The main reason Silicon Valley or where-founded-high-cost-of-living companies hire in low cost of living locations is due to the value they get in paying less for compensation but getting proportionally more value than the lower compensation. Requiring that compensation be the same everywhere would simply incentivize companies to only hire locally since they’d improve communication (even if fully remote) due to offsites, same timezone etc. Esp., in an economy where there is a large supply of people wanting to be hired in HCOL locations.
That’s not to say this couldn’t change in the future (sometimes it’s good to ignore the current “how” and incentives / reality). But it’s useful to be realistic. There’s also something to be said for companies taking the risk and hiring in other countries. This increases knowledge (not to say the company is “better” but it probably has some reasons for why the local talent joins), sows the seeds for future companies there etc.
The (good) companies I've been at are location agnostic on pay, or close to it. It's not about getting a discount, it's about expanding the talent pool. We want the best we can get, not the best within 25 miles of a hub.
If you have an infinite budget you can just outbid everyone, everywhere and get whoever you want. Companies like like Netflix do something like this.
If you don't have an infinite budget, you have to start making compromises. You can try to pay everyone according to the highest possible local salary you might compete against, but now you're arbitrarily paying more than you need to everywhere else. Could be fine if you have unlimited budget, but most companies don't.
So you could try to set a median pay that's higher than the LCOL targets but lower than Bay Area salaries. Now you're attractive to some talent, but other people won't consider your company because it pays less than their alternatives.
Location-agnostic pay is one of those things that sounds great when your company has limitless money (or feels like they do, as in ZIRP), but most companies at scale realize that they're either missing out on certain talent pools or spending unnecessarily to acquire people.
In the case of GitLab, the author was making a great compensation for their location. If the author had zero knowledge that other employees were getting paid more, would they have even cared about their own compensation?
> You can try to pay everyone according to the highest possible local salary you might compete against, but now you're arbitrarily paying more than you need to everywhere else.
This is the difference. I don't see it as arbitrarily paying more than I need to. I see it as paying people the same for doing the same work. My goal is not to pay as little as possible, or even to pay a high rate relative to their local market.
I can't look at someone in Romania doing the same job as someone in Chicago and tell them I'm paying them less because they're in Romania.
I completely understand that this is not economically optimal, and I love capitalism. I just have no interest in saving money this way.
> So you could try to set a median pay that's higher than the LCOL targets but lower than Bay Area salaries. Now you're attractive to some talent, but other people won't consider your company because it pays less than their alternatives.
Salary is only one part of comp. Comp is only one part of what makes a company attractive.
I see where you're coming from, but in practice offering location-agnostic salaries means you're not competitive in areas that command higher salaries (notably, large tech hubs like the Bay Area, Seattle, New York). If anything, you're trading the talent pool near those hubs (and let's be honest, the rest of the US) for talent in other countries.
That's a trade-off you might be willing to make, but I hope you understand that not every company is willing to write off the entire talent pool of the US.
(As a point of reference, the only two countries that Google pays comparably to even the cheapest parts of the US are Switzerland and Israel.)
You have bigger talent pools in the tech hubs, at the very least. And recent college graduates from top-tier institutions are most likely to either stay put (depending on the source, I saw 40-60%) or move to a hub, so you have a lot of untapped potential.
Talent being "better" is too subjective to really quantify, though.
Something like 15% of devs worldwide are in the US, so if you don't want to play ball, you're losing a nontrivial chunk of the total talent pool (even without accounting for timezone affinity or English fluency).
If you think paying market rate for a Bay Area dev is overpaying, are you exclusively hiring devs in Argentina (with the rapidly-devaluing peso)? You can get 10 devs for the price of one person based in SF! Even paying Amsterdam's market rate is drastically overpaying in comparison to the areas with the lowest cost of labor.
My experience is from a fully remote unicorn startup that hires globally. Not Gitlab. Have continued equity exposure and strongly believe in the remote first model as a differentiator. There is exceptional talent globally, but you must be intentional about finding it.
>Is there data showing the talent in those tech hubs is better than what you can find elsewhere?
There are great engineers everywhere, but this line of reasoning misses why talent hubs exist in the first place. It's more likely a qualified individual will line near a talent hub along side other companies that demand those skills. A better question to ask is how much time & effort will a company put in finding a qualified candidate outside of the talent hub.
For example, Apple has a similar problem with regards to manufacturing in China.[1] Do talented tooling engineers exist in the US? Of course. Is Apple going to spend 5 years trying to hire 100 tooling engineers in the US, or spend 6 months hiring the engineers it needs in China?
If you have the budget to hire someone from the Bay Area with a Bay Area salary, then you also have the budget to hire someone from Bumfuck Nowhere, with a Bay Area salary.
I agree with the other commentator who said: It's not stupid to pay a location-based salary, but please don't pretend it has anything to do with fairness. It's not about being fair - it's about the company trying to save money by getting a discount on employees when that discount is available.
I should emphasize that I'm not trying to comment on fairness, one way or another.
I'm pointing out that location-agnostic salaries are often trading one segment of the global talent pool for another, since what I've seen in practice is more like "everyone gets paid 80% of a Bay Area salary".
You don’t need to lose access to the entire US talent pool.
The company I work for paid high-mid US salaries before going remote. It has continued paying high-mid US salaries after going remote, just expanded to hiring from more locations.
So before we had access to the talent pool of one metro area in the US. Now we have access to the talent pool of all of the US besides a few very HCOL locations (which we didn’t have access to before anyway), and also most of the rest of the world. Our costs are the same as before, but hiring is easier and we can often get a higher caliber employee to fill an opening.
As the guy you replied to said—it was about expanding the talent pool, not about saving money.
Because software developers overseas make barely more than 6 figures usd. Basically everywhere in the US beats that so if you do a "global wage" youd get no one from the us.
Companies clearly dont want a 100% overseas work force. If they raise the price point so that they get Americans to accept why have overseas employees at all? The entire point of bringing them on was to save money on their salary.
That’s not to say this couldn’t change in the future (sometimes it’s good to ignore the current “how” and incentives / reality). But it’s useful to be realistic. There’s also something to be said for companies taking the risk and hiring in other countries. This increases knowledge (not to say the company is “better” but it probably has some reasons for why the local talent joins), sows the seeds for future companies there etc.