2026-02-25 · NextMigrate Team
Why Companies Are Hiring From Everywhere But Paying Based on Where You Live
You are a senior backend developer. You passed the same technical interview as a candidate in San Francisco. You solve the same problems, push to the same repository, attend the same sprint meetings, and ship the same features. The person in San Francisco earns $185,000. You earn $45,000. You both work for the same company.
This is not a hypothetical. This is the standard practice at hundreds of companies that hire globally. They call it "localized compensation" or "geo-adjusted pay." Workers in developing countries have a more direct name for it: the location discount.
This article examines how geo-based pay actually works, what the real salary differentials look like, how companies justify it, and what it means for professionals in Nigeria, India, the Philippines, Egypt, and Pakistan who are increasingly doing the same work as their colleagues in high-cost countries.
How Geo-Based Pay Works in Practice
Most companies that hire globally use one of three compensation models:
Model 1: Cost of Living Adjustment (COLA)
The company sets a base salary for a role (usually benchmarked to US rates) and then applies a multiplier based on where you live. The multiplier is derived from cost of living indices.
Example: Senior Software Engineer Base = $160,000 (San Francisco)
| Location | COLA Multiplier | Adjusted Salary |
|---|---|---|
| San Francisco, USA | 1.0x | $160,000 |
| London, UK | 0.85x | $136,000 |
| Berlin, Germany | 0.72x | $115,200 |
| Toronto, Canada | 0.70x | $112,000 |
| Lisbon, Portugal | 0.50x | $80,000 |
| Bangalore, India | 0.30x | $48,000 |
| Lagos, Nigeria | 0.25x | $40,000 |
| Manila, Philippines | 0.28x | $44,800 |
| Cairo, Egypt | 0.22x | $35,200 |
| Lahore, Pakistan | 0.20x | $32,000 |
Notice the ratios. A developer in Lagos earns 25 cents on the dollar compared to San Francisco. In Lahore, it is 20 cents. The work output is identical.
Model 2: Local Market Rate
The company does not start from a US base at all. Instead, they benchmark against local market salaries in each country and offer a premium above that. This is often described as "competitive local pay."
Example: Senior Software Engineer local market rates and typical remote company offers
| Country | Local Market Median | Remote Company Offer | Premium Over Local |
|---|---|---|---|
| Nigeria | $12,000-$18,000 | $35,000-$50,000 | 2-3x local |
| India | $22,000-$35,000 | $40,000-$65,000 | 1.5-2x local |
| Philippines | $15,000-$25,000 | $30,000-$48,000 | 1.5-2x local |
| Egypt | $8,000-$15,000 | $25,000-$40,000 | 2-3x local |
| Pakistan | $10,000-$18,000 | $28,000-$45,000 | 2-3x local |
This model feels generous because you are earning 2-3x what you would locally. But compared to US or European compensation for identical work, you are earning 20-35% of the total package.
Model 3: Equal Pay Everywhere
A small number of companies pay the same rate regardless of location. These include:
| Company | Policy | Base Location |
|---|---|---|
| Basecamp | Same pay globally (based on SF market top 10%) | Chicago, USA |
| Buffer | Transparent formula with location factor (smaller discount) | Fully remote |
| GitLab | Location factor applied but published transparently | Fully remote |
| Automattic | Competitive global rates, less location-adjusted | Fully remote |
These companies are the exception. The vast majority of remote-first companies, including major ones like Shopify, Spotify, Stripe, and Meta, apply location-based adjustments.
Real Salary Data: Same Role, Same Company, Different Countries
Let us look at actual salary bands that have been publicly disclosed, reported on platforms like Glassdoor, Levels.fyi, and Blind, or shared in compensation transparency reports.
