What is a good remote salary?

Hey,

I'm Sergio Pereira, and this is the Remote Work newsletter 👋

Last week I shared a few thoughts about the impact of AI in remote work, especially as ChatGPT and other generative AI tools become mainstream.

This week, I'll address some questions often asked about remote salaries. What is a good remote salary after all?

Well, the answer to that question would be different depending on whom we ask. It depends on one's context, especially the cost of living.

So let's drill down remote salary dynamics, and flesh out some important things you should know when applying to remote jobs (or when hiring remotely, in case you are in such a role):

1) Companies that pay salaries indexed to location

This means that employees with the same role in the company will earn different salaries, depending on where they live. Eg: An engineer in India earns a lower salary than an engineer at the same level in the US.

The benefits of salaries indexed on location, for companies, is paying lower salaries to employees who live in lower cost locations, so they can pay high enough salaries to attract people in expensive cities.

This means for example paying $60k/year to a Software Engineer in India, but paying $180k/year to an equivalent employee in New York.

The main drawback of this practise is that it can create some tension among employees, after all they are doing equivalent jobs but earning very different salaries.

2) Companies paying equal salaries around the world

This means that employees in similar roles and levels will earn the same salary. Eg: Engineers at the same level in India and US earn equal salaries.

The main benefit of this type of salary policy is to create a sense of fairness across the company, people don't feel bad that equivalent colleagues earn a higher salary.

Also, this policy is usually very competitive to hire people in lower cost locations. Even if the salary paid is a "low US-salary", it's very likely that it is already a life-changing amount that could attract the top 5% talent in lower cost of living countries. Imagine earning $70k/year while living in India, Pakistan, Nigeria, etc.

There's a common misconception about these companies, though. We are all looking out for those fat USD salaries. However, it's not so common that these companies pay high US salaries across the world (eg: above $200k/year). The few companies that pay them are well funded startups that operate fully remote, and those roles are incredibly competitive. Only the best candidates in the world will get them, those interview processes are very selective.

More commonly, these companies that pay equal salaries for equivalent employees around the world tend to set a budget that is half way between top US salaries and local developing country salaries.

Some companies will pay $100-150k/year, and that allows to hire the best people in the world except in the most expensive US cities.

Other companies will pay $50k/year, which is not very competitive to hire in the US, UK and most of EU. But it's still competitive to hire great talent in most of the world.

3) Companies that have ad hoc salary policies

These companies include most of early stage startups, agencies and many other companies that don't have formal salary policies.

These companies have a budget in mind, but they'll likely try to squeeze the extra pennies and negotiate each candidate's salary individually.

This means their policy is "offer the minimum a candidate will accept, up to a certain value". Eg: If the budget is $100k/year, they'll offer that to candidates in the US, but if a candidate is from India they'll try to negotiate down this amount as much as they can, and offer maybe $60k/year, which is already attractive for most candidates there.

Pro tip: As a candidate, when asked the proverbial question "What's your salary expectation?", do not reply with a number. The interview wants to anchor you as low as possible, don't follow. Instead, flip the question and ask what's the budget for the role. This way you're trying to anchor the interview as high as possible, instead of the initial framing.

If you're still pushed for a number, ask about the company's salary policy, and how much people are paid in equivalent roles. Try to gain context about the company and get a salary that matches the value you'll create for the company in case you join.

Instead of salary, think about value

Employment is a value exchange. You work for a salary, and that salary aims to improve the life conditions for you and for your family.

I used to think that living in Portugal was a curse, I thought I'd never access high paid jobs. Back then I thought people living in the US were super lucky.

However, now I think the opposite. Living in expensive cities is the actual curse, because you must earn the highest possible salary to sustain your life style. On the flip side, living in lower cost locations unlocks massive opportunity. Even with an "average remote salary" (in US standards) you can already be earning a life-changing amount, given your local country standards.

So, don't be too aggressive when negotiating a remote salary. Companies not paying high US-salaries is actually ok, and that can be the opportunity. If a company pays $50k/year for a SWE position, it means that all potential candidates in expensive cities are not applying, so those are the perfect first remote roles for most people in lower cost locations, and certainly a stepping stone to higher paid remote jobs ahead.

That happened to me. In my first remote job I earned $125k/year. It was a huge sum for me. Living in Portugal the maximum I had earned before was under $30k/year. However, no US-based CTO would accept that salary, it was too low for them, so I got the job. It made a big financial impact for me right there, but was also a stepping stone to higher paid remote jobs ahead.

I hope this knowledge can inspire you to seek a remote job that changes your life. Don't obsess about salary dynamics, just nail the skills that will get you that first remote job, everything is much easier after that first hurdle. In case you're actively searching for a remote job, have a look at this list of 1000+ companies hiring remote roles right now.

I'm also launching soon my first ever cohort based course and private community, where I'll be breaking down my knowledge into modules, and will help a batch of people find their first remote job. The launch will be private, join the waitlist and stay tuned.

Thanks for reading this newsletter until the end. You can read all past editions here. Make sure to share the link with your friends and colleagues so they can read it too.

See you next Friday,

Sergio Pereira,
Startup CTO & Remote Work Lover