Chapter 2

Benefits of a  remote work compensation policy

You may already have your own reason for creating a remote work compensation policy for your company. However, if you’re on the fence or in the exploratory stage, and you need to pitch to your boss and/or the C-suite, there are many benefits that you can share.

A well-written and formalized remote work compensation policy can:

Enhance your local compliance efforts

Improve your company’s scalability

Streamline your recruitment strategy

Develop greater transparency

Increase employee engagement

Provide a better employee value proposition

Make salaries less reliant on employees’ negotiation skills

Enhanced local compliance

One reason that hiring remote workers can be tricky is the fact that different locations have different rules. For example, if you’re a US-based company working with a Philippine-based web developer, you need to ensure that you comply with applicable laws – in both the US and the Philippines. Similarly, if you’re a business registered in New York that works with a Florida-based marketing specialist, you’ll need to ensure compliance with both states. A formal remote work compensation policy can enhance your ability to comply with local laws by incorporating your company’s pay strategy in different hiring scenarios and locations.Maybe you want to hire Philippine-based workers. Your remote work compensation policy can include the following:Worker classification – Do you need to hire employees or contractors? Employees are entitled to benefits; contractors often are not. While this may make hiring contractors more appealing (as it can be cheaper), you’ll need to ensure that you meet the Philippine Department of Labor and Employment (DOLE) Order No. 174’s strict requirements governing contractor relationships – or risk hefty financial consequences for violations. Leave entitlements – What types of paid and unpaid leave are employees entitled to? If you’re working with contractors, do you give them paid leave, too – even if it may not be required by law?Benefits and incentives – On top of leave entitlements, Philippine-based employees are also entitled to holiday pay, 13th-month pay, retirement pay, and separation pay. If you create a remote work compensation policy that incorporates these nuances, you’ll help ensure compliance each time you hire someone from the Philippines.

Top highlight

Creating or formalizing a compensation policy helps streamline your recruitment process – especially if you’re expanding globally

Improved scalability and streamlined recruitment strategy

A remote work compensation policy helps you scale so that as you hire more workers, you already have a clear idea of what salary range you’ll offer for each role, ensuring that you are not over- or under-paying and that you’re keeping pay rates consistent between similar positions. Knowing what salary range you’ll offer per role is essential when planning for future headcount.To use our previous example, let’s assume you hired your first Philippine-based employee. Now, you want to hire five more. If you have a formalized remote work compensation policy, you won’t need to keep getting approval from your manager and/or C-suite about what salary to offer before you seek more applicants. The remote work compensation policy would have enabled you to calculate and plan for how much headcount you can afford. As long as you are within the bounds of your approved headcount and the pre-determined salary range, you can rest assured that you are making financially sound job offers to your Philippine-based candidates.In short, creating or formalizing a compensation policy also helps streamline your recruitment process – especially if you’re expanding globally.

Greater transparency and employee engagement

Clearly stating your remote work compensation policy gives your team members much-needed transparency, increasing job satisfaction and making your company attractive to potential candidates. With the growing number of salary transparency laws passing in the US and beyond, companies are expected to be more upfront about how they pay their workers, and workers want to know how their pay is determined. Having a remote work compensation policy that’s accessible to your employees will help get you ahead of the trend and make your staff more engaged.

Better employee value proposition

The Society for Human Resource Management (SHRM) defines an employee value proposition (EVP) as that “part of an employer's branding strategy that represents everything of value that the employer has to offer its employees. Items such as pay, benefits and career development are common, but employers also highlight offerings that are currently in demand – like technology, remote work and flexible scheduling.”Because remote work compensation policies go beyond pay rates and often include benefits and perks (as well as the reasons why a company has decided on its particular mix of rewards), they show that a company is serious about its commitment to remote work – further strengthening company EVP.This is precisely why Ling, a gamified language learning app with over 10 million downloads and a language blog with a growing remote and hybrid team, decided on a remote work compensation policy from the very beginning. According to their HR Specialist Jarir Mallah,

“We have employees globally, and their talents are exceptional. We definitely wanted to be able to have them as part of our growing Ling family.”Jarir Mallah, HR Specialist at Ling

In addition, a clear remote work compensation policy nurtures equity. According to a 2022 study by MIT Sloan, 1 in 10 workers at large US companies experience their workplace as toxic, which is the number one factor driving people to resign. A remote work compensation policy that details how a company treats its workers can be a powerful addition to your EVP.

Fairer salaries that aren’t based on employees’ negotiation skills

One reason that Plane decided to create a remote work compensation policy is that, before a policy was in place, each employee’s salary largely depended on how well they negotiated.Co-founder and CRO Staszek Kolarzowski says, “When we started, we didn’t have any [compensation] policy. So, basically, whenever we wanted to hire someone, we [had to] negotiate the salary.” Promotions also depended on negotiation: “When people wanted to get a raise…we used the same approach – we just negotiated.”Kolarzowski gives an example of two engineers at Plane, one of whom asked for a raise “every four months,” while the other didn’t ask for a raise “for two years, and we were super happy with both of them.” This lack of policy meant that, Kolarzowski states, “after some time, we ended up with people on completely different compensation levels. So your compensation was more connected to how well you negotiate, not necessarily to anything else.” Having a remote compensation plan with defined salary bands adds much more clarity to how much each role is paid, limiting or even eliminating the need for employees to negotiate their salaries.

Next Chapter

Different types of compensation

When discussing compensation, people often refer to the money paid in return for completed work. However, it is much more than an employee’s salary or a contractor’s fee.