At Nebulab, we hire people all over the world, with no restrictions on geography or nationality. We have teammates in the US, Brazil, South Africa and Italy, just to name a few. This allows us to tap into the global talent pool and enrich our team with diverse perspectives.
It's also a policy that has its challenges, the main one being how to compensate people fairly when they live in countries with wildly different job markets and costs of living. There are typically two approaches to global compensation:
- Paying everyone the same salary, no matter where they are located.
- Adjusting salaries according to the job market or the cost of living.
The proponents of both philosophies will tell you that their way of doing things is the better, fairer approach. At Nebulab, we've been battling with this problem for a while now, and we came to the conclusion that there's no one-size-fits-all solution: each company needs to choose its own compensation strategy in accordance with their business model, values and long-term vision.
In the next paragraphs, we'll explain why we pay based on the job market.
Why we pay based on the job market
In designing our compensation strategy, our main goal was to be able to compensate people fairly and competitively all over the world, while continuing to scale the company in a sustainable way. Nebulab has been completely self-funded from day 1, meaning that every decision we make needs to keep the company successful, healthy and profitable.
Paying everyone the same salary would have prevented us either from hiring teammates in specific regions (e.g., metropolitan areas in the US/UK), or from keeping the company profitable. Both outcomes were undesirable for us, since we want to have reasonably few restrictions when it comes to where we hire from and we very much want to stay in business for the long run.
Moreover, it didn't feel like paying everyone the same salary would be fairer than paying local salaries: someone who's making $150k/year in Pescara, where we have one of our offices, can afford a much more luxurious lifestyle than someone who's making the same salary in San Francisco. We might be paying both people the same money, but it results in two very different outcomes for them.
This leaves us with the two options of paying employees based on either the cost of living or on the job market.
Cost of living, unfortunately, is not really an option: it's a flat index that doesn't tell us whether we're actually competitive when compared to other companies in the same industry. Software engineering pays higher than most industries in the majority of countries, and it's very difficult to model this using the cost of living. Furthermore, we found most datasets to be severely outdated or not granular enough for our use case.
Job market data, on the other hand, is more granular, it's updated often enough for us to stay competitive with other companies hiring in the same region, and it also allow us to pay everyone according to the same rules.
This is, by far, one of the most critical decisions we've ever had to make, as it has very practical consequences for everyone at the company. Still, we feel like we made the best choice based on our business model and values.
We use Kamsa to administer compensation reviews. We commit to reviewing everyone's compensation package at least once a year, but we may do it more often if market situations change dramatically and/or we need to adjust the general compensation strategy.
In principle, compensation reviews are a fairly simple thing: we review everyone's compensation packages and compare them to what they should be. We then use the salary budget for the year to increase salaries as needed and reduce the gap between the current and the ideal state of things.
There are three main factors that can influence your compensation:
- Your job title: if you get a promotion, you will (obviously!) get a salary bump. Note that, depending on budget allocation, this might only be a partial bump that takes you closer to your target salary.
- Your performance: some promotions may take years, but we still want to reward people for performing well and living by our values. If they think you have really shined, your manager may decide to bump your salary.
- Market data: if market data tells us that salaries in your region have increased, we'll increase your salary accordingly.
Keep in mind is that the adjustments that originate from compensation reviews are based on the company's current budget and overall compensation strategy: salaries are rarely increased in one-time bumps, but rather over the course of several compensation reviews.
Salary decreases and relocations
We never decrease salaries, even in the off chance of a demotion or unfavorable market conditions. While it seems intuitively fair, decreasing someone's salary may put them in a tough financial situation—it's simply not worth it, not to mention illegal in some jurisdictions.
Our strategy is to aim for long-term fairness: if you are being paid above the expectations for your title, market and/or recent performance, we'll simply take that into account in the subsequent compensation reviews.
One exception to this rule is if someone relocates for the long term. Since this is a deliberate decision, we'll work with the teammate to design a competitive offer based on their new job market. If you're thinking about relocating, speak to your manager first to understand how to best approach the situation.