Workplace

'The candidate is king': How tech workers can leave Silicon Valley, but keep the pay

In the battle over cost-of-living salary adjustments, job seekers have won. For now.

An illustration of the blurred globe with pins

Although it sounds more equitable, HR experts debate how fair it really is to issue a blanket pay policy regardless of location.

Christopher T. Fong/Protocol

This story is part of our Salary Series, where we take a deep dive into the world of pay: how it's set, how it's changing, and what's next. Read the rest of the series.

Last month, the CEO of marketing startup Iterable, Andrew Boni, made a surprising announcement: The company would be moving to 100% "geo-neutral" compensation. Iterable's roughly 500 employees, working across 33 states as well as the United Kingdom, would be paid equitably regardless of where they lived, with the salaries of those living in the U.S. anchored to the most competitive market, the Bay Area, and those in the U.K. anchored to London.

"If you're a software engineer and you're talented, there's not a great reason why you shouldn't be paid the same if you're living in San Francisco versus if you're living somewhere else in the U.S.," Boni told Protocol.

Iterable's move, though unusual, is becoming increasingly common in a tech industry that has in recent months witnessed an almost unprecedented competition for talent.

"I've been doing this for 22 years, and the candidate is king right now," said Megan Slabinski, a district director for global staffing firm Robert Half.

In the past, "it was kind of like old school 'Mad Men' thinking," and companies thought that they could dictate the terms of compensation and issue things like cost-of-living adjustments without pushback, according to Scott Orn, the COO of Kruze Consulting, which works with seed-stage to series C-level startups on their accounting, finance and HR practices. Finding someone "out of market" or outside of the major cities like San Francisco and New York was a way to reduce compensation costs, added Slabinski.

That is no longer the case, according to tech executives, investors and industry experts who spoke to Protocol. Today, startups and public companies alike are losing candidates in secondary or tertiary markets who are getting competitive offers "that are blowing historic offers out of the water," observed Katie Hughes, a partner at General Catalyst. Venture capital is more active "than anything I've ever seen in my career," and that activity has translated directly into the competition for talent, she said.

One sign that companies are loosening their grip on relocated workers: PEOs, or professional employer organizations, which help companies with their state and local tax compliance, have doubled their market share in the second half of 2020, and "it's gotten even stronger in 2021," according to Orn. What this means is that startups that used to have employees in two or three states, for example, may now have them in six to eight.

One reason companies may be moving away from the old model, or geo-differentiated pay, is that it's frankly easier, said Bethanye McKinney Blount, the CEO and co-founder of Compaas, a compensation analysis software company. When companies have geo-differentiated pay structures, figuring out compensation can get complicated quickly due to the "very nuanced permutations" of salary bands. Having a national rate makes compensation much easier to manage and administer from an internal systems perspective, said Blount.

The move is also strategic for smaller startups that otherwise have a harder time competing with the Googles and Facebooks of the world, according to Zuhayeer Musa, a co-founder of Levels.fyi, a website that crowdsources and analyzes tech industry compensation packages.

But even the FAANGs are moving away from their strict, tiered compensation system, according to Hughes. Musa told Protocol that in the past, large public tech companies might have had three tiers, with employees in Tier 2 cities like Chicago or Atlanta being compensated maybe 80% to 85% of what those in Tier 1 would command, and so on down the line. Today, those companies are feeling pressured to go down to, say, two tiers instead of three, and decreasing the differential, said Hughes.

Officially, geo-based pay is still king. Spokespeople from Microsoft, Google and Facebook all confirmed in statements to Protocol that they do indeed still issue market-based compensation. Google even developed a Work Location Tool to "help employees make informed decisions about which city or state they work from and any impact on compensation if they choose to relocate or work remotely," according to a Google spokesperson. As of early August, around 10,000 Google employees had applied for fully remote work or to transfer to a different office since the launch of the tool in June.

Despite its popularity with employees, it's not always in the company's favor to issue geo-neutral pay. For one, it's usually more expensive. Each additional tax nexus in a state is an added cost and a headache for HR departments to sort through.

And although it sounds more equitable, HR experts debate how fair it really is to issue a blanket pay policy regardless of location. It can cause cultural tension within an organization when a person who lives in Bozeman, Montana, for example, gets paid the same as someone living in New York. That salary would go a lot farther in Bozeman, said Hughes, which can get awkward and poses a question of inequity.

