As company leaders consider plans to support remote work in a post-COVID world, they’re looking to their peers for insights around making a smooth transition. This is uncharted territory for many. Fortunately, companies like GitLab have paved the way—and documented their journey in their public, internal employee handbook.
One important decision to think through and communicate company-wide is how to pay remote employees. Your employees depend on their compensation to pay their bills and maintain their lifestyle. If compensation might change due to relocation, it’s important to document and communicate that well in advance so employees can plan accordingly.
GitLab is a global, fully remote company that manages remote compensation for hundreds of employees in over 200 regions. Here’s how they do it:
1. Strategic local market compensation
There are a few basic approaches to remote compensation. Some companies use a global rate, where they pay everyone the same—no matter where they’re located. Others create zones to group together geographical areas with similar labor costs. GitLab, like many office-based companies, uses local market compensation, where each employee is compensated based on their area’s cost of market. This allows for:
- A more consistent “standard of living.” More precise compensation means you’re less likely to under- or over-pay employees for their market, leading to a more consistent standard of living across regions.
- Greater geographical diversity: A more consistent standard of living can prevent you from having employees clustered only in areas with a lower cost of living. Plus, you don’t risk “Golden Handcuffs,” in which employees in low-wage regions earn more than they would elsewhere, discouraging them from leaving—even if they’re unhappy.
- A more strategic use of your compensation budget. Hiring in lower-cost regions can lead to reduced salary spending without losing productivity or sacrificing the quality of work.
2. A scalable remote compensation salary formula
GitLab uses a compensation calculator that aligns with their “commitment to transparency, sharing, efficiency, directness, and boring solutions.” The calculator is open to everyone, within and outside of GitLab, so candidates and team members can see how different inputs affect compensation.
GitLab takes the following factors into account when targeting for local market compensation:
- SF benchmark: GitLab uses data from compensation surveys including Radford and Comptryx to determine a competitive rate at or above the 50th percentile for the San Francisco market. They may also use crowd sourced data if survey data isn’t available. Benchmarks are set for Individual Contributor, Manager, Director, and Senior Director roles.
- Location Factor: The SF benchmark is then multiplied by the location factor to account for the difference between market rates in San Francisco and other geographical areas. GitLab uses multiple sources to perform their cost of market evaluation and validate information, including Economic Research Institute, Numbeo, Comptryx, Radford, Robert Half, and Dice.
- Level Factor: Level multipliers are used for roles that aren’t benchmarked. For instance, a junior individual contributor uses a 0.8 multiplier, while a senior individual contributor uses a 1.2 multiplier.
- Compa Ratio: GitLab uses four Compa groups—learning, growing, thriving, and expert—that determine where employees fit into their roles’ salary bands. These are based on knowledge, skills, and abilities, rather than years of experience or performance.
- Contract Factor: GitLab may hire contractors in countries where they don’t have the structure to support employees. In that case, a multiplier of 1.17 is applied to cover things like health insurance costs and social security taxes.
- Exchange Rate: GitLab aims to pay people in their local currency, when possible, and updates the exchange rate from US Dollars to local currencies twice per year.
Then they multiply these factors together to determine each employee’s compensation.
3. Transparency
Transparency is a core value at GitLab, and they apply it to compensation in several ways, including:
- They document their compensation process in their handbook so employees can access it asynchronously and understand how compensation decisions are made.
- The public salary calculator allows employees to see how their compensation can change depending on various factors.
- GitLab employees can report discrepancies if the benchmarks or factors seem wrong, which will be reviewed and addressed. The compensation team may then adjust compensation, or disagree and commit. Any changes are made for every employee to ensure internal equality.
According to their handbook, “Transparency creates awareness for GitLab, allows us to recruit people that care about our values, gets us more and faster feedback from people outside the company, and makes it easier to collaborate with them. It is also about sharing great software, documentation, examples, lessons, and processes with the whole community and the world in the spirit of open source, which we believe creates more value than it captures.”
Final thoughts on managing remote compensation at scale
A great compensation strategy allows flexibility for necessary changes, and GitLab certainly accounts for that. They run annual compensation cycles, and constantly iterate on their model. Anytime they make a change to their compensation model, they run an analysis against their current team to understand the impact and get financial approval. It's certainly challenging to manage this level of complexity, and we’re proud to say that Gitlab uses Compaas to make this process manageable at scale.
Want to learn more about managing remote compensation at scale? See more best practices from GitLab.
