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Comment by bko | Hacker News Reader

> while your competitor says I can live anywhere and remote in

I think most companies still consider your location when determining your pay. Facebook does for instance, even going as far as tracking your IP to make sure you're being honest. If you choose to move to a lower cost city, they'll adjust your wage. Not sure about the other way around.

That'll probably eventually change, but it could be a useful indicator. The median employee that chooses to live in X may be more productive that the median employee that chooses to live in Y. But that's yet to be seen

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> I think most companies still consider your location when determining your pay. Facebook does for instance, even going as far as tracking your IP to make sure you're being honest. If you choose to move to a lower cost city, they'll adjust your wage. Not sure about the other way around.

Truthfully, I don't see this working out in the long run. Companies like Facebook are making desperate grabs to keep control over how work is done and how it is compensated, but I believe market forces will kill efforts like ZIP code based compensation.

In reality, if you're top tier talent, you can command top tier compensation no matter what your ZIP code is. Facebook's strategy relies on every other company colluding with them to suppress compensation based on locality.

> Truthfully, I don't see this working out in the long run. Companies like Facebook are making desperate grabs to keep control over how work is done and how it is compensated, but I believe market forces will kill efforts like ZIP code based compensation.

I think you're right, but I don't think the end game is that everyone gets FAANG-level salaries everywhere.

When companies realize that they can hire people for a fraction of SF Bay Area salaries while still paying them 20-30% more than their local salaries, the overall compensation structure will slide downward toward that number.

Then the next step is when they realize they can hire foreign people in similar timezones at another lower step on the compensation ladder (while still paying more than their local jobs would offer). The compensation then slides further down toward this average.

> In reality, if you're top tier talent, you can command top tier compensation no matter what your ZIP code is.

Works in theory, not as much in practice. There's still value to having people collaborate in person (I say this as someone who has primarily worked remote long before COVID). Companies paying top dollar have a lot of leverage to get employees to move and work in-person still.

"A fraction?" How much less do you think they can pay? This sounds suspiciously like the myth of off-shoring, get the same work for a fraction of the cost, but from what I've heard the competent ones quickly command more pay and are certainly not "a fraction" of a SF salary.

> "A fraction?" How much less do you think they can pay?

Half of Bay Area FAANG salaries is still more than a huge swathe of localities in the country - let alone the continent, where you'd likely plumb a quarter or an eighth and still be above local averages.

I think this would be an interesting hypothesis to entertain if it wasn't already falsified by the observation that FAANG (& similar) pay much more than a 30% premium over the "median" tech job not just in the US, but in pretty much every market where they compete.

An instructive example would be India: TC for senior engineers at Google, Amazon, Uber, etc is already north of $150k there. Note that this is _already higher_ than the median tech salary _in the US_. Meanwhile there are still places in India paying new grads $10k.

You see something similar in Ukraine, where 40-50k was a reasonable rate for senior engineers, and then Lyft enters the market and starts giving seniors 6-figures.

I think the answer, as always, is that there are just not enough sufficiently talented & qualified engineers, even taking into account the global talent pool, to balance the rapidly increasing demand for those engineers. If it was just one or two companies paying this level of outsized compensation I'd be skeptical of the long-term trend, but it's not - this is pretty much all modern tech companies, because the unit economics of software businesses make good developers extremely valuable.

I was curious what the story looked like for South America, and, hey, turns out these tech companies already pay 6-figures there too. Heck, Coinbase is offering _mid-level_ engineers in Brazil 6-figures for remote roles.

> An instructive example would be India: TC for senior engineers at Google, Amazon, Uber, etc is already north of $150k there. Note that this is _already higher_ than the median tech salary _in the US_. Meanwhile there are still places in India paying new grads $10k.

Keep in mind these companies are really trying to get the 1% of developers in that market. Anything below the 95th percentile is unemployable. [0] [1] [2]

[0] https://restofworld.org/2020/india-engineering-degree/

[1] https://www.business-standard.com/article/opinion/india-s-ta...

[2] https://www.business-standard.com/article/companies/95-engin...

I would be wary of the 95% figure. Another user on HN (who currently works at FAANG) pointed out that he took the test used in that survey and failed. The interface for the coding test was not reflective of how actual software development is done (ie no syntax highlighting, memorization, etc). Even accounting for the diploma mills and the private universities with underresourced CS departments, the 95% figure seems unusually high.

