Quick point to note - Basecamp bases their pay on the Chicago market.
A few others have pointed that paying Indian developers less than the USA is somehow relevant here. That is simply not the case. I know good developers in India making mid-high Seattle rates from right here in Bangalore. I also know of people who work at body shops that farm out a single developer's job to 3-4 engineers and paying them less than a tenth in aggregate compared to an Engineer making high-market rates. The services being rendered are widely different and hence the pay disparity.
The point here is, if we're accepting geographical location as a factor, what about the area they live in? Let's say someone wants to live in small room in a shared house in Daly City and someone else wants to rent a nice cabin in Woodside. Is facebook going to pay them different rates now? What about Harrison NJ vs Manhattan? This whole argument is absurd.
Also, someone mentioned the COLA in the Military. That works very wel. But for one condition. The person actually is required to be on the base. People here will be remote, meaning they don't "have to" be anywhere really. As far as the company is concerned, absolutely nothing is different.
The person actually is required to be on the base. People here will be remote, meaning they don't "have to" be anywhere really.
That is the whole point. If as a company you're going fully remote then location should go completely out of the window as a factor. People can move around, even go abroad, go "digital nomad".
If you choose this company model then you just need to pay based on competency and performance, period.
Lead Developer, business owner, US Army veteran. I build things for the web. My website is a bunch of HTML pages that didn't need a framework. Yours can be too!
Not necessarily on the base. I lived in a town within an hour from the base with lower housing costs (rent and housing immediately around the base is always based on military pay rates, and that drops the further out you go from the base). My COLA didn't change, because it was based on the base's location.
That said, I don't think it could be an exact 1:1 comparison to the military system, nor do I think it would work worldwide, but I do think it could work with something along the lines of "US/Irish/Indian/Chinese/Australian/Costa Rican base salary + geographic COLA adjustment"
As long as the worker stays within their original geographic base, moves are a simple COLA adjustment. If you move to another "base" it requires a renegotiation of salary (up or down)
This would allow the company to avoid overpaying based on the market value of labor, but also allows the employee freedom to move to anywhere in the world.
The "geographic base" approach does less to even-out pay disparities across countries, and would benefit companies that want to exploit market labor rate differences, BUT with a high degree of transparency (IE: Clear documentation of what the median salary is per "geographic base") you could easily convert someone to a new base ("previously you made the median + 25% in base1 due to a successful negotiation/advanced skillset/documented reason, so you will make median + 25% in your new base, and the region you live in has a COLA adjustment of +2.5%"
It requires a lot of initial and ongoing effort on the company's part to carry something that detailed, so I don't think any smaller shop would ever be able to keep up with it, but for a Facebook? That's not that hard at all... It DOES require transparency in the pay bands for all markets to allow employees to make informed decisions when deciding on whether or not to change their geographic base...
Just spit-balling ideas based on the rest of the discussion. I know we would probably all like there to be one universal salary, but unless we have a universal set of laws, market forces and even economic systems, that's impossible to implement economically.
I hear the point about regional base salaries and a more fine-tuned COLA type adjustment.
My question is, what would facebook lose if a developer who lived for so long in the Bay Area decides to move to Montreal or Chattanooga or wherever (let's say for this conversation, within a reasonable time zone difference)? They get X value and in return pay Y amount. What are they losing to reduce Y? The argument that the employee no longer needs Y is a silly and absurd argument very much along the lines of Twentieth Century Motor Company.
The cost to the company is less (no money spent on an office space for this person + any of the office perks). Are they claiming remote workers are inherently less efficient to warrant the pay difference?
Nothing is ever truly universal. But something along the lines of "Anywhere in the world except [these places we aren't allowed to do business in, can't get a payroll system up in, etc] gets the same pay" is not all that complicated.
The only beneficiary wrt location-specific pay is the employer. Given that they're already saving on expensive real-estate, this is nothing but a "we'll try this too and keep doing this if we can get away with it" type situations.
If this is applied across the board, engineers who are now already in smaller cities and towns or cheaper countries can, in theory, move to the more expensive locations and demand a higher pay? I don't for a second believe Facebook or any other company is ever going to support or even begrudgingly get on board with this side of the equation. They will find a way to block such moves, claim employees are free to do so on their own without a change in pay, etc.
