How to Calculate Employee Compensation for Remote Workers

As a remote employer, you have the unique opportunity to hire people from across the globe. By doing so, you can find the best candidates for your open positions and build an unstoppable remote team.

While hiring from a global talent pool comes with many perks, it also introduces some added complexities. Most notably, you must provide fair compensation for remote workers who live in vastly different geographic regions.

So, whether you’re hiring from Istanbul, Paris, New York, or Cairo, how can you determine compensation for remote employees?

Below, we’ll review six factors to consider when setting your remote salary ranges, as well as some tips and tricks to make the process easier.

7 Factors to Consider When Calculating Remote Compensation

Here are seven factors to think about when determining your remote work compensation:

1. Role – Certain roles require candidates who possess specialized education, extensive experience, and strong decision-making skills. Attracting these types of candidates often requires you to provide more competitive pay or compensation packages than you would for entry-level roles.
   
2. Industry standards – Remote workers aren’t limited to their city’s local job market. They can accept offers from remote employers across the world. As a result, you need to construct your compensation packages with this steep competition in mind. The only way you’ll know how your compensation levels compare to competitors is by doing your market research.
   
3. Work Location – The cost of living can vary significantly across countries, cities, and regions. Depending on their work location, some job applicants may require higher salaries to afford their living expenses.

4. Laws – Since employment laws in different countries and regions can vary, it’s important to make location-based salary adjustments. Every time you hire a remote employee, you must familiarize yourself with their location’s minimum wage laws and employment regulations to ensure your compensation package is compliant.
   
5. Employee Benefits – Compensation packages often feature more than a base salary—they can also include paid time off, health insurance, retirement benefits,  accident, illness and death benefits, stock options, and other enticing perks. Nearly 60% of employees say that the  benefits package is one of the most important considerations when choosing a job.¹ If you can provide compelling employee benefits, many job candidates may be willing to accept a slightly lower base salary.

6. Remote Work Stipend – Consider reimbursing your team for various remote work expenses, such as office supplies or internet costs. Similarly, you’ll want to ensure your employees have access to ideal remote working conditions. Doing so promotes safety, productivity, and employee satisfaction, ultimately contributing to a stronger company culture and greater risk management.
   
7. Fairness – Roughly half of employees are more likely to leave a position if they don’t believe they’re receiving fair pay.² Even so, significant gender and racial wage gaps still exist in many countries. In Turkey, for example, the gender pay gap is 10%, whereas in Israel, it’s 25.4%.³ By preventing these gaps at your company, you can improve your retention rate and boost employee satisfaction. To do so, audit your compensation policies regularly to verify that all employees are receiving equal pay for equal work, regardless of their demographics.

Remote Work Compensation Examples

After considering these seven factors, you can customize your compensation strategy accordingly. If you don’t know where to start, use these two remote companies as inspiration:

• Basecamp keeps things simple with its salary formula. It pays all employees within specific seniority levels the same salary. These salaries are set to the 90th percentile of the notoriously expensive San Francisco job market, ensuring all employees earn enough to cover their cost of living, no matter where they reside.⁴
  
• Buffer adjusts its standardized salaries to its employees’ locations and corrects for their cost of living.⁵ While this approach is more complicated, it’s a lot more affordable.

Both types of compensation methods have pros and cons. You can choose to emulate one of these methods or construct one that’s uniquely suited to your company’s industry, size, goals, and culture.

Communicating Transparently About Remote Compensation

Once you’ve determined your remote compensation range for each role, you may want to share it with prospective job applicants. Pay transparency is valued by job seekers around the world, as showcased by these labor statistics:

• According to LinkedIn, 91% of respondents said they would be directly influenced to apply for a job based on the listing’s inclusion of average salary ranges.⁶

• 75% of job seekers are more likely to apply for a job if the listing contains salary information.⁷
  
• 56% of job seekers are more likely to apply with an organization if it shows average salary ranges in its job listings, even if they don’t recognize the company name.⁸

In addition to attracting more job seekers, being transparent about your pay ranges and compensation calculations can future-proof your legal compliance. For instance, the EU Pay Transparency Directive will soon require organizations with over 250 workers to disclose pay information during their recruitment process.⁹ As time goes on, more regions are likely to follow suit.