Understanding the benefits and drawbacks of location-indexed and location-independent salaries, with numbers.
Q: “I’m the CTO of a Series A startup, and I’m leveraging our remote culture to attract engineers from larger companies. However, despite being well-funded, we don’t have the budget to compete on salaries with unicorns and Big Tech.
What are my options to hire good engineers, within a reasonable salary budget?”
This is an evergreen question. However, it’s especially timely as strong VC funding is one of the six contributing factors to the current heated tech hiring market. As startups raising healthy funding look to scale, they naturally seek to hire experienced engineers, often wooing them away from larger companies.
To answer this question, I’m pulling in my friend Sergio Pereira who has been a Chief Technology Officer (CTO) of remote teams for 6 years and is sharing his knowledge at Remote Work Academy, through articles and courses. He is also active in several CTO roundtables, keeping his ear on the ground.
In this issue we cover:
The shift from office-based to remote. Remote work is here to stay, and increasingly so with startups.
Location-indexed salaries. The benefits and drawbacks of this approach.
Location-independent salaries. Although often a more expensive approach, this comes with plenty of upsides. It also brings the important question of what, exactly, to benchmark on.
Benchmarking. How can you anchor ranges for remote salaries?
Numbers. Salary numbers considered competitive for seed-stage and Series A companies based on The Pragmatic Engineer Job board statistics and conversations with founders at Seed and Series A stages who are hiring successfully.
Although the issue is written targeting CTOs, the information below is relevant for engineers and managers. It’s good to understand the tradeoffs companies make when deciding on a compensation strategy. Also, one day you might become a decision maker on budgets. When you do, come back to this article to weigh tradeoffs on either approach.
Over to Sergio: