Ask HN: Local vs. remote salary gap

https://news.ycombinator.com/item?id=7973304

by reinhardt • 12 years ago

74 45 12 years ago

news.ycombinator.com

Any info or insight on how common is it for companies that have both local and remote developers to offer different salary ranges based based on the employee's city/state/country? I am talking about regular full time remote employees ala 37signals, not lowest bidder outsourced contractors.

nedwin• 12 years ago

It's relatively common for their to be a gap between local and remote developers.

Buffer have been incredibly transparent about their approach to this: http://open.bufferapp.com/introducing-open-salaries-at-buffe...

GFK_of_xmaspast• 12 years ago

Incredibly transparent about their low-ball salaries.

joncp• 12 years ago

What do you think they should be?

nilkn2• 12 years ago

The salaries are low for San Francisco but high for most of the country. The people working remotely are getting a great deal, provided they're using the opportunity to live cheaply. The people working locally in SF not so much.

TheCoelacanth• 12 years ago

It seems like instead of being low across the board, their base salary is too high and the premiums for expensive locations and for experience are too low. For instance, a junior engineer working in Manilla is making a killing while a lead engineer working in San Francisco is getting horribly low-balled.

bfwi• 12 years ago

As I read this, Buffer doesn't pay remote employees less. Rather, you're payed more if you work from expensive cities (eg. Hong Kong), than if you work from cheaper cities (eg. Bucharest)

izolate• 12 years ago

I've never understood or agreed with this approach. Your lifestyle choices should have no bearing on your salary. If somebody reduces costs by choosing a cheaper city to live in, it should be regarded as any other frugal activity. That is, an independent and completely personal affair.

I understand the cost saving benefit from an employer's perspective, but since that's not me, I've chosen my side.

quaffapint• 12 years ago

I'm in a big financial institution in the US and we have many remote and many local workers in the IT side. The only difference in pay (that I know about) is they might pay local more in some areas because the cost of living, and often the wages, are higher in that area (like San Fran). Only bummer is they're slowly doing away with the remote working.

ChiperSoft• 12 years ago

Preface: this is purely anecdotal.

I've worked at two companies where I was explicitly told that I was being given a lower offer because I was working remote instead of relocating. Both companies offered to pay me more if/when I decided to relocate.

Both companies had lousy policies regarding remote employees that left me feeling like a second class citizen within the organization. Poor communication practices, poor or absent advancement opportunities. Both jobs ended around the 8 month mark.

By comparison, two other companies that I've worked remotely made me excellent offers, had awesome policies, great communication, and provided merit raises. At those places I felt like I was on equal footing with all other staff.

So, anecdotally, yes, there can be a gap, but any company that is likely to pay you less as a remote developer probably isn't going to be a good company to work remotely for.

patio11• 12 years ago

Anecdotally, companies which I've worked with set bands based on local market conditions and allocate you within the bands on a roughly cross-company performance basis. e.g. 10 levels of engineers, level 3 engineers in NYC and Bogota are roughly comparable in skill level but the ones in NYC make quite a bit more.

Mostly for internal sensibilities of fairness, it is generally the case that e.g. level 3 engineers in Bogota working at the company would earn above-market for their skillset in Bogota. The companies tried to strike a balance between "We want to pay them equitably with our employees in high-cost US locales.", "We want to retain them versus other offers.", and "We do not want to give them golden shackles by e.g. paying grossly more than any employer in their low-cost locale."

This assumes functioning remote cultures and regular, full-time, full-class employees. Consultants obviously do things differently. (And any consulting client which made reference to Nagoya FTE rates in a negotiation with me would have gotten a firm handshake and non-specific pleasantries immediately.)

ryanSrich3• 12 years ago

It's very interesting to read that most companies change salaries based on location. I'd like to hear from someone in a senior level position explain the reasoning behind that.

I think that it would make the most sense to pay someone what they are worth, regardless of location.

