Based Pay

When hiring remote talent, adjusting salary based on an employee's geographical location offers several advantages. Most importantly, it allows you to normalize pay relative to local costs of living. For example, paying someone in Bangkok the same USD salary as someone in San Francisco fails to account for the huge difference in expenses.

Location-based pay enables competitiveness within regional talent markets. You can offer pay aligned with local rates to attract top candidates wherever they reside. This flexibility also expands your hiring pool globally. With remote work, you're no longer limited by physical proximity in sourcing skills and capabilities.

Geo-specific pay can incentivize hiring in lower cost-of-living areas to maximize budgets. For example, employing remote developers in Eastern Europe versus Silicon Valley cuts costs substantially. This approach provides financial benefits without sacrificing quality.

Challenges of Location-Based Pay

However, location-based salaries also introduce complexities. First, determining accurate, up-to-date salary data globally is difficult. Reliable localized pay benchmarks require significant research.

There are also legal and ethical considerations around disclosing employee locations and adjusting pay accordingly. Transparency is crucial to avoid discrimination.

Multiple pay scales can create internal equity issues. Employees may feel it's unfair for remote colleagues in lower cost areas to earn similar salaries. Managing these perceptions requires strategic communication.

As remote workers relocate, altering their pay on the fly gets complicated. Policies will be needed to handle salary changes, cost of living adjustments, and more.

Global Cities and Cost of Living Indexes

Understanding how global cities rank in terms of cost of living will inform location-based pay decisions. Useful tools include Numbeo's Cost of Living Index and Mercer’s Cost of Living Ranking. They compare expenses like housing, transportation, and utilities across hundreds of cities worldwide.

For example, Singapore and Zurich top the lists as most expensive. Eastern European and South American cities rank far lower. Among US cities, New York and San Francisco have the highest costs. Even within the same country, costs can vary greatly.

When determining salaries, don’t rely solely on simple country comparisons. Analyze specific city costs tied to where remote employees are based. With indexes as reference, you can tailor competitive pay accounting for local standards. Regularly reviewing rankings also allows adjusting to shifting prices globally.

Comparing In-Office vs. Remote Salaries

Benefits of Remote Work

Remote work offers appealing advantages that can influence salary considerations. By working from home or anywhere with internet access, employees avoid commute times and costs. Remote staff also benefit from greater flexibility regarding when and where they work, allowing for better work/life balance. These perks improve morale and can enhance productivity.

With no need to commute, remote workers gain back precious time and avoid transportation expenses. For those with lengthy commutes, this provides substantial quality of life improvements. Employees also appreciate the ability to have flexible schedules and work from their preferred locations. Whether it's at home, a cafe or beachside, they can create comfortable and customized workspaces. These advantages incentivize top talent to accept lower base salaries in exchange for the benefits of remote work.

Office Overheads vs. Remote Work Setups

Traditional office spaces carry major real estate, equipment, and operational costs. Expenses like rent, office supplies, utilities, and IT infrastructure quickly add up. With remote staff, companies can downsize offices and reduce overheads. Employees working from home also cover their own basic equipment and workspace costs.

For example, a company might spend $20,000 a year per employee on office space and facilities. With remote staff, those costs shrink dramatically. Some distributed companies operate with just a small shared coworking office. Remote workers Armed with laptops and internet access, remote workers can get by with minimal company-provided tools. The lower overheads allow firms to maintain profit margins while offering lower salaries.

Real-Life Salary Case Studies

When the pandemic forced remote work, many companies adjusted pay. Home Depot, Dell, Stripe, and others cut salaries citing location-based pay practices. Workers moving from high-cost cities to more affordable ones saw salaries decrease. However, some firms like Reddit and Zillow chose to keep salaries consistent regardless of location.

HubSpot adopted a progressive policy, reducing pay but never more than 10%. They also increased minimum salaries to $60,000. Other companies like Mailchimp and Vista established pay tiers based on cost-of-living. In these systems, expensive cities like San Francisco and New York warrant higher salaries than cheaper ones like Nashville or Austin.

The approaches vary, but remote work has prompted reevaluation of compensation. While salaries may decrease in lower cost areas, pay still reflects local rates. The overall equation balances employee needs, company goals, and market forces. With Teami timesheets, businesses can easily track remote and in-office staff hours and analyze productivity.

Tools and Platforms for Salary Benchmarking

AI-Driven Salary Tools

Cutting-edge AI tools analyze millions of data points to generate accurate salary recommendations. Platforms like Comptryx use advanced algorithms to instantly benchmark roles. After entering a job title, location, and basic qualifications, the AI compares with its salary database to produce a customized range.

