As the world of work becomes increasingly globalized and more companies embrace remote work, the question of how to fairly compensate remote workers becomes more complex.
This is where companies opt for a salary structure that is more linear and transparent, with fixed salary ranges per position and everyone in those positions earning the same salary regardless of where they are located.
What is Equal Salaries to Similar Roles?
This is the other side of the payment structure among companies. Unlike location-indexed salaries, this strategy usually doesn't involve complex calculators or benchmarks. Instead, it recognizes that remote employees in similar job roles deserve to be paid equally, regardless of their location.
This can help to create a more level playing field for remote workers and help to prevent salary disparities based on location.
Benefits of Equal Salary to Equal Roles
Equality and Fairness
A sense of equality and fairness among employees is the most obvious benefit of equal salaries for equal roles.
Just like rewarding the best perks to your employees, this helps to foster a more positive and productive workplace environment, as remote workers feel they are treated fairly compared to their peers.
The sense of equality and fairness ultimately leads to increased engagement and motivation among employees.
This is especially true for remote employees based in developing countries, who may feel empowered by this type of salary structure. By fairly compensating all remote workers for their work, regardless of location, companies can effectively create a more engaged and motivated workforce.
Helps to hire/retain the best talent from developing countries
By offering equal salaries to employees based in developing countries, companies can effectively attract and retain the best talent from these regions.
This is because these workers are often attracted to the high salaries on offer, which helps to offset the lower cost of living in their home country.
For instance, these companies can hire the best talents from developing countries by offering them $100k. Although this might not appeal to talents in the most expensive places, like the Bay Area, it will be a gem of an offer for even the best talents in a developing country like India.
Remote workers can fully leverage salary arbitrage to earn or save more as they work. Working for a company that practices equal salaries for similar roles could skyrocket the income of digital workers.
Drawbacks of Equal Salary to Equal Roles
Expensive compensation budget, otherwise leading to less competitiveness in expensive cities
Paying the same high salaries to all employees, including those based in developing countries, makes the compensation budget expensive for companies.
This is because wages in developed countries are generally much higher than in developing countries. As a result, companies need to be mindful of their budget and bottom line when implementing this type of salary structure.
Some companies mitigate this drawback by lowering their salary package across the board in order to stay sustainable. Doing so will make these companies unable to hire good talent in expensive cities.
Some startups doing that variation start with a low salary budget and increase gradually as they gain funding or revenue.
They would typically hire from countries like India, Nigeria, or Brazil at the Seed stage, then from Poland, Romania, or Portugal at Series A, and only at Series B will they be in a position to compete for talent in London, Berlin, or NY.
Taxes and contractual setup lead to equality claims
Since employees are based in countries that can have massively discrepant taxes and other legal obligations between them, it can be a big challenge for the company to define what’s the variable to equalize on.
Should it be an equal cost to the company? Equal gross salary? Equal net salary? There’s no right or wrong. There are companies doing either of these options with success.
What’s important is that companies set a clear policy upfront on what they are equalizing on, and make it clear for everyone at the time of extending an offer. Failing to do that, employees who expect equality could potentially become unhappy for reasons beyond the company’s control.
Although there are drawbacks to providing equal salaries to similar job roles, it is a more preferred payment structure by freelancers than getting a location-indexed salary offer. With the benefits we discussed, this salary structure is a lot superior to the other when displayed from a remote worker's perspective.
On the other hand, this can get quite expensive for companies unless they manage to leverage it with adequate profit. So it's vital that companies keep an effective strategy at hand before bringing in an expensive compensation budget.
Ultimately, it will be a win-win for both remote workers and companies, if companies manage to leverage their payment structure and function strategies effectively and efficiently.
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