Even if we assume for the sake of argument that that's true, I think that only enhances my point: there aren't enough engineers that these companies are willing to employ such that they would tip the scale on the supply/demand balance sheet and push compensation down (in real terms; obviously every additional marginal engineer pushes down compensation in counterfactual terms).

It strikes me as unlikely that big tech companies could save a large fraction of their engineering salary payments by firing a ton of engineers and replacing them with newly-hired engineers in different countries, and the only reason that they haven’t done this is that they simply have not had this same realization that you have had. It’s possible, of course, but I have a sneaking suspicion there’s more to the story.

I think some companies might do that. I think they'll wind up losing money as a result.

If you're willing to pay more for identical work because your employee chose to live somewhere more expensive, you're encouraging your employees to live in the most expensive places.

On the other hand, if you offer a fair wage for the work done regardless of location, your employees get better value by living somewhere inexpensive, which lowers the required compensation for the same employee.

I think Facebook is simply creating more problems for themselves by bothering with this.

If the cost of living adjustment were “perfect” then it wouldn’t encourage employees to live in any particular place, right? Presumably the whole point is to give each employee the same “effective compensation” for their particular place of residence. Of course, it’s not so easy to agree on what the ideal method of cost of living adjustment would be.

A "perfect" CoL adjustment can't exist. If it's fairly applied across distinct individuals then it won't be perfect for some of them, and if it's applied consistently to a fixed individual that person has enough tweakable parameters to warp the situation to their advantage and actually prefer one location over another. E.g.:

(1) Bob is optimizing long-term savings, and Joe is optimizing purchasing power for nearby activities like bars and restaurants. After subtracting other comparable expenses, any salary surplus strategy which is a "perfect" cross-city CoL adjustment for Bob will when applied to Joe cause him to prefer a cheaper CoL location because his dollars will go further. Supposing the employer doesn't have power to discriminate based on such preferences, no fair CoL adjustment is perfect for both individuals.

(2) Bob is still optimizing long-term savings. MegaCorp chose a "perfect" CoL adjustment based on Bob's preferred standard of living, but the multiplicative nature of price increases in a high CoL city means that Bob can save a ton of money with a mild decrease in his standard of living. He's incentivized to live somewhere more expensive because doing so will maximize his potential savings with minimal impact elsewhere in his life. If the employer isn't discriminating based on what's paid for rent and other expenses, the CoL adjustment is gameable.

The thing is that even if the cost of living adjustment was perfect, that still incentivizes living in a high cost of living area.

It's much easier to move from an expensive city to an inexpensive city than vice versa since your savings will go much further in the inexpensive city.

Compensation should be adjusted to value created not expenses incurred.

Then some of my coworkers should pay the company.

Ha, spat my coffee out at that one

Most of tech either isn’t remote or hasn’t been for very long, so strong candidates with large scale prod experience are still concentrated in markets where these skills are most valued and attainable. If you want those candidates, you have to compete with offers from local big tech.

> strong candidates with large scale prod experience are still concentrated in markets

As I keep asking when this comes up, if this is true then why are salaries for FAANG engineers so much lower in London? London, as you may know is 100% not cheap, and yet salaries there for FAANG tech people are approximately 50% of those in SF/US.

Because in the UK (where all of my ancestors are from) they don't value software engineers like they do in the US.

In the 1990s we were paid and managed like accountants. When the Web went mainstream, Bay Area VC companies created a sudden shortage which slowly spread.

ISTM that the main cultural difference is that UK companies consider developers as cost centers, not profit centers. Therefore, the bean counters have an incentive to either eliminate us or consider us as interchangeable cogs in the system.

But FAANG do. So why don't they raise salaries?

> I think Facebook is simply creating more problems for themselves by bothering with this.

This was always the policy, they paid wages based on the market. They did, however, pay identically in all of their US offices (prior to Covid) which is perhaps why people are surprised about this (entirely normal and expected) practice.

Given that I don't live in the US, I don't like this policy, but it's been around forever basically, at all large tech companies.

> If you're willing to pay more for identical work because your employee chose to live somewhere more expensive, you're encouraging your employees to live in the most expensive places.

I think the salary adjustments aren't so extreme that you're actually indifferent from living in an expensive place. Also, most employees aren't unattached 20 year olds. I choose to live in a high cost area because my family is here and this is where I grew up.

