Factors That Calculate How Much to Pay Remote Workers

Recruiting for a new role and the candidate isn’t needed in the office?

So now you’ve successfully brought on a remote employee. Now what? Not surprisingly, one of the first things is to decide how much you will pay this new team member. Not enough and retention will be an issue; too much and you’ll be spending more than you should.

So what is the right salary? From my experience of more than a decade of dealing with a remote team based outside the U.S., I’ve found that there is actually no one specific answer to this question, but there are things you can do that will help determine the right figure.

1. Cost of Living and Industry Standards

The cost of living in your remote employee’s area is a significant component in determining pay rate. The right amount will be fair, equitable and unique for every region, role and person. That’s why it’s also important to consider industry standards (look online for average salaries), the requirements of the position and simply what you can afford.

2. Experience, Expertise and Company Culture Fit

The more experiential and capability hash marks an employee has, the more value they’ll bring to a company and the more you should pay them, but the right pay is not the end of needed considerations. The selection process is also about finding the right balance between company and employee needs, including ensuring that the culture is one where a potential hire can fit in and be both productive and happy. You want remote employees to feel like they are part of something bigger, not just another number on a spreadsheet or an extra pair of hands at an assembly line.

And while it might seem unfair to pay an employee less than they would get in a traditional office setting, you have to consider what you are getting in return. The flexibility offered by working remotely is often worth it for employees because they can choose where and when to commit their hours.

3. Role Responsibilities and Requirements

When considering the salary sweet spot, the most important thing you need to think about is what this person will be doing on a day-to-day basis. What skills are required and how much training will they need? Does the job require specific equipment? You’ll also want to consider whether the role has any special requirements regarding working hours (nights, weekends, etc.).

4. Company Size and Structure

These factors play material roles in determining pay. If you have a small team, you can often offer lower salaries, but if the company is large, you will need to pay more to attract the best talent.

5. Budget and Benefits

Of course, budget is foundational in determining salaries. While you may be able to negotiate, there is also a limit to how much you can pay without exceeding your budget and causing problems with the rest of the employees who work in the office.

And though salary is surely one of the main factors in employee attraction and retention, it’s not the only one: Benefits like healthcare and retirement programs are often just as important to a remote worker. If you want to attract and retain the best talent, be sure you’re offering a competitive package.

6. Attrition Rate and Voluntary Turnover

Attrition refers to employees who have left the company of their own accord, while voluntary turnover refers to leaving due to dissatisfaction with the company or their role. Both types can be costly, and are also more common in remote work arrangements — all the more reason to select with care.

Related: 5 Ways to Turn Employee Turnover Into Opportunity

While it’s challenging, establishing a fair salary for remote employees doesn’t have to be arduous — there’s usually a winning balance between frugality and generosity.