Compensation Disparities and Market Competition for Telecommuting Jobs

When estimating salaries for office-based positions, it is important to take into consideration a range of factors, such as current market trends, the level of education and skills possessed by the candidate, and their job history. There are a variety of tools available that can help with salary estimations, including templates, programmes and professionals.

However, how can you figure out how much to pay your remote workers? Does it work the same way?

Due to the lack of time to establish a clear set of regulations, it can be confusing when attempting to work remotely from another country. If you are encountering this issue, please do not hesitate to get in touch with us. We are the leading experts in the field of remote working and are more than happy to offer our assistance.

If not, then let’s investigate if remote workers get paid differently, and if so, how, why, and what your options are.

Remote Work: Myths and Misconceptions – As Well as Weak Justifications for Using Them

The following are some common misconceptions and trouble spots in the remote work compensation market:

  • Because of their status as outsiders, remote employees are not eligible for the same perks as their in-office counterparts.
  • There’s no need to put money into them since they’re disposable and can be replaced quickly.
  • They are not making enough of an effort to warrant equal compensation.
  • If you don’t come into the office, you don’t do your job.
  • Substitutes from contracting firms are always a cheaper option.
  • It’s unfair to pay them more since they have such a fantastic perk—not having to go to an office.
  • What should their wage be if they are working in a different state?
  • Can a person who does not live in the United States work remotely for a US-based company?
  • How much should overseas remote employees be paid?

The question is why distant employees should be paid less.

The following are some of the reasons why some companies may pay their remote employees less:

  • Getting there and back isn’t a problem. Employees should accept a wage decrease due to the fact that they no longer have to incur the cost of travelling to and from their place of work, they have increased flexibility with regards to the scheduling of their work, and their workload is more manageable.
  • Methods for obtaining low-cost labour As with other forms of outsourcing, such as offshore, remote work allows for the use of lower-cost workers.
  • The excitement about cost-cutting opportunities presented by remote work The greatest method to save expenses is to stop paying salary to remote workers.

Despite wages making up a small portion of total corporate costs, there are a number of alternatives that can be implemented in order to avoid having to lay off workers. These alternatives include reducing expenditure on equipment, reducing the amount of office space rented, and a variety of other cost-saving measures. A full list of these alternatives, numbering 20 in total, can be found below.

Furthermore, organisations reap the rewards of the enhanced productivity and value that their remote staff bring to the table. Offering them a lower remuneration package sends out an inappropriate message and can lead to them feeling underappreciated for their hard work.

Is There Really a Differential in Compensation for Working Remotely?

At present, the situation surrounding remote pay has been defined and redefined by a small number of rules, exceptions and guidelines. Therefore, it is not a straightforward answer as to whether or not companies should reduce the pay of their employees who work remotely. Ultimately, it is up to each individual business to make their own judgement as to when, and if, they should implement a pay cut for those who are working from home.

The answer may also depend on whether or not the remote worker is:

  • American citizen working either domestically or internationally The vast majority of businesses that have embraced a remote working culture are of the opinion that their remote employees are remunerated in the same manner as their counterparts employed in the office. At a webinar hosted by FlexJobs, all participants unanimously conceded that “there is no difference” between working remotely and working in an office environment. It was established that the total salary is determined by job role and performance, regardless of whether an employee is based in the office or is working from home.
  • Working for a company full-time vs. working independently In the United States, both permanent employees and long-term contractors typically receive the same remuneration as those who work in the office. However, engaging remote temporary contractors may not necessarily result in cost savings for businesses, since such an arrangement does not allow for significant reductions in office space or furnishings costs.
  • Foreign-based worker who is not a citizen of the United States When compared to the United States, employing remote workers from other countries can often be more cost effective. Candidates from Eastern Europe and South/Southeast Asia are known to offer a great value, as they often possess a high level of education and skill, yet can be hired at a fraction of the cost of US workers.

