Nadia has been working with Chevron in Silicon Valley for the past 5 years. She was compensated a lump sum amount of $121,867 a year in 2019 but given the high cost of living in San Jose, it wasn’t a lot. She earned enough to lead a comfortable life but every time the thought of quitting her job traversed through her mind, she found herself dead worried. The salary and the lifestyle she had worked so hard for seemed like an absolute reality to her. 

Little did she know that her reality was going to go through immediate changes soon after. When covid hit in 2020, she continued to work remotely but she realized her overhead costs were increasing. Little things like a sturdy but comfortable work setup, a more powerful internet connection, and lunch were accounting for increasing costs. On top of that, the new work conditions required more effort on her part to ensure she took better care of herself. 

On the surface, these costs seem less but they compound and the accumulated can soon burn bigger holes in one’s pocket. She could ask reimbursements for some but the others didn’t seem tenable. But she kept on. The first wave of the pandemic subsided and things seemed like they were going back to normal until the second wave hit. Dreading the consequences, Nadia decided to move to a cheaper location before the borders closed again. She decided to move back to her home in Pakistan with her parents. 

At the time, it sounded like a great decision. She hadn’t been home since college and now she could spend time with her parents who with their chronic illnesses and old age were nearly circling the well. The rent was low and with her family around, it was easier to take care of her well-being. Besides, the money she was making was enough, and then some for the first time in her Asian abode. 

While the pandemic continued, companies had no choice but to opt for remote work. It worked out well. The real problem began when the pandemic was over and companies sought to reestablish the status quo. The people who returned to the office felt that it was only fair that they be compensated more than their remote coworkers. Nadia’s boss now offered her two options: back in the office for the same salary or remote work with a pay cut. Nadia was already making about $150,000 by then and with her decreased expenses of not living in the most expensive suburbs of the world, a little pay cut didn’t seem to make a lot of difference. She graciously accepted the pay cut in exchange for a free reign over her life. 

This is just one scenario of a previously full-time employee turning into a remote worker, but in the past few years, the number of remote hires has increased tremendously as well. As the world became more intricately connected, leaders in the industry resorted to making smarter choices that served everyone involved. 

Remote hires have offered companies the ease of swift and efficient hiring with the most kickass talent from all over the world at their disposal. But the list of benefits only begins here. Companies have also experienced a higher rate of productivity and reduced costs with the remote work option. At the same time, the talent is also happier with this change given greater control over their lives and their time. 

With all the stakeholders experiencing a higher overall joy, despite some inconveniences and hassles in a global work structure, it’s only natural that the trend is growing at an unprecedented rate. 

And this is why it’s all the more essential for organizations to have a strong global salary policy. 

In this blog, we are going to help you navigate compensation in a rounded manner for the hybrid work structure.

Let’s dive straight in  with factors that should be a part of your consideration before arriving at compensation for your global workforce: 

Your Unique Compensation Philosophy

In crude terms, this refers to the salary you are going to offer in relation to the market. While some companies want to stay at par with market rates, in the current competitive situation, some don’t shy away from kicking the average salary up a notch. Also, one important thing to bear in mind is that salary is only one part of the total compensation, although the most dominating. In the contemporary setting, the workforce is also becoming more aware of their own needs and has started seeking more wholesome compensation in exchange for their skills and time. This includes a supporting culture at the organization, opportunities for growth and development, and health benefits among others. So for example, if you have more opportunities for continuous learning and development, perhaps that could be the reason your employees stick around even if their salaries are not particularly higher than other players in the industry.

Now again, these factors will also vary from person to person. There are some who value growth more than money in the long term, while for others the numbers on the paper tell the entire story. It’s vital that you account for these exigencies by understanding data and trends in the industry. 

Salary Bands Based on Location

A global kind of salary for a global workforce may seem like the easiest and the most hassle-free option at first glance, but this choice may be rife with challenges in the future. You might not need people to work out of the office all the time but you might have a need for a more skilled talent that would require you to pay more. Take time to consider the difference. 

