Remote Salaries: Understanding the Compensation Divide

Sergio Pereira -

"How do Remote Salaries work?

Some companies pay high wages, but others cut salary for employees in low-cost countries."

After having hired and managed hundreds of engineers in my remote teams, this is what I know about remote salaries.

As more teams go remote, CTOs and HR teams have a decision to make:

  • How much should they pay to each remote employee?

Two schools of thought have emerged:

Salaries Indexed on Location

Eg: An engineer in India earns a *lower* salary than the same engineer in the US.

Benefits

  1. Lower cost - Paying less to most of the company's employees saves money
  2. Competitive in expensive cities - That money is usually invested in attracting top talent even in expensive cities

Drawbacks

  1. Creates team tension - Employees don't usually feel "ok" by earning half the salary of a colleague in the same role
  2. Hard to retain employees in low-cost regions - Their lower salary means they can leave if offered better terms

Equal Salary for the Same Role Regardless of Location

Eg: Engineers at the same level in India and US earn the *same* salary.

Benefits

  1. Equality & fairness - Equal roles get an equal salary, and no one feels they are paid less than an equivalent colleague
  2. Hire the best talent in low-cost regions - A low salary in the US is a huge salary in India, and get's the best talent there.

Drawbacks

  1. Higher cost - Paying the same to everyone tends to be more expensive
  2. Not competitive in high-cost regions - A high salary in India is likely still not be attractive for US-based Engineers

My preference is equal salaries for similar roles:

  • Easier to set up and manage in a Startup context
  • I like the sense of fairness and being transparent about salaries
  • If I have a tight budget, I’m constrained to hire mostly in lower-cost countries, and I’m ok with that.

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