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How to create an effective compensation strategy for remote workers?

How do other companies compensate their remote workers?

Remote is fully transparent about how we compensate our team. As a fully remote, globally distributed company with hundreds of employees in dozens of countries all around the world, we have faced every conceivable challenge related to remote worker compensation and have created a system that works. Different companies take different approaches. Here are a few different compensation philosophies practiced by other global companies:

Basecamp: Pay the same salaries to everyone, everywhere.

Basecamp simplifies salary calculations by paying everyone the same amount based on seniority level. All junior programmers make the same amount, as do all senior customer service representatives, and so on. Basecamp sets its salaries to the 90th percentile of the San Francisco market, so people who work at Basecamp are compensated very well.

This strategy guarantees Basecamp the ability to handpick top talent from around the world. Standardization of Basecamp salaries across levels of seniority also allows the company to consider raises versus promotions in the same conversation.

Buffer: Adjust remote employee pay based on cost of living.

Buffer famously publishes the salaries of every person who works at the company. This commitment to transparency allows people who would like to apply to the company to get a good idea of what their salary might be if they were to apply.

Buffer’s salary calculator provides a quick and easy way for companies and individuals to see what Buffer might pay a person in a certain position. The calculator uses a base salary for each role and multiplies by the person’s cost of living.

Salary calculators like Buffer’s are nice because of their transparency, but they are not always the best approach. Highly qualified candidates living in areas with low costs of living may use the calculator and decide not to apply because they could make more money elsewhere.

GitLab: Create an original salary calculator

GitLab has a complex salary calculator for remote employees. They use the following formula:

SF benchmark x Location Factor x Level Factor x Experience Factor x Contract Factor x Exchange Rate
Notable in here is the San Francisco benchmark, which is also used by both Buffer and Basecamp. That benchmark is multiplied by location-specific data, which GitLab collects from a variety of sources to ensure accuracy. GitLab publishes the full strategy behind its remote employee compensation calculator online, so anyone can see and understand the process.

Like Buffer, GitLab further modifies salary calculations by level and experience. They add a bonus for employees who are contractors, as contractors have to cover more of their own costs and do not receive employee benefits.

GitLab’s formula guarantees accuracy and transparency in salary calculations, but maintaining a complex calculator with at least two variables that need constant maintenance (location factor and benchmark salary) is very time consuming.