AI tools also account for real-time market trends versus relying solely on historical data. As the talent landscape evolves, the tech continuously updates suggestions. By leveraging AI, companies get robust insights without manual research. Comptryx even optimizes suggestions for remote versus in-office roles.

Industry Benchmark Databases

Industry benchmarking databases offer aggregated salary data across sectors. PayScale provides crowdsourced compensation profiles for thousands of positions. You can filter by job title, location, experience level, skills, and more. The platform analyzes pay ratios at specific companies to inform its recommendations.

Role-specific resources like the 2020 Robert Half Technology Salary Guide contain comprehensive benchmarks. The report compiles prevailing wages for developers, data scientists, IT project managers, and other tech professionals. Firms use the yearly guide to align pay with industry averages.

Compensation Analytics and Insights

Robust analytics tools like Compt’s software produce visualizations of compensation data. The dashboards allow filtering by departments, locations, jobs, and other criteria. Interactive graphs showcase trends in salaries over time, projected increases, and more.

Powerful analytics provide insights beyond just salary ranges. Businesses can identify pay inequities, map trajectories for promotions, and forecast budgets. The data empowers leaders to make strategic decisions regarding remote and in-office talent compensation.

Advanced analytics platforms integrate peer benchmarking as well. For example, Compt taps into its database to analyze pay at comparable companies. This allows businesses to develop competitive compensation strategies.

With the help of these modern tools and platforms, companies can overcome remote hiring salary challenges. AI, benchmarks, and analytics offer the necessary insights to optimize compensation. By leveraging technology, businesses create data-driven frameworks for determining fair pay. The approach produces win-win outcomes for employers and remote talent.

International Labor Laws

When hiring remote employees internationally, companies must comply with labor laws in each country. Understanding the legal landscape is crucial when determining salaries.

Many nations have regulations around minimum wages, overtime pay, benefits, and more. For example, in the EU full-time workers are entitled to at least 4 weeks of paid vacation annually. India mandates employers provide paid maternity leave. Violating these statutes when compensating remote staff can trigger lawsuits and penalties.

Beyond minimum requirements, some countries limit how much you can decrease salaries for remote roles. Others restrict asking employees' current or past compensation. Staying updated on the myriad global, federal, state, and local laws impacting pay prevents missteps. Consult experienced local payroll and HR services providers when expanding teams abroad.

Ethical Pay Guidelines

Establishing equitable, ethical remote salaries requires analyzing beyond legal minimums. What pay rates are truly fair and competitive? First, ensure salaries adequately cover local costs of living and are in line with industry benchmarks. Underpaying remote workers because it's cheap exploits labor in poorer regions.

Avoid drastic pay cuts purely based on geography. Slashing 50% or more for employees moving from Silicon Valley to cheaper cities strains morale. Consider caps on location-based pay adjustments. Likewise, increases for those relocating to high-cost areas should be reasonable.

Transparency around compensation processes also matters. Clearly communicate pay rates and formulas to candidates. Explain factors like cost-of-living indexes used. Annual pay equity audits help spot discriminatory practices. When disparities exist, offer additional training, mentoring and advancement opportunities.

Ultimately effective remote salary strategies balance employee needs, ethics and the bottom line. Savvy businesses realize fair pay boosts retention and performance.

Wage Discrimination Cases

Several recent lawsuits allege remote salary discrimination. In He v. Apple Inc., a program manager claimed pay discrimination related to remote work location changes during COVID-19. The lawsuit accuses Apple of unfairly reducing salaries when employees left Silicon Valley for less costly cities.

In another case, Bornstein v. Spotify, a sales associate sued after a relocation from New York to California prompted a salary decrease. The plaintiff alleges the pay cut violated California's salary history ban.

Such lawsuits emphasize the legal and ethical intricacies of remote pay decisions. Following established laws and implementing ethical practices reduces exposure to claims of unfair compensation. Proactively communicating policies, offering training, and addressing issues internally further helps avoid lawsuits. With the right frameworks, businesses can ethically optimize salaries when managing a distributed workforce across borders and locations.

Mastering Remote Salary Negotiations

Expert Tips and Strategies

When negotiating salary, focus first on conveying your skills and accomplishments relevant to the role. Demonstrate you possess the capabilities to drive results and add value from day one. Come armed with data quantifying past achievements like key metrics improved, revenue generated, and projects delivered.

Research typical pay for the position at comparable companies using sites like Glassdoor and Payscale. Understand what the role warrants based on factors like skills, experience, and geography. Consider your minimum salary needs, but also have a desired range in mind accounting for added value you provide.

