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Remote First at Brex

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Re: Remote First at Brex

#71

Post by maxlamb »

nhumrich wrote: post #48
tempsy wrote: post #37

I blame FB for setting this bad precedent. Now that they've set the standard for remote compensation every company now has cover to adjust compensation using some flawed cost of living calculator.

I disagree. I think its actually correct to adjust based on location. Everyone is only looking at it from a "I am smart by living somewhere cheaper, dont doc my pay", but not seeing it the other way around as well. If you worked at a company based out of, say, detroit, but lived in SF, you would demand SF income, because otherwise you wouldn't be able to afford a living. This policy protects you, even if you do work…

The other viewpoint is that you provide the same value to your company whether you work in SF or in Kansas City (assuming WFH in both places). So basically you are saying "Hey, if I move to a cheaper place, please take 40% of my compensation and give it out to the C-Suite and shareholders, since I have no other options in my new city". I guess that is the reality of capitalism, and why ownership/equity is so important.

Re: Remote First at Brex

#72

Post by daavable »

Companies don't pay employees based on "what they're worth to the company". Just like with other goods and services, the market dictates the price.

So, companies pay what they can to compete for talent in the market. This meant that in high-competition markets like SV, the price (for engineering talent) was very high.

If now the market dynamics have shifted by not limiting supply to the SV area, then you would SV companies to pay LESS for the same engineering talent. So, if you argue that people should be paid the same no matter where they live, then you should also be prepared for salaries for many engineers to fall.

Re: Remote First at Brex

#73

Post by dasil003 »

ponker wrote: post #67
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 easiest to understand when you realize that the company is not going remote to pay SF salaries everywhere, they’re going remote to pay rock bottom salaries everywhere. Geographic pay is a temporary patch to give extra to people in SF while they wait for SF engineers to decamp to the boonies or be replaced by people who do.

Lowering salary costs is one reason. The other potential reason is to vastly increase the talent pool.

If it's only about the first reason then management will cut salaries as deep as possible, if it's only about the second then they'll keep salaries at the same level and just change the job description. I suspect for most companies final pay scales depend on the weighting of two reasons. A lot of companies will try to have their cake and eat it too with location-based pay, but that approach will neuter the benefits of opening up for remote work, and its efficacy will only degrade further over time.

Re: Remote First at Brex

#74

Post by nickcox »

jnwatson wrote: post #49
ryanSrich wrote: post #40

Earlier quoted context omitted.

> 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 understand the ideal of it, but the main reason why it doesn't work is simple supply and demand. Your employment opportunity will seem compelling for folks that live in LCOL areas, or folks trying to escape HCOL. But for the 5x as many programmers that live in HCOL areas, your pay isn't competitive. If you want to reduce your candidate pool by 70 or 80%, by all means, go for it, but there's a clear market reason wh…

Where are you sourcing your stat from? It's hard believe that the millions of developers in China, India, SE Asia, East Europe, etc. are outnumbered by people in New York and San Francisco.

Cripes, US$150k is good money in London and that's a considerably higher cost location than rural Kansas.

Re: Remote First at Brex

#75

Post by alexeys »

daavable wrote: post #72

Companies don't pay employees based on "what they're worth to the company". Just like with other goods and services, the market dictates the price. So, companies pay what they can to compete for talent in the market. This meant that in high-competition markets like SV, the price (for engineering talent) was very high. If now the market dynamics have shifted by not limiting supply to the SV area, then you would SV com…

It will take years for markets to even out. Think SV vs rural Alabama. Paying market rate for the talent is table stakes. And I do agree, there will be less incentive to pay SV rates, so engineers living in SV will have to work even harder to demonstrate in the interviews that they are worth the money. Interesting times are coming.

Re: Remote First at Brex

#76

Post by selfinvariant »

staticassertion wrote: post #69
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.

If you were already bought into and budgeting for 4 years of an employee at price X, it seems opportunistic and irrational to then try to cut them to price Y due to an unexpected factor. As some other CEOs have chimed in, I'll say that my relatively small startup (6 people, but growing) just pays people what they're valued at, regardless of location or business expenses. I budgeted for those salaries - if someone mov…

The biggest question is how you determine 'what they are valued at', given that you would get drastically different numbers in different markets.