As a remote worker who moves quite a bit I'd be constantly having to renegotiate my salary.

troels• 12 years ago

Sense for who? As an employer, it makes sense to pay as little as you can get away with. Cost of living has a pretty big say in that matter.

bgun• 12 years ago

We try to equalize net pay taking into account a reasonably consistent standard of living. As mentioned above, equalizing gross salary across geographies where employees have dramatically different purchasing power doesn't feel fair and takes a toll on morale.

If you move often and work remotely, it seems to me that salary renegotiation would become as routine as any number of other tasks you doubtlessly encounter.

ryanSrich3• 12 years ago

What doesn't seem fair is that if I move from San Francisco to Kansas City to save money my pay goes down. I'm not doing anything differently. I'm still working the same amount of time, doing the same level of work.

michaelt2• 12 years ago

Let's say market rate for a programmer in San Francisco is five times the market rate for an equally good programmer in Bangalore.

Why would you hire one guy in Bangalore and pay him five times market rate, when you could hire five guys and pay them exactly market rate, and presumably get a bunch more work done?

(Obviously it isn't quite this simple, programmers are special snowflakes who cannot be substituted, it's worth paying more for talented people who get more stuff done, larger teams have greater management and communication overheads, remote workers will be in inconvenient timezones etc but my point remains even if you decided to hire three guys at 60% above Bangalore market rate)

crpatino• 12 years ago

Definitively not a "senior level position" guy, but let me give it a try.

There is no such thing as what you are worth.

Let's assume that it is possible to asses your BaseWorthIndex, which would include such factors as your technical skills, people skills, general experience, relevant industry experience, motivation, work ethics, etc. You will notice that even this base index will not be a constant over time (in general, you learn as your career moves forward, but you may also pick up vices), nor will it be the same for all positions for which you are a potential candidate (industry experience and motivation may vary widely from one position to another).

If you want to consider that your TrueWorth is the amount of value you add to your company by direct result of your labor, you have to consider that this is proportional not only on your BaseWorthIndex, but on a number of force multipliers that your employer provides (or fail to provide). Doing the same excellent work for an obscure IT department in some random enterprise, for a high tech big corporation, for a SV startup or for a non profit results in very different outputs, and that more often than not these are out of your control.

In a sense, the employers with bigger multiplier factors want to bring in the best talent, and should pay above average salaries, industry-wise, but it's not required that this extra factor has to be directly proportional to the value added by your position.

If on the other hand, you want to define your TrueWorth in terms of a ratio between your BaseWorthIndex vs average BaseWorthIndex for your industry, you are in similar problems. Being (noticeably) above average means you may command above average salaries, but it does not mean an arithmetic proportion will be calculated; after all, our BaseWorthIndex is a fiction and it would be extremely hard to measure.

Then there is the issue of cost of living. Since as we discussed before, your compensation is not defined in absolute terms but relative to your peers, the issue of how much does it take to make a decent living at your current location comes to play. Take into account also that this is an asymmetric market and that you are always at disadvantage. I have seen more than one good friend and colleague been lured to NYC or SV/SF on the promise of plump returns, only to find out that cost of living lets them in worse conditions that what they had already achieved locally.

khuey• 12 years ago

There's no "what they are worth" without a market, and the location is an inherent part of the market because most companies don't do remote work.

ktavera• 12 years ago

I make the same remote as I did as an in-house senior developer. But I will note that when I was interviewing for remote opportunities I came across a lot of cases where the salary was different for remote and on-site employees. Even signing bonuses of $10k or so to come in and work from the office.

programminggeek• 12 years ago

I think there is something sort of foolish about the fact that across the board employees are basically not allowed to mention real numbers regarding how much they make or even things like the industry average pay.

Read these threads and you almost never hear anyone mention real numbers because they are terrified of either being fired or having their peers realize what a good/bad deal they've made.