Also in such cases, location-based salary that varies according to location and skill (top 75%, top 25%, or top 10%) might be your best bet. One way to navigate this is taking the help of agencies that specialize in salary bands in different locations. Also, figure out the minimum amount of salary (perhaps $2000 a month) you want to pay globally to set your own unique standard in the industry. Now combine the two, the minimum salary band with the trending salaries in different locations to arrive at salaries that account for different locations while ensuring a certain unique standard your company follows. Now simply just take the location of a certain employee and add these trends with your unique standard to ensure a well-rounded salary band for the particular employee. Repeat the process for the whole of your global workforce. 

Cost of Living

A major factor that the agencies specializing in salary bands consider is the cost of living. If you decide to freewheel the number on your own, ensure that you consider the costs. For example: the workforce in large cities like New York or Paris would require a much higher salary than somebody working in a rural village. You can be more meticulous in this detail if you like by further segregating the differences in the cost of living for big cities and small villages alike. Ensure that you have a comprehensive understanding of the cost of living in every location your employees work out of. It might seem like an undue hassle but it pays, we promise. 

Currencies 

When working with a global workforce, a question that frequently comes up is which currency to use. The one that of your area of business or their area of work? 

Unless you’re both in the same time zone or the parts of the continent of Europe that use the Euro, chances are, that you’re dealing with two currencies. 

So how do you decide? If your approach is that of using currency where you operate, it may have an impact on the employees’ pay adversely due to ongoing fluctuations in the exchange rate. Also, government policies are also closely involved in this decision so you need to have an active knowledge of these policies as well. For example: The government of India requires the employment contract to contain the salary amount in Indian Rupees.

Then there is also the government policies on pay periods so that also needs to be a part of your consideration. For instance: Ukraine’s government has made it mandatory for their people to be paid twice a month while countries like Germany require Germans to be paid once a month. 

What’s more? Some countries have policies regarding which day of the month is the right date for payment. 

Tax Policies

Most governments require employers to withhold a certain amount of salaries, called the payroll tax. Since these policies vary from country to country, you need to have a deeper understanding of different tax systems. You need to know what taxes need to be held back, the rates of these taxes, and when these taxes need to be paid in order to circumvent problems that might arise in the future related to taxes and incomes. 

Stock Options

Stock options are becoming a popular way of employee equity compensation. The stock options give the employees the right to buy a given number of shares of a company at a price determined earlier by the company. Stock options are not only an essential way to pay the workforce but it also increases their loyalty and direct contribution to the company. 

In most cases there are three types of equity compensation: 

• Restricted Stock Units, issued in the form of stock or shares, typically adhere to a vesting plan and a specified distribution schedule that is based upon certain milestones that employees must achieve to be considered. 
• Employee Stock Purchase Plans allow employees to buy stocks of a company at a much-discounted price. The discounted price can be as much as 15% lower than the market price. 
• Performance Shares are like the rewards given to employees once they have achieved performance objectives predetermined by their supervisors. This incentive-based stock option is usually driven by performance metrics and KPIs. An example of this would be if the employee completes a certain project within a given timeline. 

Companies use VSOP (Virtual Stock Option Pool) or ESOP( Employee Stock Option Pool) to administer the above stock options to their employees. The main advantage of VSOP over ESOP is that it has fewer legal limits and in the case of remote workforce, this might be the more sensible idea but at the same time, employees who hold these shares cannot become legal shareholders of the company. Also, VSOPs require a lengthy notarization process which can be tedious and long-winded while ESOPs can be designed to circumvent such processes. As an organization you need to decide which option suits you best to compensate your employees in the best way possible. Perhaps an ideal way to approach this would be conducting an in-house survey to determine the direction of their needs and wants and arriving at your choice.

Conclusion

When it comes to bringing home the bacon, employees want a fair share of it, more so if they are the creme de la creme of their industry. Companies need to be cognizant of this fact and they also need to recognize that in today’s information-driven industry, chances are, employees know what they deserve. And that’s why it’s crucial for any company to have competitive compensation to offer. That being said, they also need to be aware of their own spending capacity. This process becomes more complicated in the new work environment running on a global workforce. While the global work structure poses its own share of advantages that have allowed several organizations to become more efficient in their process while cutting extra costs, other factors like location, cost of living, and stock options make the process of arriving at remunerations a more complex job. But ultimately, it’d serve leaders well to be aware of the financial policies of governments of the locations of their employees.