Why local taxes require location-based salaries
You will have different salaries in different countries due to varying local tax laws.
For example, in Dubai, you don’t have any sort of taxes on your salary while in Austria there is a tax you pay as an employee plus the taxes your employer has to pay for you. So the employee pays about 30% and the company pays about 30% and that will all be reflected in the salary. This is why when at a macro level at all large companies with a remote-friendly setup, you start to see a lot of location-based salaries.
How we create our salary bands based on location
We decided against a global kind of salary because, for us as a business, we would not be able to do that because we don't need people sitting in San Francisco all the time but maybe there's a talent there that we would need to pay more for. We decided to have a location-based salary that varies in accordance with location and skill ( top 10%, top 75%, etc). To do this, we bought different kinds of data sets globally from ranking agencies that specialize in salary bands, and then we combined it together a minimum kind of salary that we want to pay globally. (Everyone gets at least $2000 a month no matter where they live).Then, depending on the local variance on the salary, we would then basically rise that to whatever it is.
We base our band on the datasets we bought but the final product is our own. We try to find the ranges that make sense for us, because of course, sometimes we need to make an exception.Most of the time it's, it's quite simple. Occasionally we validate our bands by using publically available calculators like Gitlab or Buffer salary data. There are many different public datasets you can look into.
The salary bands are decided by 2 dedicated team members inside Storyblok that do the benchmarking. Salaries bands are not decided by the hiring manager themselves. (This probably allows for a more consistent and methodical process -ed)
What about the cost of living?
The salary bands we created have directly included the cost of living to some extent. They are usually already built around that. We are quite lucky with the way that we handle that because of the databases that we purchased.
Do you take into account currencies?
We pay people in their local currency. We don’t pay people the same dollar amount or the same Euro amount as currencies would complicate things and we anyways need to pay people in a local currency.
How we handle Payroll for our remote global company
We use an Employee of Record set up for all employees outside of Germany, Austria, and Brazil (we already have entities there). Even if we have a very large team in a certain country, we would not consider opening a subsidiary there just for payroll purposes. It is just too complex. The main reason for us to open a subsidiary is not so much on the employee side because you can employ them with an employee of record. Especially if you are not the employee is a contractor and you are not their only customer. We would only establish an entity in a different country for sales purposes. For example, in the US it might make sense for us to establish a US entity there because somebody should have direct liability in that country with certain local laws that we need to fulfill.
How we handle global ESOP (i.e. VSOP)
We offer a global VSOP - (Virtual Share Option Pool) instead of an ESOP (Employee Share Option Pool). We had to hire a lawyer in Austria as we are an Austrian GMBh. But honestly, setting up a company in Austria or Germany adds a huge paperwork burden. If I would do it again, I would set up a company in a country with a more convenient bureaucracy like a UK Limited Company or a Delaware/Wyoming kind of Limited Company. With such a setup, you already have all the documents you need. You wouldn’t need a notary and ten people checking line by line as you would in Austria to sign documents - you just use a digital signing tool like DocuSign.
In conclusion, compensation is a crucial aspect of any company, and remote workforces present new challenges that companies need to address. Companies should consider factors like cost of living, location, and job function while developing compensation policies.