The level of transparency required for this is absolutely in stark contrast to the very nature of companies like Facebook (there's so much documented evidence that if they could run a black box without zero oversight they'd jump at the chance).
Lead Developer, business owner, US Army veteran. I build things for the web. My website is a bunch of HTML pages that didn't need a framework. Yours can be too!
Oh, don't get me wrong: I absolutely believe all companies SHOULD pay the same rate for the same work. Full stop.
Edit: I forgot to address the primary issue: What does FB have to lose?
It's purely economics. They consider it an overpayment for payroll. See below for the reasoning, I just wanted to make sure I was talking TO you and not past you by not addressing the specific point... Sorry about that!
I'm simply describing what I see as an economically viable alternative system to "Your pay is going to get cut arbitrarily if you don't come back to the Bay Area"
The key here is that the Bay Area cost of living is so astronomically above the average that someone making 300k is making 300k not because that is the value of their labor on the open market, but because companies cannot recruit employees without either an incentive to drive an hour+ from affordable housing (I don't know where the affordable housing is in that area) or enough that they can live nearby.
Without the enormous cost of living, none of those workers would be making as much as they do.
Zuck is (shudder) correct that if a worker isn't in the Bay Area, then they shouldn't get paid the recruitment premium necessary to get the best and the brightest to come work for FB in the Bay Area.
The thing that most people fail to realize is that if we truly had a globalized average of pay for Senior Software engineers, the average would probably be (off the top of my head, zero research) somewhere in the 60 to 80k/year range.
But COLA is already baked into the salary. This is just making it explicit.
Now that I feel icky, I do think there are a lot of important conversations to be had around worker treatment, profit sharing and general compensation packages, but when it comes to a company trying to optimize pay based on localized cost of living, we can say things like "They should get the same pay regardless" (which would make them targets for the next round of layoffs), "They should pay overseas engineers the same as domestic US engineers for the same work" (decimating the offshore engineering market by removing it's primary value proposition, which is labor in markets with much lower cost of living thresholds than the US), or we can approach it from a position of how to get the most good and best transparency in the process so workers can be informed and know what to expect rather than what Zuck did, which is just say "we'll cut your pay if you don't come back"...
Jeez... I feel like I'm defending giant companies (I'm not, I just don't think this is a good target)... I need a shower now 🤣
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Quick point to note - Basecamp bases their pay on the Chicago market.
A few others have pointed that paying Indian developers less than the USA is somehow relevant here. That is simply not the case. I know good developers in India making mid-high Seattle rates from right here in Bangalore. I also know of people who work at body shops that farm out a single developer's job to 3-4 engineers and paying them less than a tenth in aggregate compared to an Engineer making high-market rates. The services being rendered are widely different and hence the pay disparity.
The point here is, if we're accepting geographical location as a factor, what about the area they live in? Let's say someone wants to live in small room in a shared house in Daly City and someone else wants to rent a nice cabin in Woodside. Is facebook going to pay them different rates now? What about Harrison NJ vs Manhattan? This whole argument is absurd.
Also, someone mentioned the COLA in the Military. That works very wel. But for one condition. The person actually is required to be on the base. People here will be remote, meaning they don't "have to" be anywhere really. As far as the company is concerned, absolutely nothing is different.
This:
The person actually is required to be on the base. People here will be remote, meaning they don't "have to" be anywhere really.
That is the whole point. If as a company you're going fully remote then location should go completely out of the window as a factor. People can move around, even go abroad, go "digital nomad".
If you choose this company model then you just need to pay based on competency and performance, period.
Not necessarily on the base. I lived in a town within an hour from the base with lower housing costs (rent and housing immediately around the base is always based on military pay rates, and that drops the further out you go from the base). My COLA didn't change, because it was based on the base's location.
That said, I don't think it could be an exact 1:1 comparison to the military system, nor do I think it would work worldwide, but I do think it could work with something along the lines of "US/Irish/Indian/Chinese/Australian/Costa Rican base salary + geographic COLA adjustment"
As long as the worker stays within their original geographic base, moves are a simple COLA adjustment. If you move to another "base" it requires a renegotiation of salary (up or down)
This would allow the company to avoid overpaying based on the market value of labor, but also allows the employee freedom to move to anywhere in the world.
