Compensation for Remote Employees: Complete 11-Step Guide

The rise of remote working has been a welcome change for employees looking to break away from the traditional office environment¹. But with this comes one big challenge: how do you fairly pay your remote workers and international employees?

Here’s our complete 11-step guide on how to effectively pay remote employees (It’s also a good guide for the freelancers and independent contractors out there). We’ll also discuss how the Wise Business account can help with payments and save on currency transfers.

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Table of Contents

How to figure out remote pay for your employees Step 1: Are you hiring a new remote worker? Step 2: Are you making a remote work salary adjustment? Step 3: Consider the different parts of remote compensation Step 4: Assess how other competitors in your sphere are setting remote salary Step 5: Look into local tax laws and payment guidelines for your remote workers Step 6: Look at how much remote pay is based on geographic location Step 7: Calculate worker relocation costs or travel expenses if meeting in person Step 8: Develop a plan for how you will adjust your remote worker's salary in the future Step 9: Plan out how you will negotiate or communicate remote employee salaries Step 10: Consider developing a compensation strategy for remote workers Step 11: Investigate how to pay remote worker(s) Pay with Wise Business and Save on Fees What’s so special about Wise Business?

How to figure out remote pay for your employees

Remote pay isn't as straightforward as traditional salaries. So, you’re going to want to break the process down into the following steps to make sure you get it right. Let’s dive right in!

Step 1: Are you hiring a new remote worker?

If you’re bringing on a new employee, you need to decide how much they should be paid. Start with your budget and figure out how much you can afford to pay them. You'll also want to do what you'd do with a non-remote worker:

Another key aspect is making sure you know the laws and regulations in the employee’s country of residence. Different countries have different rules about minimum wage, overtime pay, and more. Make sure to research this before you make any offers.

And lastly, your new employee should be happy with the offer – make sure that you’re both on the same page about expectations, pay rates, and more.

Step 2: Are you making a remote work salary adjustment?

For existing remote workers on your team, you may want to adjust their salaries at some point. Maybe the employee has taken on more responsibilities or gained new skills that warrant a raise. In this case, evaluate the current market rate for these roles and compare it to how much they are currently making.

Say there’s a big discrepancy between what the remote worker should be getting and what they're actually earning – then it's time to make an adjustment. You should also consider their individual performance when making a salary adjustment. If they’ve gone above and beyond in their role, then they may deserve a raise that's higher than the market rate.

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Step 3: Consider the different parts of remote compensation

The best way to determine remote job salaries is by taking a look at the breakdown of each offer, which will make it easier to see how they’re different. Here are the six main components you need to consider:

• Base salary: This is the amount that your employee will be paid per month or year. It should reflect their experience and qualifications, as well as their location and industry rates.
• Bonuses: Bonuses can be either performance-based or given out on a regular basis. They can be used to reward good performance, encourage loyalty or attract talent.
• Stock options: Stock options should encourage your employees to stay with the company and keep contributing. After all, the success of your business depends on their hard work and dedication. Plus, it's a great way to reward employees and keep them motivated.
• Benefits: Perks can include health insurance, vacation days, flexible hours, or educational support. These are all important factors when it comes to evaluating job offers and making sure employees feel valued.
• Tools: Make sure you’re providing your employees with the right tools to do their job. This could be anything from laptops and software to communication tools like Slack or Zoom.
• Workers’ Comp: Depending on the country, you may need to provide workers’ compensation insurance to your employees. Workers’ comp is designed to protect them in case of injury or illness while they’re working for you.

Step 4: Assess how other competitors in your sphere are setting remote salary

Do some research on how other companies in your field do remote work compensation. This will give you an idea of what the market rate for a particular job is and what you could offer to stay competitive.

For example, if you know that other companies are paying their remote web developers $50 an hour, then this should be your starting point.

Helpful Tool: Different industry formulas for calculating remote worker salary

There are some handy tools out there that can help you come up with an accurate remote work salary.

Formula	Explanation
Buffer²: Benchmark for position and experience + cost of living in employee’s location	This formula takes into account the employee’s experience, the job market rate in their location, and how much it costs to live there.
Remote³: Employee country + position + gross annual salary	This formula uses the employee’s country of residence, their position in the company, and what the gross annual salary should be. It also factors in all mandatory contributions for government programs that need to be paid.
Basecamp⁴: Role + seniority	Everyone is paid the same based on their role and seniority, no matter where they are located
GitLab⁵: City benchmark x location of employee x seniority level x exchange rate	GitLab takes things a step-up and looks at the benchmark where the company is located, where the employee is, their seniority, and the exchange rate.

Step 5: Look into local tax laws and payment guidelines for your remote workers

Each country has its own set of laws for paying employees. So, it helps to understand the local tax regulations and payment guidelines. This will lead to employees getting paid correctly and legally.

Take this, for instance. If you’re hiring a remote employee from Ireland, you need to understand a few things. This could include Irish taxes, leave, minimum wage, public holidays, and employment laws. As well – any individual employment contract details.

You should also brush up your knowledge on any rules or restrictions in the country you live in that could affect how you pay your remote staff. Some countries need employers to register for social security payments or withholdings for their employees.

A simpler way to hire can involve looking into temporary agency options if you’re looking for a more flexible workforce arrangement. At the end of the day, seeking out professional legal services should always be a must when hiring staff abroad.