Software Engineering (Mid-Senior Level)
| Company Type | USA (SF/NYC) | UK (London) | Canada (Toronto) | India (Bangalore) | Nigeria (Lagos) |
|---|---|---|---|---|---|
| FAANG | $200K-$350K (TC) | $120K-$200K | $100K-$170K (CAD) | $40K-$80K | N/A (no offices) |
| Late-stage startup | $150K-$250K | $90K-$150K | $85K-$140K (CAD) | $35K-$65K | $30K-$55K |
| Remote-first company | $130K-$200K | $80K-$130K | $75K-$120K (CAD) | $30K-$55K | $25K-$45K |
| Early-stage startup | $100K-$160K | $60K-$100K | $60K-$95K (CAD) | $20K-$40K | $18K-$35K |
All figures in USD unless noted. TC = total compensation including equity.
Product Design (Senior Level)
| Company Type | USA | UK | India | Philippines | Egypt |
|---|---|---|---|---|---|
| Large tech | $160K-$250K | $80K-$140K | $30K-$55K | $25K-$45K | $18K-$35K |
| Remote-first | $120K-$180K | $70K-$110K | $25K-$45K | $20K-$38K | $15K-$30K |
| Agency/consultancy | $90K-$140K | $55K-$85K | $18K-$35K | $15K-$28K | $12K-$22K |
Data Science / ML Engineering (Mid-Senior)
| Company Type | USA | UK | Canada | India | Pakistan |
|---|---|---|---|---|---|
| FAANG | $180K-$320K | $100K-$180K | $90K-$160K (CAD) | $40K-$75K | N/A |
| Remote-first | $130K-$200K | $75K-$120K | $70K-$110K (CAD) | $28K-$50K | $22K-$40K |
| Startup | $100K-$160K | $55K-$90K | $55K-$85K (CAD) | $20K-$38K | $16K-$30K |
The Company Justification (And Where It Falls Apart)
Companies give several reasons for geo-based pay. Let us examine each one honestly.
"Cost of living is lower, so you don't need as much"
This is the most common argument. Rent in Lagos is cheaper than rent in San Francisco, so a lower salary goes further.
There is some truth here. Monthly living costs for a comfortable middle-class lifestyle:
| City | Monthly Living Cost (Single Professional) | Monthly Living Cost (Family of 4) |
|---|---|---|
| San Francisco | $4,500-$6,500 | $8,000-$12,000 |
| London | $3,200-$4,800 | $6,000-$9,000 |
| Toronto | $2,800-$4,200 | $5,500-$8,000 |
| Bangalore | $800-$1,500 | $1,500-$3,000 |
| Lagos | $1,000-$2,000 | $2,000-$4,000 |
| Manila | $800-$1,400 | $1,500-$2,800 |
| Cairo | $600-$1,200 | $1,200-$2,500 |
| Lahore | $500-$1,000 | $1,000-$2,200 |
But the argument breaks down when you examine what cost-of-living adjustments actually measure versus what they exclude:
What COLA captures: rent, groceries, transportation, utilities, local services.
What COLA does not capture:
- International travel (same price everywhere)
- Technology (an iPhone costs the same in Lagos as in London)
- Quality healthcare (often more expensive in developing countries when you want international-standard care)
- Children's international education (same or higher cost)
- Savings and investment (your savings rate is what matters, not your spending rate)
- Property as an investment (global real estate markets do not adjust for your local salary)
- Retirement planning (you need the same absolute amount to retire comfortably)
- Currency risk (your local currency may depreciate 20-50% against USD in a single year)
Let us illustrate with real numbers. A Nigerian developer earning $40,000 and a US developer earning $160,000:
| Category | Lagos ($40K salary) | SF ($160K salary) | Ratio (Lagos as % of SF) |
|---|---|---|---|
| Annual rent | $6,000 | $36,000 | 17% |
| Groceries | $3,600 | $7,200 | 50% |
| iPhone 15 Pro | $1,200 | $1,200 | 100% |
| Flight to London | $800 | $800 | 100% |
| International school (per child) | $8,000 | $0 (public school) | N/A |
| Quality health insurance | $2,000 | $0 (employer covered) | N/A |
| Annual savings | $10,000 | $60,000 | 17% |
| Savings as % of income | 25% | 37.5% | — |
The developer in Lagos earns 25% of the SF salary but saves only 17% as much. Over a 20-year career, the SF developer accumulates $1.2M+ in savings. The Lagos developer accumulates $200K. Both did exactly the same work.
