So you’ve made the decision that building a remote team makes the most logistical, cultural, and financial sense for your business. As someone who has built remote teams from the ground up and transitioned legacy teams to become remote first, I can say you’re making a great decision. Now the planning begins.
Before you make any hires, you need to have an idea of how much your remote team will cost. Whether you run a startup or more established business, the factors that influence the cost of a remote team will vary from organization to organization.
Let’s start by examining how the reasons companies decide to build remote teams have shifted.
Old School Mentalities vs New Mentalities
When businesses first started building remote teams in the ‘90s, the primary driver was to save money. Outsourcing IT and marketing to teams in India and other developing nations seemed like a way to considerably reduce costs. And it was: in fact, some business owners have reported saving as much as 90% thanks to outsourcing jobs overseas.
But as it turns out, if reducing costs is the only reason for building a remote team, the consequences can be severe. Innovation, retention, and company culture all take a hit with this “old school” approach.
The new school of thought for building remote teams, which I advocate for, is different. These days, the best reason to build a remote team is the access it gives you to an international pool of talent. It means exponentially more high-quality candidates than if you were to only hire in your local market. Plus, an international pool of talent also means you can hire faster, and because of the freedom that comes with remote work, you’re more likely to retain the people you bring on for much longer.
How to Pay Remote Talent Around the World
While many companies choose remote teams to access an international pool of talent, one of the main things to consider is your approach to paying talent. Currently, there are a few different approaches for how much to pay the remote talent you bring on.
The companies who understand that skimping on salaries can cause culture and innovation to suffer in the long-term, pay workers the same competitive rates, no matter where they are in the world. Remote software company Basecamp is one such example, with workers getting paid on the same scale regardless of where they are.
There is a downside, though- talented workers in more expensive markets are unlikely to take jobs making below-market wages, and depending which pay scale you follow, this might be the case. On the other hand, if you decide to base salaries on the world’s most expensive markets, the cost of building a remote team can quickly become exorbitant.
This is why companies like Buffer don’t pay workers around the world based on the same pay scale. However, the company takes measures to make sure the gaps in pay between workers across different regions are not excessive.
At Microverse, salaries are largely determined independent of where the employee is living, but a portion of salaries are still adjusted based on local costs of living. GitLab is another company that is known to follow this approach. You can read more about how the company does so here.
Companies with remote teams usually end up paying salaries that are neither strictly based on local markets nor aligned with the most expensive markets. Rather, they fall somewhere in between. This way, the company saves money, and the employee has access to a professional opportunity and compensation that wouldn't be available locally. This makes them much more likely to stay in the company in the long term.
Remote Teams: An Advantage or Necessity?
The demand for software developers has never been higher. With companies competing for top talent more than ever before, prices are rising, making it impossible for many companies to hire developers locally. As a consequence, companies are forced to look for talent outside their local markets, which leads to more remote hires.
As the trend of building remote teams with international talent grows, the competitive advantage that comes with building remote teams will dissipate. The most talented workers will prefer to work in environments that give them more freedom, leaving companies that don’t have remote teams.
The Perils of Transitioning to a Remote Workforce
It can be difficult to transition a legacy organization to become remote-first, mostly because an established company culture is hard to upend. In this case, the best thing is to start by building an autonomous and fully-remote team. This is a better approach than adding a few remote team members to every team, where these team members might end up feeling detached from their colleagues. Likewise, there will be growing pains if you try to transition your entire workforce (assuming it’s more than a few dozen people) overnight.
Overall, it’s important to understand that you shouldn't go remote just because it's cheaper, but because it will open a huge talent pool for you. That will require a different way of hiring, compensating, motivating, and managing your team.
And once again, while it’s great to grow a business with cost-effective salaries, the true value of remote teams lies in the higher retention rates thanks to the cultural and lifestyle advantages, and a larger talent pool to choose from.
Are you interested in learning more about how much it might cost to build a remote team? Get in touch with us here.