Step 6: Look at how much remote pay is based on geographic location

The cost of living in different parts of the world can vary greatly. This means that salaries for remote workers should be adjusted accordingly. Consider looking at prevailing wages for countries and regions to make sure you’re offering competitive rates of pay.

If you have a team member from India, for example, you might need to account for the lower average wage in that country compared with other locations.

Country

The cost of living in different countries can vary greatly. This means that salaries for remote workers should be adjusted to reflect current wages in their country or region.

City

The different cities also vary, so you’ll want to take this into account when setting salaries. If your remote worker lives in Tokyo, they may need a higher salary than someone based in Lagos due to the difference in wages between these two cities.

Region

In some cases, you may also need to adjust your remote pay rate, depending on the region where a worker is located. If someone is living in a rural area, their salary may need to be adjusted accordingly.

State

In the United States, wages can vary between states. For example, you may need to adjust your remote pay rate for someone living in California compared with someone living in Indiana.

Helpful Tool: Geographic pay differential calculators

Luckily, there are plenty of geographic pay differential calculators online to help with this process. These calculators let you compare the cost of living between two countries, so you can easily figure out how much to adjust the salary.

Calculator	Description
Economic Research Institute: Geographic Assessor	Helps you figure out the cost of living between two countries. It gives you an estimate of what the salary should be to provide the same standard of living to remote employees.
Salary.com: Cost of Living Calculator	Ideal for comparing consumer price index (CPI) and salary differentials of over 300+ US cities
Robert Half: Salary Calculator	Check out location-specific salary ranges for 500+ positions within the USA.

Step 7: Calculate worker relocation costs or travel expenses if meeting in person

If you’re paying your remote employees to travel for work, then you’ll need to factor in the cost of their transportation and accommodation. Don’t forget to calculate this as part of their full compensation package to reimburse them for all costs incurred during their travels.

Step 8: Develop a plan for how you will adjust your remote worker's salary in the future

Now, you’ve finally got your remote worker's salary figured out. The next step is to plan for how you will adjust their pay if and when the market or their skills change. This could include offering them a raise or bonus, depending on the situation. You should also consider whether you want to provide other forms of compensation, like health benefits or retirement plans.

Being future-proofed and flexible with your remote employee compensation is vital. It helps keep employees motivated and engaged, plus it shows that you value their contribution to the company.

BLOG POST: BEST WAYS TO PAY FOREIGN CONTRACTORS >>

Step 9: Plan out how you will negotiate or communicate remote employee salaries

When it comes to negotiating salaries for remote employees, you need to be upfront and honest about what you can offer. Don’t get into a bidding war or try to lowball them. Instead, provide clear expectations and make sure everyone is on the same page from the start. Have an open dialogue with your team, so they know exactly how much they will be getting paid and when they should expect their payments.

Step 10: Consider developing a compensation strategy for remote workers

A compensation strategy is useful for taking into account the needs of both remote and in-house employees. It’s essentially how a company will decide how to reward employees based on performance, skills, experience, and other factors. And all taking into consideration local laws as well as international ones.

Perhaps you want to go for a national pay scale system, or you may want to offer different wages depending on the employee’s location. Whatever you decide, make sure to document it all and communicate it clearly with everyone involved.

Step 11: Investigate how to pay remote worker(s)

Now that you have a compensation strategy, it’s time to figure out how to actually pay your remote employee. Depending on the payment methods available in their country, this can vary significantly. You’ll also want to consider what’s easiest for them and most cost-effective for you.

If your remote employee is in the same city or country, then you can use traditional methods like checks or direct bank transfers. But if they’re located elsewhere, there’s a way to pay international employees simply – through online payment service providers, such as Wise Business.

There are also Professional Employer Organizations (PEOs) that take care of everything for you. We’re talking payrolls, taxes, and benefits on their end – making things even easier. It’s important to know that these organizations my also charge a fee.

Pay with Wise Business and Save on Fees

If you’re looking for a convenient and cost-effective way to pay your remote employees, Wise is the perfect solution. The Wise Business account lets you send payments with no hidden fees or markups when making international transfers.

Plus, you can also access the mid-market exchange rate when sending money internationally. This way, your company will save on currency conversion costs.

Remote work is the future of work, and that means finding the right ways to pay your employees from wherever they are. With Wise, you can make sure everyone gets what they’re worth with no hassle.

What’s so special about Wise Business?

We’re the account that’s fighting to keep the money in your pocket and your financial management quick, easy, and transparent.

• Use permissions, alerts, and controls for complete oversight
• Connect to accounting software: Sage, Wave, QuickBooks, and Xero
• No monthly fees
• No minimum balance requirements
• No opening fee for US business accounts

Want to save while paying remote employees?

Pay employees around the world
with Wise Business >>

Send up to 1,000 payments in one click

Send payments 19x cheaper than PayPal

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Source:

1. https://www.mckinsey.com/industries/real-estate/our-insights/americans-are-embracing-flexible-work-and-they-want-more-of-it
2. https://buffer.com/salary-calculator/
3. https://remote.com/employee-cost-calculator
4. https://m.signalvnoise.com/how-we-pay-people-at-basecamp/
5. https://about.gitlab.com/handbook/total-rewards/compensation/compensation-calculator/
6. https://www.erieri.com/geographicassessor
7. https://www.salary.com/research/cost-of-living
8. https://www.roberthalf.com/salary-guide/calculator