Avoid being the first to state an exact figure - let the recruiter provide a pay band first. If required to share expectations early on, give a range like $65,000 to $75,000. Pitch yourself at the higher end citing your background. Be a confident advocate for your worth while remaining open and reasonable.

Negotiate any additional perks that sweeten the deal like signing bonuses, extra vacation days, and work from home equipment stipends. Focus negotiations on total compensation not just base salary. Carefully review the entire offer before accepting. Get any agreed upon terms in writing.

Successful Negotiation Case Studies

A marketing manager in Austin with 8 years experience was offered $85,000 for a remote position. Based on research, he knew the role’s market value exceeded $95,000. He framed negotiations around proven contributions at past companies, highlighting campaigns that generated over $5 million in pipeline. He remained firm yet polite on the higher salary needed to make the move. The company compromised at $92,000 base with a $5,000 signing bonus.

A software engineer in Toronto received an offer 10% below her target. She emphasized specialized skills in Kubernetes the role required and showed comparable salaries on Glassdoor. She asked about bonus eligibility and additional paid time off to bridge the gap. The recruiter agreed to increase the base pay offer by $5,000. They also added a flexible 25 day PTO allowance, aligning closely with the engineer's goals.

Win-Win Negotiation Strategies

Effective negotiation satisfies both parties. Strive for mutual understanding rather than treating it as a zero sum game. Communicate your value-add clearly while respecting the company’s needs.

Ask smart clarifying questions on pay rationale to surface win-wins. Perhaps special tenure milestones unlock salary jumps or performance bonuses. Convey flexibility around timing if a higher salary can't be accommodated immediately. Maybe it's possible after a probation period or 2023 budget cycle.

If required, share constructive counteroffers like accepting a lower base in exchange for more remote days. Collaborate to align incentives and demonstrate commitment beyond just pay. With creative thinking, even difficult negotiations can end favorably.

Future Work Predictions

Experts widely agree that remote work is here to stay and will only continue growing in the coming years. A Gartner Survey found that 46% of employees will likely work remotely at least part of the time after the pandemic, up from 30% before COVID-19. PWC Research predicts over 25% of professional roles will be fully remote moving forward. These predictions signal major shifts in how companies hire and compensate talent. With increased competition for skilled remote workers, salaries may rise. Upworks report shows more businesses are expanding budgets for remote roles given shortages of technical and creative talent. As the dynamics evolve, compensation strategies must also adapt.

Remote Work Growth Data

Data confirms the explosive growth of remote work over the past few years. Flexjobs reports remote job postings on career sites increased over 350% since 2005. Surveys by OwlLabs found 50% of full-time U.S. employees now work remotely at least part of the time, up from 31% pre-pandemic. Buffers report reveals 99% of remote workers want to continue long-term. The demand from both employers and talent points to further expansion of remote roles and the need to remain competitive on salaries.

Expert Salary Opinions

Thought leaders see remote salaries rising in high-skilled fields given talent shortages while decreasing for admin roles easily outsourced abroad. Economist Paul Krugman predicts a bifurcation based on skill levels. Likewise, the CEO of RemoteForever expects increased pay in tech and sales versus declines in general admin or support functions. However, salaries may normalize globally as remote work removes geographical barriers.

According to CompensationLeaders, careful attention to ethics and pay equity will be crucial with dispersed talent. Salary setting must balance company needs, employee expectations, and market rates. Regular audits, transparent policies and proper benchmarking will enable fair and competitive pay. With the right frameworks, remote salaries can incentivize top talent within budget constraints.

In Summary

In today's increasingly distributed work landscape, determining appropriate and equitable salaries for remote staff requires careful analysis of multiple factors. As outlined in this article, key elements like an employee's specific skills, job role complexity, industry benchmarks, geographical location, and relevant laws all significantly impact pay decisions. While shifting to remote work provides great advantages, the model also introduces salary complexities around variability in cost of living, local competitiveness, internal parity perceptions, and wage discrimination claims.

By leveraging the right tools and strategies, HR leaders can overcome these challenges to optimize salaries. Advanced platforms enable localized salary benchmarking, peer comparisons, and ethics audits to ensure fair compensation. AI tools provide instant recommendations adjusted for real-time data. Clearly communicating policies and changes transparently also smooths the process. When negotiating offers, both parties should aim for mutually beneficial outcomes, not zero-sum games.

As remote work proliferates in the coming years, compensation will remain a complex balancing act between employee needs, business spend, and market forces. However, with the insights in this guide, companies can devise data-driven frameworks to set fair pay rates that attract top talent within budget. The future of work requires compensation to become more adaptable. But by staying agile and ethical, businesses can build distributed teams successfully while keeping employees happy.

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