According to Ladders, a quarter of professional opportunities will involve remote work by the end of 2022. With more and more workers leaving their traditional in-office jobs to join the remote workforce, remuneration has become complicated. Startup entrepreneurs and novice organizational leaders are left wondering how their companies should set salaries for remote jobs. The answer depends on numerous factors.
Here at SelectSoftware Reviews, we employ remote workers from five different continents. Because of this, we have an educated perspective on the topic. According to our founder, Phil Strazzulla, the way companies think about salaries is also shifting. According to Phil, “...we are in a cost-based pricing world that will eventually switch to a value-based pricing world which will decrease US wages and increase rest of world wages over the next 5 years.”
How Do Companies Set Remote Salaries?
Companies have various strategies when determining salaries for their remote employees. While it’s often easiest to pay remote workers the same as your in-house staff, a fair wage isn’t always that straightforward. Here are the most common ways a company would determine a remote salary
Remote Salaries Based on the Company’s Location
The most straightforward method of determining salaries for remote workers is to base it on the industry standard of where the company is based. For larger companies with multiple locations, it’s common to default to the location of your organization’s primary headquarters.
While this strategy is great for startup businesses and even large enterprises that maintain limited, localized demographics, there are some drawbacks to consider.
- The salary might not cover the costs of living in the employee’s location.
- The salary might be significantly above the employee’s expectations.
- If your company relocates in the future, you might need to re-evaluate employee salaries.
Remote Salaries Based on the Employee’s Location
Some companies put a lot of consideration into the individual’s location. With varying costs for rent, schooling, and local transportation, employees will have higher or lower salary expectations based on what they need to maintain their lifestyle in their city.
Because salaries can differ so greatly between cities, states, and countries, location is an important consideration in ensuring everyone receives adequate compensation for their time.
Remote Salaries Based on the Employee’s Industry Expertise
Companies that operate in highly specialized industries can base their salaries on their industry average or current industry trends, as well as the employee’s expertise. This method most often applies to employees in mid- to high-level roles that almost always require a college degree, professional certification, or targeted skills training.
Common examples of industries that pay remote workers according to expertise are:
- National Defense
- Aviation and aeronautics
- Information technology (IT)
- Financial investment firms
- Software and tech developers
Remote Salaries Based on the Availability of Skills
Companies can also set their salaries according to the overall availability of remote workers and the current worker demand. If there is an immediate need to fill many job openings, you might consider offering a salary that is higher than what your competitors are offering. Logically, this would also be higher than the industry standard.
Paying above the median for your industry makes your organization more attractive to job seekers. It can get you noticed amongst more skilled, experienced workers.
A lot of U.S. industries are currently experiencing a lack of skilled workers, but a remote or hybrid workforce could help alleviate some of these issues. In a lot of these cases, the salary would likely be determined by the company’s demand for the candidate’s skills.
Business-to-business (B2B) sales in the IT industry is a great example. Although some sales roles require little more than above-average charisma and strong people skills, the complicated nature of modern IT systems calls for highly educated and trained sales experts.
Performance Based Remote Salaries
Some organizations base individual salaries around the performance of the employee. Although the rate of pay tiers is still largely determined by the industry median, remote employees have more control over the income they receive.
Examples of roles that typically incur performance-based pay are:
- Sales: The salary of many sales professionals is directly linked to hitting targets.
- Marketing and advertising: Salaries may be based on achieving certain key performance indicators (KPIs), such as traffic growth, sales growth, or overall campaign profits.
- Virtual Assistants: Many remote workers are paid per hour, effectively tying their wages to work that needs to be done, and hours clocked rather than set responsibilities.
Examples of How Companies Set Remote Salaries
Remote workers are nothing new. Although the remote workforce is much more prevalent in recent years, plenty of jobs – with varying degrees of difficulty, responsibility, and scope – have been performed remotely. This provides plenty of past examples to use when determining salaries for your remote team members.
The team with Microsoft recently discussed increasing pay transparency regarding remote and onsite workers. While they announced that they’ll release specific information regarding employee salaries in 2023, we already have some insight into how they determine pay for remote and onsite employees.
Similarly to other IT companies, Microsoft offers a base salary that is primarily determined by three factors:
- The specific role of the employee: There are many possible remote roles with Microsoft, ranging from positions in data entry to programming and engineering.
- The level of responsibility: Some roles feature various levels of functionality and responsibility. A level III software engineer, for example, has much more responsibility than a level I software engineer.
- The location of the employee: While many Microsoft employees do live locally to their headquarters, the company has recently started pursuing a remote workforce more than ever before.
Microsoft is also open to negotiating salaries with prospective remote employees. This is especially true with senior-level roles.
The majority of Microsoft workers are happy with their current salaries. According to Glassdoor, 97% of workers also approve of the current CEO, Satya Nadella, and 91% would recommend the job to a friend or family member.
