I hope I don’t get fired for writing this article.
Kidding, of course.
The truth is, the question about proper compensation in remote work has long been hotly debated. Only then, it was easy to overlook the issue since the work from home model isn’t as pervasive as it is now.
2020 really did turn the world on its head, and the workplace as we know it is no exception. Rodolphe Dutel, the founder of remote jobs platform Remotive, said it best. “In three months, remote work jumped a decade forward.”
While lots will certainly go back to the office once it’s safe to do so, the WFH set-up isn’t going away anytime soon. Arguably, even more people are realising its advantages and are unlikely to abandon it. And that goes for both employers, who are reaping cost savings from less overhead expenses, and employees, who no longer have to endure an arduous commute or too much time away from their loved ones.
But the caveat is that there’s not much room to ignore compensation issues. Not when the demand for top remote talent is higher than ever, and not when outsourcing is the best option for many AU companies to keep operating sustainably.
So, on to the question at hand. Should remote workers be paid based on their location or their skill?
Let’s look at both sides of this equation.
There’s a reason why India and the Philippines are incredibly popular outsourcing locations. As with anything and everything businesses do, it comes down to cost.
In these countries, the cost of living is significantly lower compared to most Western countries. Then there’s the exchange rate. In the Philippines, for example, Australian dollars will go much further, given how AUD1 is roughly equivalent to PHP37.
So, while wages of AUD8/hour don’t sound all that impressive Down Under, that translates to almost PHP300/hour. And in the Philippines’ capital city, the current minimum wage rate is Php537 PER DAY.
Assuming that a remote worker puts in an average of 8 hours per day at work, that adds up to PHP2,400 per day. That’s more than double (or even quadruple) the minimum wage rate. Yet that would only mean AUD64/day in comparison, which is hardly enough to live on in Australia.
Hence, it’s possible for an Australian company to outsource an entire remote team in the Philippines AND pay all of them livable wages. While still enjoying MASSIVE savings.
Okay, so what’s the problem with this seemingly win-win solution?
There’s two things, apparently. One is that a purely location-based compensation scheme begs a crucial question. Let’s say a Filipino developer can do the job as well (or perhaps even a shade better than) a Sydney-based developer. Wouldn’t that mean that the former should get paid as much as the latter would?
Secondly, there’s skill scarcity. The top IT developers tend to get paid roughly the same wherever they live in the world. There’s simply not enough of them, and the companies that outsource to them compete to employ the best.
Then there’s also the tendency of some employers to forget that remote workers are humans too. While they live in countries with lower costs of living, they do get older and/or start families. Either way, living costs increase considerably, despite wages staying roughly the same.
Plus, unlike in-house employees, remote workers have to be largely self-sufficient. While Australian dollars do translate into more Philippine pesos, they have to allocate for their own utilities and their own equipment.
If their laptop breaks or if they need a certain software, they often have to provide their own. If they or a family member get sick, they don’t have a medical plan to fall back on for the medical bills. These things don’t come cheap, and can eat into even what most would consider a generous salary.
Let’s not even get started on taxes and government-mandated contributions.
The Importance of Meeting Halfway
As of now, there is no easy answer. Proper and timely compensation is key to retaining an all-star remote team. Ultimately, the amounts involved comes down to what the employer and employee can agree on (and sometimes, just how much the former values the latter).
Ideally, you should consider both. While, yes, you do outsource in order to lower costs, these savings should not be at the expense of your remote worker’s ability to afford a decent living. Lowballing a remote worker isn’t just unethical. It’s also unsustainable. If a certain worker has top skills, it won’t be long before someone else sees that -and makes them a much better offer, regardless of where they’re based.
While we’re on the subject, do consider the employee’s workload as well. It’s one thing to pay someone the going rate for, say, social media managers if that’s their official job title. It’s quite another thing to pay someone for one job, but expect them to do that of so many others.
Again, for example, don’t make your social media manager do graphic design, SEO management, content writing, and customer service too. (Unless you intend to increase their pay with each role.) Those are all responsibilities for individual jobs, and thus should be compensated accordingly.
Not sure about how to broach the subject with your remote team? We can help you out with that.
Thanks to more than ten years of experience in recruiting and onboarding top Filipino remote talent for various AU businesses, Remote Staff has garnered veritable expertise in arbitrating such matters between both parties. We also provide continuous support and guidance to both our clients and remote talents all throughout to ensure a smooth working relationship.