"We pay well above local market rates"
This is true, and it is why many remote workers initially feel grateful. Earning $40,000 in Lagos when local companies pay $12,000-$18,000 is transformative.
But the comparison to local market rates is misleading. You are not doing local market work. You are doing work that generates the same value as someone in San Francisco. The company is not paying you based on the value of your output. They are paying you based on the accident of your coordinates.
"The labor market sets the price"
Some companies argue that they pay what the market requires. If they can hire excellent engineers in Nigeria for $40,000, why would they pay $160,000?
This is economically rational from the company's perspective. It is also the core of the problem. The labor market for remote work is not a free market. It is distorted by:
- Visa restrictions that prevent workers from relocating freely
- Credential recognition barriers
- Banking and payment infrastructure limitations
- Time zone preferences that create unequal bargaining power
- Information asymmetry about compensation at other companies
If the Nigerian developer could freely relocate to San Francisco, the company would have to pay the SF rate to retain them. The location discount exists precisely because mobility is restricted.
The Real Impact: A Career-Length Analysis
Let us model what geo-based pay means over a full career. Consider two developers who start at the same time with equivalent skills:
Developer A: Based in Bangalore, India. Works remotely for US companies. Strong performer, promoted at the same rate as peers.
Developer B: Relocates to Toronto, Canada. Works for the same companies in-person or hybrid.
| Career Year | Developer A (Bangalore) | Developer B (Toronto, CAD converted to USD) |
|---|---|---|
| Year 1 (Junior) | $25,000 | $55,000 |
| Year 3 (Mid) | $40,000 | $80,000 |
| Year 5 (Senior) | $55,000 | $110,000 |
| Year 8 (Staff) | $70,000 | $145,000 |
| Year 12 (Principal) | $85,000 | $175,000 |
| Year 15 (Director) | $100,000 | $210,000 |
| Cumulative earnings (15 years) | $850,000 | $1,800,000 |
Developer B earned $950,000 more over 15 years. Even accounting for higher living costs in Toronto (roughly $15,000-$20,000 more per year), Developer B is ahead by $650,000-$700,000 in cumulative savings.
And this does not account for:
- Employer-matched retirement contributions (typical in Canada: 3-6% match)
- Stock options and equity (significantly larger grants for higher-base employees)
- Health and dental insurance (employer-paid in Canada)
- Employment insurance and government benefits
- Mortgage access (Canadian banking system vs. Nigerian/Indian mortgage rates)
The Equity Gap Is Even Worse
For tech companies, a significant portion of compensation comes through equity (stock options or RSUs). Here is where the location discount becomes most extreme:
| Level | US Employee Total Comp | Of Which Equity | India Remote Total Comp | Of Which Equity |
|---|---|---|---|---|
| Senior Engineer | $200,000 | $60,000-$80,000 | $55,000 | $5,000-$10,000 |
| Staff Engineer | $300,000 | $100,000-$150,000 | $75,000 | $10,000-$20,000 |
| Principal Engineer | $450,000 | $180,000-$250,000 | $100,000 | $15,000-$30,000 |
A US-based staff engineer might receive $100K-$150K in equity annually. Their counterpart in India might receive $10K-$20K. If the company's stock appreciates 3x over five years (common for successful startups), the US engineer gains $300K-$450K in stock appreciation. The India-based engineer gains $30K-$60K.
