I recently read a couple of articles about employee compensation at Balsamiq . It is obvious that they really thought through this problem and came to what is an undoubtedly a generous package. It would be great to hear more about how they use OECD Consumer Price to calculate relative cost of living (since I fail to see how), but what really bothered me was a stated fairness of:

You are paid a little better than someone with your same job in your geographical area.

I am amazed at how often this view comes up in discussions I have about geographically distributed teams  and I still don’t find it fair. The only argument for it is the free market one. You are paid as little as company can get away with which in general is around average salary. Obviously this approach works only for those who can’t or won’t telecommute to somewhere with a higher salary or can’t find a more appealing environment with about same compensation. At least in our industry this certainly loses you a good chunk of top talent.

A fair compensation should reflect value added by the employee. Two people doing same work and providing same value deserve to be paid equally no matter where they happen to live. It is somewhat hypocritical to price your service based on value provided and fail to do so with service provided to you by your employees.

In essence it is also a judgement on what kind of living standard an employee deserves – about the same as peers around him. Probably alright if you happen to live somewhere like Stockholm and far less impressive in less developed parts of our planet, but fundamentally it is a judgement that shouldn’t be made by employers.

For those paid enough to meet existential needs compensation isn’t the most important part of a job or at least it shouldn’t be. It certainly isn’t for me and I doubt Balsamiq employees are unhappy with theirs. I also don’t have a problem working for an organization with such a policy, but I still think it is wrong.

A side note: have you noticed how every author describing their company practices says they are paying slightly above average? Either only people from above average companies write these kind of articles or some of them have to be delusional.