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Remote First at Brex

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Re: Remote First at Brex

#51

Post by bryanrasmussen »

ponker wrote: post #41
kag0 wrote: post #20

Earlier quoted context omitted.

Can someone explain the rationale behind geographically based pay in remote-first companies? I don't necessarily disagree with it, but I don't know what aspects of the issue companies are actually looking at to decide that geo-based pay is the way to go.

The fact is that having an employee in New York City, in the average case, is worth more than having an employee in Mongolia. They can talk to a customer more easily, given that your customers are more likely to be English-speaking Yankees fans in the Eastern Time Zone than Mongolian speakers in Ulaanbataar. They can go to an event more easily, since there are more conventions in NYC than Mongolia. They can fly to th…

James Clark, open source programmer and standards expert, lives in Thailand https://en.wikipedia.org/wiki/James_Clark_(programmer) he can probably speak adequately with English speaking Yankees fans - although time zone might be a problem.

That said, I think the whole recruitment/interviewing phase of the whole tech world is geared towards local employees and not sure if it can all be moved remote first at any time.

Re: Remote First at Brex

#52

Post by kag0 »

barry-cotter wrote: post #21
kag0 wrote: post #20

Earlier quoted context omitted.

Can someone explain the rationale behind geographically based pay in remote-first companies? I don't necessarily disagree with it, but I don't know what aspects of the issue companies are actually looking at to decide that geo-based pay is the way to go.

> Can someone explain the rationale behind geographically based pay in remote-first companies? How much you are paid depends on how much they have to pay you before you decide to quit. The lowest pay you’ll accept before you decide to quit is based on what you think you can get if you quit. That’s heavily influenced by geography. As geography and job markets become uncoupled compensation will become more uniform regi…

There's a name for that kind of thinking, but I can't recall what it is.

Essentially you're minimizing cost by paying the lowest possible local rate, but isn't it just as valid for someone else to maximize quality by paying a competitive rate for the most expensive locale? Presumably both would be pushed to a middle (location independent) wage because the company minimizing price will (presumably) have issues hiring all bottom-of-the barrel employees, while the company optimizing for quality will have issues paying top dollar when it only provides marginal gains over a high-average wage.

Re: Remote First at Brex

#53

Post by ericd »

_AzMoo wrote: post #34
enra wrote: post #31

Earlier quoted context omitted.

So how do you imagine hiring people with similar experience/skill level SF if they base salary offers are $200k and Europe people are happy with $100k since their rent/mortgage/livingcost is about 5-10x less? Pay everyone $200k or $100k (essentially stop hiring in high cost location)? Until the markets/remote salaries align, you kind of have to pay based salaries the people are able/need to receive in their respected…

If an employee is worth $200k to your company in SF, why are they not worth $200k to your company in Europe?

Because, at least for the moment, it's unlikely that any company is going to offer that European $200k. It's about BATNA, not perceived fairness.

That said, this might change if remote work becomes a lot more common, and we might see a big flattening of salaries. Bad for SF real estate prices (and for high earners in those companies in general), since people in those HCOL markets will suddenly be competing a lot more directly with workers from elsewhere, modulo language skills, ease of scheduling, cultural fit, etc.

Re: Remote First at Brex

#54

Post by kag0 »

ponker wrote: post #39
enra wrote: post #31

Earlier quoted context omitted.

So how do you imagine hiring people with similar experience/skill level SF if they base salary offers are $200k and Europe people are happy with $100k since their rent/mortgage/livingcost is about 5-10x less? Pay everyone $200k or $100k (essentially stop hiring in high cost location)? Until the markets/remote salaries align, you kind of have to pay based salaries the people are able/need to receive in their respected…

Yeah, essentially stop hiring ordinary skill in high cost locations. Why would you? Why would you pay $200K to someone in San Francisco for work that can be done for $100K in Alabama? Unless the person in San Francisco is higher skill, in which case they will be hired at a higher level/comp package, which has nothing to do with geography. Pay adjusted to location is an unearned bonus for people living in expensive ar…

> going to really suck for the people who have gotten used to earning $200K entry level in San Francisco

at first, yes, but wouldn't CoL eventually come down if everyone were earning a nationally based income?

Re: Remote First at Brex

#55

Post by _AzMoo »

ericd wrote: post #53
_AzMoo wrote: post #34

Earlier quoted context omitted.

If an employee is worth $200k to your company in SF, why are they not worth $200k to your company in Europe?

Because, at least for the moment, it's unlikely that any company is going to offer that European $200k. It's about BATNA, not perceived fairness. That said, this might change if remote work becomes a lot more common, and we might see a big flattening of salaries. Bad for SF real estate prices (and for high earners in those companies in general), since people in those HCOL markets will suddenly be competing a lot more…

Right, it's about BATNA, but it stands to reason that especially in a time of ubiquitous remote work, offering remote workers salary parity will attract the highest talent from all regions, thereby providing a competitive advantage.

Re: Remote First at Brex

#56

Post by mbesto »

ryanSrich wrote: post #23
kag0 wrote: post #20

Earlier quoted context omitted.

Can someone explain the rationale behind geographically based pay in remote-first companies? I don't necessarily disagree with it, but I don't know what aspects of the issue companies are actually looking at to decide that geo-based pay is the way to go.

