Tech startups who hire workers living all over the world tell us their answers to an uncomfortable question: How do you decide on a fair wage?
GitLabGitLab cofounders Dmitriy Zaporozhets and Sid Sijbrandij
- An increasing number of tech startups are opting to hire only remote employees, rather than work out of an office - a move that lets these companies hire top workers from anywhere in the world, without having to compete in the Silicon Valley talent wars.
- But this raises a hard question: Should you pay someone in the pricey San Francisco metropolitan region the same as a worker in places with a lower cost of living, like Indonesia or the Philippines?
- We spoke to three all-remote startups about how they try to keep things fair: Zapier pays the same to everyone, wherever they are in the world, while GitLab and Emsisoft try to benchmark against Silicon Valley salaries.
- Meanwhile, Microsoft, Amazon and Google tell us that they pay out different rates based on where a remote worker is based.
An increasing number of tech startups are making a dramatic choice - rather than open an office in a major metropolitan area, they'll employ only remote workers, so they can hire the best talent from anywhere. It means sidestepping both the Silicon Valley war for top talent, and the San Francisco housing crisis.
But the choice to go all-remote raises a big, sometimes uncomfortable question: When you're hiring workers from all over the world, how do you decide on a fair wage?
From country to country, and city to city, both the cost of living and the average household income can vary greatly. Just look at the United States: In San Francisco, the center of the most expensive metro area in the United States, the average household income is $140,720. Compare that to the national mean household income of $84,525 a year - and consider how widely those figures could vary internationally.
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"Someone living in the U.S. has much higher living costs than someone in Indonesia and the Philippines," Christian Mairoll, CEO of all-remote startup Emsisoft, told Business Insider. "We still have to consider the living costs that they have, but we try to keep the wages as close as possible."
Emsisoft threads this needle by benchmarking salaries against each other, and making sure that people living in countries with lower costs of living make no less than 40-50% of the salaries of people in more expensive countries.
Zapier, an all-remote work automation startup, takes a different tactic.
"The way we think about compensation is we pay the same rates nationally no matter where we're at," Zapier CEO Wade Foster told Business Insider. He says that the company only makes slight adjustments to salary based on the employee's location, but generally pays about the same everywhere.
Meanwhile, hot code-sharing startup GitLab, also an all-remote company, attacks the problem by setting a salary floor - no employee will make less than 41% of what they would pay them for the same job, if they lived in San Francisco.
"Paying someone in San Francisco the same you'd pay in Nigeria might be nice on paper, but in reality, one of you will be very well-off while the other is average," GitLab Chief Culture Officer Barbie Brewer told Business Insider.
"Or one will be very poor and not able to afford a place to live while the other is doing great. We try to have parity as much as possible, but that doesn't mean everything based on where you live will be the same."
This is all in comparison to the tech giants, who will sometimes hire remote workers if the candidate and the opportunity are both right.
A spokesperson for Microsoft says that the company sets a salary rate for each region of the world, and pays remote workers based on where they live. Importantly, Microsoft says, no remote worker will draw a different salary than someone doing the same job working out of an office in the same region.
Similarly, spokespeople for Google and Amazon both tell Business Insider shared that it will consider location when compensating its employees.