Although many roles in aviation and aerospace manufacturing are hands-on jobs that require sophisticated machinery and tools to complete, approximately 60% of Boeing’s entire workforce – totaling more than 90,000 employees – switched to remote roles during the recent COVID-19 pandemic. While some have since transitioned back into onsite roles, others remain working in remote capacities.
This field will always include jobs that require the kind of performance, collaboration, safety, and technical oversight that can only be achieved in a professional setting. However, there are opportunities to join Boeing through a remote role.
According to ZipRecruiter, the current national average pay for work-from-home Boeing apprenticeships hovers around $29 an hour. While there are some instances of remote apprenticeships reaching nearly $60 an hour, these are generally advanced opportunities based on the candidate’s prior experience, overall skill, and the cost of living in their geographic location.
The Boeing workforce tends to be happy with their pay, benefits, and general work-life balance. They currently have over 3,000 5-star ratings on Indeed with a 4.1 rating regarding pay and benefits.
As an open-core company specializing in DevOps (software developers and operations) solutions, GitLab’s business model has always revolved around remote work. Since they have no company offices, and because they have approximately 1,300 employees positioned around the globe, any sort of traditional or standardized salary structure just isn’t feasible.
Instead, GitLab uses a combination of various factors when determining salaries for remote workers. While much of their data is location-based, primarily within San Francisco, other factors include:
- Additional geographic data: Benchmarks based on the candidate’s geographic region are considered alongside the San Francisco-area benchmark.
- Job level: Available options are junior, intermediate, senior, staff/manager, senior manager, director, and senior director.
- Exchange rates: It’s critical to consider local currency exchange rates when utilizing a global workforce.
Additionally, all benchmarks used by GitLab are reviewed annually and, if necessary, adjusted appropriately. While this helps GitLab remain competitive in the job market, some employee reviews express concern for better compensation.
Providing Remote Benefits and Perks
Benefits and perks can go a long way in bolstering employee happiness, increasing retention rates, and minimizing turnover. While this is true for both in-house and remote workers, a lot of companies have standard benefits packages that are still modeled around in-office employees.
However, according to a recent survey by Paychex, workers who receive updated benefits packages after switching to remote positions experienced increased productivity and greater job satisfaction.
Benefits and perks that work well for a remote team include:
- Relevant health and wellness programs
- Online team-building events and games
- Monthly allowance for internet costs and software subscriptions
- Home office stipends
- Paid lunches via local delivery
- Vacation or sick time with pay
- Allowances for professional development or training
Many of these perks are already offered to in-house workers. Health and wellness programs have become the norm in most companies, and team-building events benefit both the employees and the organization as a whole. Who's to say you can’t enjoy the same advantages with a remote workforce?
Take healthcare for example - Corporate wellness software is a major help with offering remote employees the same care as local workers. These tools are especially important in preventing stress-related illness and burnout in remote workers who reportedly work longer hours than their office-based colleagues.
Anyplace, a recent startup that helps freelance workers and avid travelers find affordable, short-term housing all across the world, supports their mission by employing a remote workforce. Their perks include annual travel stipends, annual company meetups, healthcare coverage for U.S.-based employees, co-working space stipends, and continual development allowances.
Likewise, remote workers with InVision, pioneers of a visual collaboration platform, enjoy some great perks. These include:
- Paid time off
- Reimbursement for monthly wellness treatments
- Annual self-development funds
- Healthcare reimbursement
- Parental leave
- Home office stipends for new hires
- Charitable donation matching
- Peer recognition initiatives
Rewards and Recognition for Remote Employees
Remote employees miss out on the high-fives and big-win moments in-office employees share. It’s important to compensate for this by providing means for remote colleagues and managers to celebrate achievements.
Praising the week’s star employees in the company newsletter or Slack channel is a simple way of recognizing great work. However, it’s also important to foster peer-to-peer and worker-to-manager recognition. Employee rewards software provides multiple solutions for remote teams to recognize effort higher up, lower down, and across in terms of company rank. A lot of these software solutions also convert recognition into tangible perks, such as shopping or meal vouchers.
Are You Offering Remote Workers a Fair Salary?
Whether you’re working with remote staff members, an in-house team, or a combination of the two, it’s important to pay your employees a fair salary. Thankfully, there are plenty of resources to use when calculating salary for your remote workers.
Industry and Occupational Research
Start with online job boards. While these will give you an idea of what others are offering, the best job boards for employers are those that let you research potential candidates. These sites sometimes allow applicants to post online resumes and maintain professional profiles, which may reveal salary expectations, past wages, and related info.
Websites like Payscale and Salary.com are also great resources. They provide various compensation calculators, informational datasets, automated systems for writing job descriptions, consulting services, and more.
Comparative Salary Reports
Use online job boards and similar sites to produce ongoing customized reports for plotting your salary offerings against the industry average. You can use our HR salary report as an example.
Comparing and contrasting salaries according to location, experience, and seniority can provide a lot of insight when determining compensation for remote employees.