Another reader question today, this time on compensation. If you have questions you can always email ben@upstarthr.com and we’ll fit it into the queue if possible!
Why do companies pay employees by cost of living of the city/country that the employee is working from rather than the cost/value of the work? Can employees game this system to earn more money?
This is an interesting question, but the truth is it’s not either/or–it’s both. Employers must consider both internal equity and external/market equity when building a compensation structure.
Employers pay what the job is worth, or they will never be able to hire anyone. Try offering a software engineer $10,000 a year and see if they want to work for you. This is about internal value and equity–what value does this job have to the firm relative to other jobs? There’s a general hierarchy in terms of pay rates, which is why an administrative assistant earns less than the CEO. Continue reading