It is worth considering whether your organisation has adopted a ‘remote culture’ when determining the salaries of remote employees. This is an unspoken but important factor to consider, particularly if your company intends to hire more remote workers (which is likely to be the case, as indicated in the figure below). It is essential to consider whether a reduction in salaries is the best way forward in this situation.

Several reasons why it may be beneficial for your company if employees working from home were paid the same as those working in-office.

The company and its staff can both greatly benefit from being recognised as ethical and fair when it comes to wages. Employers that offer their employees competitive salaries are sending out a strong message that their work is valued. Such an esteemed reputation will help to attract potential employees and make them realise that your organisation is an ideal place to work.

If telecommuting jobs at your organisation pay more than regular ones, then:

  • You are not required to spend less time and money searching for qualified people on job boards with questionable credibility.
  • It’s possible to contact qualified applicants without lowering standards (doing which can end up costing you more).
  • It promotes the idea that your organisation is trustworthy and open.
  • If you are willing to hire remote workers without reducing their salary, you will attract the most qualified people.

In the present day, we are living in an era of transparency. Platforms such as PayScale, the Salary Project, SalaryList and others make it easy for anyone to find out about salary ranges. Just as employers can find out more about a prospective employee through social media, potential employees can now research employers on sites such as Glassdoor. This means that businesses who fail to treat their employees fairly will find that skilled workers are actively looking for other job opportunities, which is not ideal in a labour market which is currently driven by the supply and demand of workers.

Just a few days ago, the renowned corporate giant Amazon was required to increase its minimum wage to $15 per hour due to the Stop Bezos Act, which was designed by Senator Bernie Sanders. Although your organisation is much smaller in comparison, it is still important to consider the power of the people when making decisions.

Whilst salary may not be the primary concern for employees when given the option to work remotely, it is important to note that financial incentives can act as a motivating factor for valued employees when considering new job opportunities. Indeed, many people are willing to take a reduction in wages in exchange for the opportunity to work from home, but over time they may come to value the financial aspect of their employment more highly.

What Factors Affect the Total Compensation for a Remote Employee?

Salaries are often adjusted according to geographical location, owing to the difference in cost of living between rural and urban areas. It is possible, however, that a company’s headquarters might be in one state, while the employee in question is located in another, depending on how one defines ‘remote’ working.

Listed below are the three approaches to determining compensation for remote workers, along with an explanation of each:

  • Where is the main office located? All workers, regardless of location, are paid the same wage at these firms.
  • Whereabouts of your telecommuters It is conceivable that some organisations may utilise the close proximity of their remote employees to rural areas as a competitive edge. Alternatively, they might be more flexible with their rules if their employees are situated in expensive metropolitan regions such as Los Angeles or New York.
  • Market-driven and independent of physical location Many businesses that operate with a fully remote workforce often utilise this method of computing in order to provide compensation to their employees based on their individual contributions to the organisation, rather than their location.

Foreign remote workers’ salaries outside the US – The most effective method for calculating remuneration for overseas remote workers is to incorporate both the geographical area in which they are located and the prevailing job market conditions when making the determination. This approach provides the most precise and accurate assessment of the appropriate level of remuneration.

If you solely consider local rates when determining employee compensation, you may find yourself unable to compete with competitors within the same city or even within the same country, who may be offering higher salaries. However, if you take into account the rates available on the international market, you can remain competitive with the most attractive local offers, outbid the top local employers for the best talent, and still spend less than the US rate.

System that Actually Works

At Works, we understand the importance of taking care of the maths involved in paying remote employees, so that you can focus on the running of the business. That’s why we take pride in offering a comprehensive, global search for the most qualified candidates and providing them to you at competitive rates. Additionally, we handle all of the administrative details, including paperwork for hiring, payroll, and benefits. If you need assistance with the mathematics involved, please don’t hesitate to reach out to us by email. We’d be more than happy to take care of it for you.

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