Silicon Valley Insight: Remote work will catalyze new workforce globalization

Large companies such as Facebook and Twitter have decided to permanently adopt remote working after implementing it at the beginning of the pandemic. Gartner’s CFO survey earlier this year found that 74% of organizations intend to increase remote workers following the pandemic.

When distributed teams become the core structure for businesses and employees are no longer required at central offices, there won’t be many reasons left to limit talent recruitment to specific physical locations. Tracking where talented workers reside may be the winning recruiting strategy going forward, especially for high-tech industries where there is a significant shortage of labor.

The remote working trend triggered during the COVID-19 pandemic could become a huge opportunity for workers in developing countries across the Middle East and Africa. Andela, a start-up pioneering in building remote engineering teams for U.S. and European businesses, has been training and recruiting engineering talent in Africa for years. Andela, which is planning to close all of its offices (except one sales office) to become a remote-first business, could serve as a great model for other businesses which are new to remote work.

Making the transition to distributed workforces, many U.S. employers started to give employees the option to relocate as they wish. Employers such as VMware and Stripe, which decided to make remote working permanent, plan to adjust employees’ compensation based on the cost of living of the location to which they want to move. According to a report from Bloomberg, VMware plans to cut the salaries of Silicon Valley employees moving to Denver by 18% and of those moving to Los Angeles or San Diego by 8%. Stripe, the online payment start-up, also plans to cut up to 10% from the salaries of those employees who move out of San Francisco, New York or Seattle, but at the same time, Stripe will make a one-time payment of $20,000 to each relocated employee.

For many established businesses, reducing the compensation of employees moving out of high-cost locations seems to be an effective temporary solution for the existing geographical salary inequity issue. To reduce the geographical salary gap, it is easier in the short run to require a small number of relocating employees to reduce their salaries, rather than raising the salaries of all employees working in the destination region. However, in the long run, the differentials in compensation for the same jobs in the different locations will probably sink employee morale as remote teams collaborate more closely and discover the misalignment between compensation and their contribution. Businesses that recently turned remote could learn from Automattic, a 15-year-old start-up that began as a remote-first company. In a recent interview, Automattic CEO Matt Mullenweg acknowledged the difficulties of equalizing compensation across geographic locations, but he believes the approach is feasible over multiple years, using more frequent or higher raises for employees that are below the company’s global market norm.

Though potentially challenging to adopt, globally distributed workforces are becoming the new normal for many important companies. The opportunity to access a global talent pool is too big for any business to miss. Potentially, this trend will help spread more economic opportunity around the world. The business ecosystem in MEA regions plays a critical role in preparing young talents in the region for the emerging employment opportunity of joining foreign companies on remote teams.

If you enjoyed these insights from our Orange Silicon Valley experts, we would like to invite you to attend our upcoming live webinar on Wednesday, 7 October at 4:00 pm GST. Register here.

Wilson Lau
Wilson Lau

Wilson is an open-minded engineer who is obsessed with applying engineering mindset in business innovation. He enjoys solving business challenges, leveraging outside-the-box thinking and breakthrough technologies. As the future of work council lead at Orange Silicon Valley, he is committed to making the future of work more productive and enjoyable for human workers.