It's a relic, and a bad one. I run a remote-first, remote-only company and we pay everyone based on experience and merit. Not location. If you want to stretch $150k in San Francisco go for it. Good luck having to live with 3 other roommates. However, if you want to take that same $150k and live like a king in the middle of Kansas that's an option as well. Adjusting someones pay simply because they're logging onto the…

I agree with this.

From a cashflow perspective a lot of "remote first" companies just use cost of living adjustments because, well, it's cheaper and employees are happy to oblige. This the dirty little secret.

Here's the reality - the profitability of a tech company is directly related to the amount of total cost of running the business (duh) and human resources is typically one of the largest (usually at least 40% of the overall revenue on avg in my experience). If the same engineer is working remotely from NY versus Kansas City, their output doesn't change as a result of where they live, so profitability only changes if the company renegotiates their package (their revenue contribution stays constant, so only cost changes the profitability measure).

The only reason the salary is higher in NYC to begin with is that the increase in demand for living in places like NYC is much higher than KC, which is directly correlated (on average) to the quality of talent.

The assumption that top talent is coming from top tier cities has been challenged for the last decade and is only accelerating because of COVID.

My prediction is that there is going to be a convergence of salary values that are location agnostic. The only thing stopping this convergence is information asymmetry (e.g. companies know remote employees are happy to oblige to lower salaries because they lack negotiating acumen/power). This will change.

Re: Remote First at Brex

#57

Post by jlj »

kag0 wrote: post #52
barry-cotter wrote: post #21

Earlier quoted context omitted.

> Can someone explain the rationale behind geographically based pay in remote-first companies? How much you are paid depends on how much they have to pay you before you decide to quit. The lowest pay you’ll accept before you decide to quit is based on what you think you can get if you quit. That’s heavily influenced by geography. As geography and job markets become uncoupled compensation will become more uniform regi…

There's a name for that kind of thinking, but I can't recall what it is. Essentially you're minimizing cost by paying the lowest possible local rate, but isn't it just as valid for someone else to maximize quality by paying a competitive rate for the most expensive locale? Presumably both would be pushed to a middle (location independent) wage because the company minimizing price will (presumably) have issues hiring…

Game theory

Re: Remote First at Brex

#58

Post by esrauch »

nrmitchi wrote: post #28
ryanSrich wrote: post #26

Earlier quoted context omitted.

That's my point. Your baseline should be bay area numbers. Don't change that number simply because the person you're hiring lives somewhere else. It also leaves the company open to gaming. If I know I can make significantly more than my peers just by having an address on the bay area I could find a way to get an address while living somewhere else.

And hey, if you had started at Brex prior to Sept 1st, you wouldn't even have to game the system. But your coworkers _would_ (and would also likely be at risk of being terminated for cause if they got caught, not to mention state-tax issues).

If your company has your address in the wrong state (and withholds there) you can still correct it when you file your taxes for a full refund in the state you didn't actually reside. Though you'd maybe be penalized in the proper state for underwithholding unless you manually paid quarterly estimates in that state as well.

Re: Remote First at Brex

#59

Post by enra »

_AzMoo wrote: post #34
enra wrote: post #31

Earlier quoted context omitted.

So how do you imagine hiring people with similar experience/skill level SF if they base salary offers are $200k and Europe people are happy with $100k since their rent/mortgage/livingcost is about 5-10x less? Pay everyone $200k or $100k (essentially stop hiring in high cost location)? Until the markets/remote salaries align, you kind of have to pay based salaries the people are able/need to receive in their respected…

If an employee is worth $200k to your company in SF, why are they not worth $200k to your company in Europe?

There isn't an objective measure available what an employee is worth to a company, especially at the hiring stage, especially in startups. If engineer lvl4 with the criteria you're hiring, is paid x in y market at z stage of the company then you pretty pay bit more or less depending how good you think they are compared to the average.

Basically companies base their compensation bands on the 50-90th percentile what the market is. People are also anchored their previous compensation, it's hard to get people to accept drastically lower compensation even if you think they are overpaid in their current job.

So it all comes down to finding a compensation that both parties are willing to engage in at (the market). The market is still not fully liquid, uniform or not all talent is the same so the pay differs in different markets.

You could obviously game this too by saying to pay what people are they are "worth" but you just happen value SF experience more than other experience, essentially.

Re: Remote First at Brex

#60

Post by krasin »

ryanSrich wrote: post #40
crashedsnow wrote: post #32

Earlier quoted context omitted.

I don't see it as a relic, or a bad one. Some people can't just up and move to a cheaper location for a job they don't know they'll have in a year's time. How do you decide what to pay? Paying based on "experience and merit" needs to be anchored on something, so you just end up either massively over-paying someone in a location that's cheap, or massively under-paying someone in an expensive area. If you want to pay e…

> Any company with shareholders is accountable first to them (for good or bad) and I'm not sure your board or CFO would agree that paying peak makes sense Good thing I have neither a board or a CFO. But to respond directly, I think you're down playing how much of an advantage over paying (as you've put it) can be for acquiring great talent. Great companies are built by great people. Paying them well for the work they…

I agree that the internet flattens distance. Thank you for paying employees like it's 2020, not 2000.

One thing it does not flatten is time zone. When two team members have 11 hours difference, their ability to collaborate is very limited. It's reasonable to discount the pay of employees who are too far in time. Alternatively, avoid hiring people outside of +/- 4 hours from the mean (unless they are the best in the world in something).

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