In 2015, I left my small country town and my corporate HR career to travel the world and explore the Future of Work – in the broadest sense.
I started to work location independent and connected with new people from around the world, who were working in HR and social innovations.
One of these contacts a startup that had a platform that crowdsourced the recruitment function to independent recruiters around the world.
We explored the idea for me to get involved and I would be part of the general operation for a while to gain in-depth understanding of the processes.
Curious to this exciting new world of startups, remote working and crowdsourcing, I took on the project.
I soon found myself in a quite absurd situation:
At that time, I was stationed in the North-East of Brazil where the people found it an amazing opportunity “with really good money”. As, I imagine, was the case for many of the recruiters working for this startup, people from low-income countries like the Philippines.
However, compared to my former fee as an interim HR Director in The Netherlands, or even for any Dutch freelancer fee, the money I earned in that month was basically nothing.
And the company originated in Dubai – so compared to the hourly rates that they would need to pay to local recruiters, this company had developed a very low-cost business model.
For me this was mainly a learning experience so the money was not that important at that point.
However, this experience made me question the value I thought money, and even labor, had.
That situation lacked a reference point and I could not place it any meaningful context, so I felt it all became so relative, and what I would earn, and then spend, I somehow could not give meaning anymore.
Money isn’t an immutable, universal Truth—but a fluid, relative representation of value, which is always individual – Tara McMullin
Above quote is out of this article by Tara McMullin that explains how we, as individuals add value, to money.
And to do so, collectively, we need these reference points, or a certain context. For example, compared to minimum wage, the salary of your peers, or is it enough for your standard of living?
Maybe without a reference point, money is becoming even more relative than it already is, and we start to struggle with the value of money, hourly rates and labor itself.
And understanding that rationally is one thing, really feeling it when thee reference points and context that you are used to, are gone is something else.
A Global Responsibility
In this new, more global world of work, we need to find a way to be able to value labor in a way that allows us to compensate in a fair and equal way.
We need to understand that with the rise of technology, and the increasing number or independent workers we are also moving out of the standard employment where we knew people were getting paid for work, are protected by minimum wages and labor laws, and even have a social security in place in case they can’t work or when the work ends.
For many people, and these are often women, minorities or immigrants, or people in developing countries this is simply not their reality.
And that means, we have to make decisions when it comes to who we hire and on what terms. How are we collecting and mobilizing resources in the future? In a way that is fair, and that is inclusive and adds to a sustainable world?
With inclusion and diversity dominating our HR and Organizational agenda’s how can we ignore the reality of emerging global economies that are no longer subject to traditional labor laws and social security?
New Questions to answer in a global, virtual talent economy
With more and more companies opening up for more remote working, we are heading towards a global talent economy, and companies start to figure out what that means for compensation structures within organisations and how to compensate global distributed teams.
The question of fair compensation for employees around the world will become more relevant over the next years.
Remote and distributed teams can open the door for people in less developed areas to get access to the best companies around the world.
Will we be moving to a global world where the talent economy brings amazing opportunities for people in developing countries improving their lives and communities?
And if we indeed collectively move to a global talent economy, what does this mean in terms of fair and equal payment?
How does this relate to so social security, pension fees, and labor laws? There is, for example no minimum wage in Dubai, but there is in The Netherlands, where I am a resident.
And if we pay people in developing countries less than a ten-fold that we would have to pay a knowledge worker in our own country, does that mean we are then creating more or maintaining inequality? And to what extend are we responsible for this?
And what does this development mean for knowledge workers based in high-costs countries that in the near future need to compete with talents in low-income countries for the best jobs out there?
How to move to equal pay
As we seen in my personal experience, money is relative and it is difficult to put a value when outside of the context of living costs and a local labor market.
When we hire talents around the world, we are faced by the question how much we will need to pay them.
Most companies pay according to local salaries and follow local labor laws – which is a logical and probably the most practical choice.
But there are some problems with this model that is creating inequality by nature.
We hear more and more companies who feel that it is unfair to pay different salaries to employees that working side by side on the same projects.
Also, jobs are often not valued the same in each country, because of high local demand for certain roles in various countries.
Taxes, pensions and social security vary across countries, that further increase inequality.
For example, in the Netherlands employers pay the pension premiums for their employees, which is a form of postponed salary. So, on top of higher salaries Dutch employees also build a higher pension, while their colleagues in developing worlds would need to use their salary to build a private pension fund.
The models used by fully distributed companies
These questions are going to be on the agenda of companies and we will need to rethink how we can create more equal and fair pay for their employees, we might see some interesting new approaches in fully distributed companies, who are moving away from local salaries.
These pioneers of globally distributed set ups are ahead of the curve when it comes to developing and fine-tuning solutions for the challenges of a new world of work and we can learn from them.
Gitlab is a fully distributed company that hires across the globe, and pays according to local labor costs. On this page they explain why they pay local rates..
Buffer, another fully distributed team, chooses an pays an equal base salary based on a salary for a high-cost city. Employees living in areas with low(er) costs of living, will receive 15% or 25% less salary.
Since they are fully transparent, they have published their salary calculator, which gives us an indication of global salary payment schemes.
As you can see, a senior people operations manager has at Buffer earns between 107K – 145K USD, depending on the location.
Wildbit takes it even further and has decided to opt for “location-agnostic” pay structure, meaning employees will be paid consistently regardless of where they live, benchmarking the companies’ headquarters, Philidelphia. Here is the announcement by the CEO of the company
Moving forward to the model of the future
All three of these models are valid and thoughtful solutions, and all three have their pros and cons.
The difference is the intention that is behind it the choices that these companies make.
As we move towards global staffing, HR and business leaders around the world face the challenge to work on their best compensations model that is competitive on the labor market and inclusive for all employees.
And although we can’t change the economics around the world, but we can think about what fair pay means, and how we can ‘equalize’ compensation and benefits as much as we can for our employees around the world.
The case for the Location Agnostic Approach
So, what is the best way forward? I have given it some thought and I feel there is definitely something to say for the location agnostic approach.
A first reaction might be that by paying the same wages to everyone, we would be overpaying people in regions where salaries are lower, driving costs up. A company would be missing out on the advantage of hiring talent for lower costs.
However, the decision might be that you are looking for the best talent around the world and not for reasons of cost reductions.
Since I live on and off in the North-East of Brazil myself, I know that we need to realize that in a developing country people are expected to pay for things that are publicly provided for in the developed world.
Employees in low-costs countries probably not have access to pension schemes, social security, or public health insurance.
They also often need to provide for or help out their (extended) families or even others in their community, for example with health care or education.
This combination of factors will increase inequality even further.
For a long-term sustainable and human centric organizations in an equal world, I do believe we should be aiming for equal pay for all in the long-term, despite all the complexities that we face in the meantime.
That way, our talents around the world will be able to lift their community and contribute to a stronger economy thus reducing inequality.
As HR and business leaders, we cannot ignore the opportunity that we have to fight poverty and inequality by moving to global staffing with location agnostic payment structures.
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