Sourcing vs Recruiting: What’s the difference between them

Key takeaways

• Remote pay policies should focus on getting and keeping good workers, not on how expensive a place is to live.
• Most employers do not need to change pay right away when employees start working from home.
• Remote work allows companies to hire skilled workers from places where living costs are lower.
• Hiring from other countries can change hiring plans, but basic pay rules often stay the same.

Setting the pay policy for a permanently remote workforce appears to be a difficult challenge for compensation pros. The apparent difficulty arises from the fact that workers living in expensive locations like New York are often paid more than those working in a cheaper city. This made sense when people were required to live near an office, but it makes less sense when remote workers can live anywhere.

The problem reaches a boiling point when a remote worker from an expensive city moves to a less expensive one but still expects the same pay. Here are some truths about paying remote workers:

A lower pay policy line in your home country

How do we deal with location-based cost of living adjustments when people can live anywhere?

When paying remote workers, it helps to frame your comp policy as being, “We pay what we need to attract and retain talent,” rather than, “We pay something extra to compensate people for the cost of living.” If your office was in Manhattan, then you had no choice but to pay wages above the national average to attract and retain talent. Now, even if you have no office, the fundamental question remains the same “What do we have to pay to attract and retain talent?”

If the talent you need lives in expensive cities, then you may find them unwilling to work for national average pay levels, even though they work remote and could theoretically move to a cheaper location. In this case, your compensation policy will need to be above the national average.

However, you may well find that you can pay closer to the national average or even below the national average by finding talented workers living in low-cost locations.

Remote work is shifting pay decisions away from location-based adjustments toward talent needs, where lower-cost areas may support average pay levels and higher pay is still needed in high-cost markets. Salary.com's Compdata Max provides local pay data and real-time market insights for clear, fair decisions.

You don’t need to do much right now

There is an ongoing goal of setting pay policy at just the level needed to acquire talent. For some companies, this will mean a lower pay policy than before, such as when they had been recruiting talent only in New York.

However, in the short term, you won’t be cutting people’s pay, regardless of where they live, unless you had a specific location-based cost-of-living allowance built into the pay system. In other words, you don’t have to do anything dramatic with your pay policy or practices right now just because much of the workforce will be permanently remote.

What will happen is this: You will continually be looking at national market pay data and working with your talent acquisition team to figure out what you need to pay to get the needed talent.

If there is cheaper talent available thanks to remote work, then that will lead to a lower pay policy line. People who are highly paid will end up at the top of their pay band – and that’s okay. It always happens in any well-structured compensation system.

You may end up losing existing workers or failing to attract new workers in expensive cities, but that’s also okay as long as you are getting good talent elsewhere.

Going global

Pay differences can become much wider when you look at the global marketplace.

From a comp perspective, the fact that workers may work remotely from a different country isn’t too difficult to handle. We’ve always had some differences in pay based on global location.

If you have a location in the Philippines and another in Germany, pay rates will usually be lower in the Philippines, even for a similar role.

The fact that everyone is remote now doesn’t force you to change your pay policy. In essence, someone you hired in Germany will be paid according to that country’s pay policy line, and someone in the Philippines will be paid on its policy line.

If someone from Munich moves to Manila you won’t adjust their pay down. You’d continue to pay the rate you hired them at.

To manage global pay lines with clear and consistent data, you can use IPAS Global Salary Surveys for peer-reported pay data across 100+ countries in one currency and one method. IPAS Max adds real-time market data on top of these benchmarks, helping you compare pay ranges with live job postings and react quickly to market changes.

Broader implications

The bigger issue in a remote workforce is not a compensation policy issue but a talent strategy issue. In a non-remote workforce, you really do need to hire New Yorkers to work in New York.

In a remote workforce, many of those jobs could be done by people in lower-wage cities or countries.

Time zones can be an issue, but other than that, it is just an issue of finding available talent across the globe.

You will want your talent acquisition team to first source possible talent in lower-wage cities and countries. Only if they can’t find people there should they look for talent in higher-wage cities and countries.

The job of the HR leader is to ensure the compensation team and talent acquisition team is aligned in setting pay policies with this clear recognition: that in a world of remote workers, there may be opportunities to set lower pay policy lines in a given country and to seek more talent from low-wage countries which will further reduce the total cost of the workforce.

It may be a change in talent strategy, but the comp strategy of setting a pay line at the level needed to attract and retain needed talent hasn’t changed.

Ready to align pay and hiring strategies with clear market data to help you get pay right? Salary.com’s Compensation Surveys and Max solutions give you one trusted view of the market by combining survey benchmarks with real-time job posting data.