> On the other hand, if you offer a fair wage for the work done regardless of location, your employees get better value by living somewhere inexpensive, which lowers the required compensation for the same employee.

Would you be okay if the 'fair wage' was based on a global developer workforce? For instance, median programmer salary for the UK is ~$41k while the US is $74k, not to mention salaries in developing countries. Everyone assumes that fair consistent salaries will just take inflated San Fransisco levels and apply them globally when in reality, its more likely that we readjust all salaries based on lowest cost of living.

This works great until they start offshoring jobs to countries where software engineers make less than the total median American wage. Then do we all hope Polish or Indian immigration services approve us for a work visa?

Practically, what does this look like? There's $3M beautiful coastal homes in my area, and a few miles inland, you can get what might be called a 'starter home' for $900k. Is my wage going to be based on the extremely expensive coastal area, or the marked up, but still comparatively affordable inland area? It's all the same 'location' if we're talking at the county level.

I would think they use a metro-area scheme similar to what the government uses for their employees https://www.federalpay.org/gs/locality

Because, I mean, waterfront property has a premium everywhere, and even in the same exact "starter home" location I'm sure you could teardown and fit a $3M home. Those choices aren't determined by the metro area.

If I were looking for work and I were a top tier candidate, I would not let companies play games by determining pay based on my location. I'd work with a company that pays me well no matter where I choose to live. After all, where I live should only concern them if there's some kind of tax implication.

Top tier candidates aren't stupid, and ones that would willingly subject themselves to that are probably just looking for a year or two stint to bolster their resumes. Either that or they aren't as smart as they make themselves out to be.

> Facebook does for instance, even going as far as tracking your IP to make sure you're being honest. If you choose to move to a lower cost city, they'll adjust your wage.

That's the official HR policy.

In real life... key contributors are magically exempted. If you aren't making SV rates no matter where, that's a career red-flag.

Any Facebook employee that wished to would surely find it trivial to use a VPS or something to mask their true location.

Technology is not always the solution. If your employer asks you to affirm something, and you do that, and then cheat (because, let's say, cheating is technologically trivial), then you take a huge risk. A lot of people will not take that risk. It's enough to make example of 1 or 2 people who are caught, and the rest will fall in line in no time.

Is my opinion, the company is cheating the employee by paying them less for the same work just because they live somewhere else.

One side fully presented the terms at the start. The other lied. If you don't like the terms, don't accept them. It isn't like facebook is the only employer.

It has never worked differently. If you want to average out the pay you'll be paid much more closer to Bangladeshi pay than to SV one.

It’s more a legal thing. Companies have to follow the local labor laws and pay taxes to the appropriate states.

Not sure the courts will really care about your opinion when there was an employment contract in place?

You and the company still needs to know/decide which locale you get taxed in and which regulation to follow.

Even in California, SF has different payroll taxes and regulation than other cities in the area. Massachusetts requires employers to open a unemployment account in state. If the employee moves to a state the employer doesn’t have a employees previously, you need to register in the state and it might mean you have to now pay sales taxes on revenue in the state.

So unless you become an independent contractor and deal with this things yourself, the employer needs to know where you live most of the tax year.

More and more remote companies use PEOs. No need to incorporate in 50 states, you just pay someone else to.

We use it too, but doesn't change the fact the the employer needs to tell the PEO where the employee is located. PEO also have limits, like MA example, the company still needs to open the unemployment accounts directly with the state. Sales tax is another thing that you have to do directly.

My point was that main reason companies need to know where the employee is compliance, employment law, taxes and potentially IP protection. While the employer wouldn't care about the location because of pay scale, they still need to know for other reasons.

Until we can all live in some United Kingdom of the Internet, the unfortunate fact is that local laws apply to companies and employees when the employee resides in the jurisdiction.

I worked at a company that switched to a PEO, people seemed weirdly outraged.

Playing games with your employer probably isn't the best idea if you're looking for a long term relationship with them.

It's not just the company caring for their own purposes (although there's that as well), there are external requirements which depend on the employee location which force them to need to know. Such as which taxes and how much they are required to deduct and even which health plan choices are available.

Facebook probably has really good data on IP geolocation, probably much much better than anyone, both through data users willingly provide and data from attackers they are certain to be fending off constantly. They'll know you're on a VPS.

I wouldn’t be so confident as to think Facebook won’t catch me lying for years.

Don't you have to give them your legal address when you start working for them?

I believe Facebook could catch them if it wanted.

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