Re: Remote First at Brex

#77

Post by 121789 »

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…

It's not a relic, it's a way to price labor effectively. You're not paying for work, you're paying for the candidate to choose you over a competitor. If you're competing against local Bay Area or high CoL companies that are local, you will have a lower offer and will likely lose out on talent. That's OK as a strategy, but you may just be selecting out of low-CoL areas and limiting your pool of labor.

The alternative, which sounds like a relic, is offer your 150K and a reasonable upward CoL adjustment certain areas. Small enough that someone from a low CoL place wouldn't want to move, but high enough to keep your company competitive in high CoL places. If you have enough labor supply, you many not have an issue, but if you are having trouble finding skilled people and assume that skilled people are unevenly distributed in high-CoL places, it's a reasonable path to go down.

Re: Remote First at Brex

#78

Post by alexeys »

nrmitchi wrote: post #35
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…

You're discussing "markets" across countries, which had much more reason for adjustments to be made. Social services, taxes, and healthcare are all different. There is not necessarily free movement between countries, and large goods that most people purchase in their lives (cars, education, healthcare) have very different costs. In my opinion that is different that companies doing large-scale adjustments within a cou…

Taxes and cost of goods vary widely across markets within the US. Not to mention that progressive scale shifts more tax burden to people living in high cost of living (COL) locations.

Think $120k in Washington or Florida with no state income tax and lower COL. you’d pay maybe 25% tax. In San Francisco, $200k comp to adjust for higher COL will push you into higher federal tax bracket plus 10-12% state income tax. Now you’re paying more than 40% in taxes.

25% vs 40% is a significant difference.

Local taxes also greatly affect the cost of goods and services. 9.5% sales tax in SFBA vs 0% sales tax in Oregon.

25% vs 49.5% — two extremes, but that the reality in the US.

Not to mention gasoline taxes in CA — highest in the nation, they directly affect the cost of gas that we pay as consumers.

Re: Remote First at Brex

#79

Post by opportune »

121789 wrote: post #77
ryanSrich wrote: post #23

Earlier quoted context omitted.

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…

It's not a relic, it's a way to price labor effectively. You're not paying for work, you're paying for the candidate to choose you over a competitor. If you're competing against local Bay Area or high CoL companies that are local, you will have a lower offer and will likely lose out on talent. That's OK as a strategy, but you may just be selecting out of low-CoL areas and limiting your pool of labor. The alternative,…

It doesn't seem that effective to me, because it makes some assumptions about employees' willingness to move or engage in location arbitrage.

For many employees without children and especially those who are single, moving areas is not a dealbreaker. For those who save a lot, really you just end up incentivizing them to move to expensive areas.

It's basically based on the model of thinking of "we should pay this employee the minimum it takes for them to work for us" rather than "we should pay this employee what it takes for working for us to be worth it to them"

It makes more sense to lock someone's CTC (cost to company) if they're remote and then let them live anywhere. This allows them to fully realize the remote benefit of being able to live wherever they want. Especially if other companies stick to the old model of adjusting pay based on COL, this makes working remotely in a low COL a better offer at no price difference to the company for someone who is willing to move whichever place is most economically efficient for them.

Re: Remote First at Brex

#80

Post by opportune »

ryanSrich wrote: post #26
erik_seaberg wrote: post #25

Earlier quoted context omitted.

Maybe someday all tech employers will be remote-first and pay will be the same everywhere. But if you don’t compete with Bay Area offers now, you filter out everyone who relocated to the Bay Area to benefit their career.

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.

Thank you for this. I don't understand why people have such a hard time thinking this way. Many people are very elastic and flexible about where they live (especially when it's 'anywhere in the US') and as someone with a job in the bay area, I don't understand why I should take a pay cut to move somewhere cheaper to do the same job. The employer ends up incentivizing me to stay in the most expensive area that also happens to be the easiest place to get a competing offer... makes no sense
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