Yet, in a lot of public institutions like Universities, public schools, salaries are a lot more transparent.

Companies probably don't want people to know what other people make because it gives the individual leverage to negotiate. We as developers are terrible at negotiating and don't want to admit it.

Anecdotally, in Lincoln, NE I've seen developers paid anywhere from $25,000 to $120,000, but most range in the $35,000 - 65,000 range. I believe most devs at UNL or the state of NE fall between 45k and 65k, but some can be a good bit higher.

What gets me is if a dev in the midwest who would normally get paid $60,000 or so, how much should they get paid as a remote worker for a startup in SF? In SF I assume a dev costs $120,000 or more, so if you were being hired there what is the right number to ask for?

In a truly remote work environment, does it really make sense to pay dramatically less or more just because of where someone lives? Is someone's relative value decided by their location or by their skills and abilities?

dankoss• 12 years ago

I'd suggest the reason people don't want to talk about how much they make is that it's a reflection of their self worth, and there's always someone who can anonymously claim to make more.

michaelt2• 12 years ago

  Companies probably don't want people to know what other
  people make because it gives the individual leverage to 
  negotiate. We as developers are terrible at negotiating 
  and don't want to admit it.

If you're a developer who is good at negotiating, it's a whole lot easier to negotiate a $20,000 raise for yourself than to negotiate the same raise for everyone on the same pay grade.

If I make the company $200,000 that funds my $20,000 raise right there - if it's just a raise for me. If I have to fund the same raise for 100 other guys before I can have one myself, funding that will be about 100 times more difficult.

dnt404-1• 12 years ago

totally true that negotiating for oneself is very easy than the rest of the team. back when i was working (before taking studies), it was easy to get my pay raised, however later as i became team leader, and when i tried to raise the pay for all of my team and that never really went through.

throwawaybsacct• 12 years ago

I worked remotely as a sysadmin for an internet security startup in SF for almost 3 years. I made $45K/yr because I was living and working in Oklahoma. My co-workers living in SF doing the same job as me were making 2-3x more.

yesimahuman• 12 years ago

Something I've noticed is that for projects that are publicly visible (i.e. open source), remote workers can often command higher rates as they work more like a contractor. The independence is a trade off for the quick ramp up.

crdb3• 12 years ago

We pay the same (and offer a Singapore visa if they change their mind). The method is pretty simple: we pay X amount of money and get Y (or more) amount of code "value" back, and try and keep Y/X relatively stable.

Works out well for those living in cheaper cities, but it does suck a bit if you're in a high tax country/state, since Singapore's tax rate is in the single digit percent.

nomadpdx• 12 years ago

This is exactly the comment I was looking for. So many folks on here that are resistant to the idea of paying everyone equally for the amount of value they bring to the team.

davewasthere• 12 years ago

It's quantifying that value that is the difficult part. Delivery of x amount of lines of code would be a terrible metric for example...

jimmy5804• 12 years ago

A bit late to this discussion, but I'll provide a comment from the employer side. Employment is a market, and it has market-based dynamics. Most of the developers here are (understandably) looking at this from a cost-perspective - "I should be paid what value I provide" etc. That's not how it works. Just like products aren't priced by what they cost, employers don't value developers by the value they add.

Instead, developers are priced by companies at what the market will bear just like any other product. If a $40k salary in Bangalore will get them X quality of developer, and they need $120k in SF to attract the same quality of developer, then that's what the policy is. The policy might be disguised behind cost-of-living etc., but it's really market-based pricing.

In the same vein, keep in mind that it costs a company more to hire someone in an expensive area. So if developer skill was the only issue, why would companies want to hire locally if it costs more? The answer is If developer skill was the only thing at issue, no developers would ever get hired in SF because there's plenty of great developers elsewhere for less money. The reality is that having people local adds significant value, all other things being equal, so companies are willing to pay more for local people.

Ask HN: Local vs. remote salary gap

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