Remote Work Compensation: Should You Get Paid Less for Living Somewhere Cheap?

You move from San Francisco to Boise. Same job, same output, same results. Your company cuts your pay by 15%.

Is that fair? The answer depends on who you ask — and it’s one of the most contentious debates in remote work.

How Companies Think About It

There are three main approaches:

Location-Based Pay

Your salary is adjusted based on where you live. San Francisco gets the full rate. Austin gets 85%. Rural Montana gets 70%.

Companies that do this: Google, Meta, Stripe (with published location tiers).

Their argument: Compensation reflects cost of living. A $150k salary in SF and a $120k salary in Boise provide roughly the same purchasing power. They’re paying for equivalent lifestyle, not equivalent dollars.

National Rate

One salary for the role, regardless of location. Usually benchmarked to a mid-cost-of-living city.

Companies that do this: Basecamp, Buffer (with public salary formula), Reddit.

Their argument: You’re paying for the work output, not the zip code. If two engineers produce identical code, they should earn identical pay.

Role-Based with Bands

A salary range for each role, with location as one factor among many (experience, performance, negotiation). Most companies land here in practice.

What the Data Says

GitLab’s 2024 remote compensation report found:

• 62% of fully remote companies use some form of location adjustment
• The average adjustment between highest and lowest cost areas is 25-35%
• Companies that switched to national rates saw 15% higher retention in low-cost areas but 8% higher attrition in high-cost areas

The uncomfortable truth: location-based pay benefits companies more than employees. When you move somewhere cheaper, your costs drop — but so does your salary. The company captures most of the arbitrage.

The Employee’s Perspective

If you’re a remote worker, here’s how to think about this:

Know Your Market Rate

Your take advantage of comes from knowing what other companies would pay you — not from arguing philosophy with HR.

Check:

• levels.fyi (tech compensation data)
• Glassdoor (broad but less accurate)
• Blind (anonymous, tech-focused)
• Your network (the most reliable source)

If your company pays $120k for your role in Boise, but three other remote companies would pay $140k regardless of location, that’s your negotiating position.

Negotiate on Value, Not Location

Don’t argue about whether location-based pay is fair. Instead:

“I delivered [specific results]. The market rate for someone with my skills and track record is [X]. I’d like to discuss aligning my compensation with that.”

This works because it shifts the conversation from policy to your individual value. Companies make exceptions to policy for people they don’t want to lose.

Consider Total Compensation

Salary is one number. Also factor in:

• Equity/stock (can be worth more than salary at growth companies)
• Benefits (health insurance alone can be worth $10-20k/year)
• 401k match
• Home office stipend
• Professional development budget
• PTO policy

A company paying $130k with great benefits might beat a company paying $150k with bare-bones everything.

The Geo-Arbitrage Play

Some remote workers deliberately optimize for this: earn a high-cost-of-living salary while living in a low-cost area.

The math can be dramatic:

• $150k salary (national rate company)
• Living in a city where $150k puts you in the top 5% of earners
• Mortgage: $1,200/month instead of $3,500
• Saving/investing the $2,300/month difference

Over 10 years with investment returns, that’s potentially $400k+ in additional wealth. This is why location-based pay is such a hot topic — the stakes are real.

For Managers: Which Approach to Use

If you’re setting compensation policy:

Use location-based pay if:

• You’re competing for talent in high-cost markets and need to offer competitive rates there
• Your budget can’t support paying SF rates to everyone
• You have clear, transparent tiers (not arbitrary adjustments)

Use national rates if:

• You want to maximize your talent pool in lower-cost areas
• Simplicity and perceived fairness matter to your culture
• You can afford to benchmark to a reasonable national rate

Either way:

• Be transparent about your approach
• Publish your compensation philosophy
• Don’t surprise people with pay cuts when they move

The worst approach is being opaque about it. Employees will find out what their colleagues earn, and unexplained disparities destroy trust faster than almost anything else.

Key Takeaways

1. 62% of remote companies adjust pay by location. It’s common but not universal.
2. Your negotiating power comes from knowing your market rate, not from debating fairness.
3. Negotiate on value delivered, not on where you live.
4. Consider total compensation, not just salary.
5. Geo-arbitrage (high salary + low cost of living) is a legitimate wealth-building strategy — seek companies with national rates if this matters to you.

The location-based pay debate won’t be settled anytime soon. But your individual compensation is always negotiable. Know your worth, document your impact, and have options.