The "geographic base" approach does less to even-out pay disparities across countries, and would benefit companies that want to exploit market labor rate differences, BUT with a high degree of transparency (IE: Clear documentation of what the median salary is per "geographic base") you could easily convert someone to a new base ("previously you made the median + 25% in base1 due to a successful negotiation/advanced skillset/documented reason, so you will make median + 25% in your new base, and the region you live in has a COLA adjustment of +2.5%"
It requires a lot of initial and ongoing effort on the company's part to carry something that detailed, so I don't think any smaller shop would ever be able to keep up with it, but for a Facebook? That's not that hard at all... It DOES require transparency in the pay bands for all markets to allow employees to make informed decisions when deciding on whether or not to change their geographic base...
Just spit-balling ideas based on the rest of the discussion. I know we would probably all like there to be one universal salary, but unless we have a universal set of laws, market forces and even economic systems, that's impossible to implement economically.
I hear the point about regional base salaries and a more fine-tuned COLA type adjustment.
My question is, what would facebook lose if a developer who lived for so long in the Bay Area decides to move to Montreal or Chattanooga or wherever (let's say for this conversation, within a reasonable time zone difference)? They get X value and in return pay Y amount. What are they losing to reduce Y? The argument that the employee no longer needs Y is a silly and absurd argument very much along the lines of Twentieth Century Motor Company.
The cost to the company is less (no money spent on an office space for this person + any of the office perks). Are they claiming remote workers are inherently less efficient to warrant the pay difference?
Nothing is ever truly universal. But something along the lines of "Anywhere in the world except [these places we aren't allowed to do business in, can't get a payroll system up in, etc] gets the same pay" is not all that complicated.
The only beneficiary wrt location-specific pay is the employer. Given that they're already saving on expensive real-estate, this is nothing but a "we'll try this too and keep doing this if we can get away with it" type situations.
If this is applied across the board, engineers who are now already in smaller cities and towns or cheaper countries can, in theory, move to the more expensive locations and demand a higher pay? I don't for a second believe Facebook or any other company is ever going to support or even begrudgingly get on board with this side of the equation. They will find a way to block such moves, claim employees are free to do so on their own without a change in pay, etc.
The level of transparency required for this is absolutely in stark contrast to the very nature of companies like Facebook (there's so much documented evidence that if they could run a black box without zero oversight they'd jump at the chance).
Oh, don't get me wrong: I absolutely believe all companies SHOULD pay the same rate for the same work. Full stop.
Edit: I forgot to address the primary issue: What does FB have to lose?
It's purely economics. They consider it an overpayment for payroll. See below for the reasoning, I just wanted to make sure I was talking TO you and not past you by not addressing the specific point... Sorry about that!
I'm simply describing what I see as an economically viable alternative system to "Your pay is going to get cut arbitrarily if you don't come back to the Bay Area"
The key here is that the Bay Area cost of living is so astronomically above the average that someone making 300k is making 300k not because that is the value of their labor on the open market, but because companies cannot recruit employees without either an incentive to drive an hour+ from affordable housing (I don't know where the affordable housing is in that area) or enough that they can live nearby.
Without the enormous cost of living, none of those workers would be making as much as they do.
Zuck is (shudder) correct that if a worker isn't in the Bay Area, then they shouldn't get paid the recruitment premium necessary to get the best and the brightest to come work for FB in the Bay Area.
The thing that most people fail to realize is that if we truly had a globalized average of pay for Senior Software engineers, the average would probably be (off the top of my head, zero research) somewhere in the 60 to 80k/year range.
But COLA is already baked into the salary. This is just making it explicit.
Now that I feel icky, I do think there are a lot of important conversations to be had around worker treatment, profit sharing and general compensation packages, but when it comes to a company trying to optimize pay based on localized cost of living, we can say things like "They should get the same pay regardless" (which would make them targets for the next round of layoffs), "They should pay overseas engineers the same as domestic US engineers for the same work" (decimating the offshore engineering market by removing it's primary value proposition, which is labor in markets with much lower cost of living thresholds than the US), or we can approach it from a position of how to get the most good and best transparency in the process so workers can be informed and know what to expect rather than what Zuck did, which is just say "we'll cut your pay if you don't come back"...
Jeez... I feel like I'm defending giant companies (I'm not, I just don't think this is a good target)... I need a shower now 🤣