Despite the changing tide, there are also always exceptions. One notable example: Stripe, which offered $20,000 bonuses and a 10% pay cut in September 2020 to all employees who chose to relocate to a less expensive city. Stripe, though, has the advantage of a major valuation and imminent public listing. "No one's going to leave," said Orn.

Tech workers will do well to remember that compensation trends in Silicon Valley would still be considered outliers in other industries, whose cultures are still deeply entrenched against remote work. Like the CEO of Morgan Stanley famously said to bankers itching to stay remote in June, "If you want to get paid New York rates, you work in New York. None of this, 'I'm in Colorado and work in New York and am getting paid like I'm sitting in New York City.'"

Fintech

Election markets are far from a sure bet

Kalshi has big-name backing for its plan to offer futures contracts tied to election results. Will that win over a long-skeptical regulator?

Whether Kalshi’s election contracts could be considered gaming or whether they serve a true risk-hedging purpose is one of the top questions the CFTC is weighing in its review.

Photo illustration: Getty Images; Protocol

Crypto isn’t the only emerging issue on the CFTC’s plate. The futures regulator is also weighing a fintech sector that has similarly tricky political implications: election bets.

The Commodity Futures Trading Commission has set Oct. 28 as a date by which it hopes to decide whether the New York-based startup Kalshi can offer a form of wagering up to $25,000 on which party will control the House of Representatives and Senate after the midterms. PredictIt, another online market for election trading, has also sued the regulator over its decision to cancel a no-action letter.

Keep Reading Show less
Ryan Deffenbaugh
Ryan Deffenbaugh is a reporter at Protocol focused on fintech. Before joining Protocol, he reported on New York's technology industry for Crain's New York Business. He is based in New York and can be reached at rdeffenbaugh@protocol.com.
Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Enterprise

The Uber verdict shows why mandatory disclosure isn't such a bad idea

The conviction of Uber's former chief security officer, Joe Sullivan, seems likely to change some minds in the debate over proposed cyber incident reporting regulations.

Executives and boards will now be "a whole lot less likely to cover things up," said one information security veteran.

Photo: Al Drago/Bloomberg via Getty Images

If nothing else, the guilty verdict delivered Wednesday in a case involving Uber's former security head will have this effect on how breaches are handled in the future: Executives and boards, according to information security veteran Michael Hamilton, will be "a whole lot less likely to cover things up."

Following the conviction of former Uber chief security officer Joe Sullivan, "we likely will get better voluntary reporting" of cyber incidents, said Hamilton, formerly the chief information security officer of the City of Seattle, and currently the founder and CISO at cybersecurity vendor Critical Insight.

Keep Reading Show less
Kyle Alspach

Kyle Alspach ( @KyleAlspach) is a senior reporter at Protocol, focused on cybersecurity. He has covered the tech industry since 2010 for outlets including VentureBeat, CRN and the Boston Globe. He lives in Portland, Oregon, and can be reached at kalspach@protocol.com.

Climate

Delta and MIT are running flight tests to fix contrails

The research team and airline are running flight tests to determine if it’s possible to avoid the climate-warming effects of contrails.

Delta and MIT just announced a partnership to test how to mitigate persistent contrails.

Photo: Gabriela Natiello/Unsplash

Contrails could be responsible for up to 2% of all global warming, and yet how they’re formed and how to mitigate them is barely understood by major airlines.

That may be changing.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol covering climate. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Entertainment

Inside Amazon’s free video strategy

Amazon has been doubling down on original content for Freevee, its ad-supported video service, which has seen a lot of growth thanks to a deep integration with other Amazon properties.

Freevee’s investment into original programming like 'Bosch: Legacy' has increased by 70%.

Photo: Tyler Golden/Amazon Freevee

Amazon’s streaming efforts have long been all about Prime Video. So the company caught pundits by surprise when, in early 2019, it launched a stand-alone ad-supported streaming service called IMDb Freedive, with Techcrunch calling the move “a bit odd.”

Nearly four years and two rebrandings later, Amazon’s ad-supported video efforts appear to be flourishing. Viewership of the service grew by 138% from 2020 to 2021, according to Amazon. The company declined to share any updated performance data on the service, which is now called Freevee, but a spokesperson told Protocol the performance of originals in particular “exceeded expectations,” leading Amazon to increase investments into original content by 70% year-over-year.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Latest Stories
Bulletins