How Companies Are Structured to Maintain This
The geo-based pay system is reinforced by several structural mechanisms:
Compensation Bands by Zone
Most global companies divide the world into compensation zones:
| Zone | Typical Countries | Multiplier |
|---|---|---|
| Zone 1 (Tier 1) | SF, NYC, Seattle, Zurich | 1.0x |
| Zone 2 (Tier 2) | London, Sydney, Toronto, Berlin | 0.75-0.85x |
| Zone 3 (Tier 3) | Lisbon, Prague, Buenos Aires, Dubai | 0.50-0.65x |
| Zone 4 (Tier 4) | Bangalore, Lagos, Manila, Cairo, Lahore | 0.20-0.35x |
Moving between zones usually requires relocation and a new offer. Some companies even reduce pay if you relocate from a higher zone to a lower one (Google and Meta have both confirmed this policy).
Salary Transparency Laws Are Not Global
In the US, salary transparency laws in states like Colorado, California, New York, and Washington now require companies to post salary ranges on job listings. But these ranges only apply to the US. The same company posting a $150K-$200K range for a US-based engineer has no obligation to disclose what it pays for the same role in Nigeria or India.
This information asymmetry is powerful. US-based employees can negotiate based on disclosed ranges and peer benchmarks. Remote employees in developing countries often have no idea what their US counterparts earn for identical work.
The "You Can Always Leave" Argument
Companies know that even with a location discount, they are offering significantly more than local alternatives. A Nigerian developer earning $40,000 has limited leverage to demand $80,000 because:
- Local alternatives pay $12,000-$18,000
- Other remote-first companies also apply location discounts
- The pool of companies willing to pay "equal pay everywhere" is tiny
- Visa restrictions prevent the developer from simply relocating
This creates a market where the buyer (company) has structural power over the seller (worker), not because of skill differences but because of mobility restrictions.
What Workers Are Doing About It
Remote workers in developing countries are responding to geo-based pay in several ways:
Strategy 1: Using VPNs and False Locations
Some workers misrepresent their location to qualify for higher pay bands. They claim to be in Lisbon or Dubai while actually working from Lagos or Bangalore. This is risky — it can be grounds for termination, may constitute fraud, and creates tax complications.
Strategy 2: Working for Multiple Companies
Since they are paid as contractors, some workers take on two or three "full-time" remote positions simultaneously. At $35,000-$45,000 each, three positions yield $100K-$135K. This practice, sometimes called "overemployment," is growing. It works until deadlines overlap or an employer discovers the arrangement.
Strategy 3: Building Location-Independent Businesses
Rather than working for foreign companies at a discount, some professionals build their own products, agencies, or consultancies that charge global rates. A Nigerian design agency can charge US clients $150-$200/hour — the same rate as a US agency — when the work quality matches.
Strategy 4: Relocating
This is the most definitive response. When the gap between remote pay from a developing country and on-site pay in a developed country is large enough, and when factoring in career progression, equity, benefits, and long-term wealth building, many professionals conclude that relocation is the economically rational choice.
The math often looks like this:
| Factor | Stay Remote (Lagos) | Relocate (Toronto) |
|---|---|---|
| Salary | $45,000 | $110,000 (CAD $150K) |
| Relocation cost | $0 | $15,000-$25,000 (one-time) |
| Higher living costs | $0 | $15,000/year more |
| Net annual income advantage | — | $35,000-$40,000/year |
| Break-even on relocation costs | — | Less than 1 year |
| 10-year cumulative advantage | — | $350,000-$500,000 |
When you frame it this way, the relocation cost of $15,000-$25,000 is recovered within the first year. Every subsequent year is pure upside.
The Bigger Picture
Geo-based pay is not going away. Companies have strong financial incentives to maintain it, and the global labor market does not have the mechanisms to correct it. There is no global minimum wage for remote workers, no international labor standards enforcement, and no free movement of workers across borders.
But understanding the system is the first step. When you know exactly how much the location discount costs you — not just in today's salary but in career-long wealth accumulation — you can make informed decisions.
Some of those decisions involve negotiating harder. Some involve choosing employers who minimize the discount. Some involve building independent income streams that charge global rates. And some involve changing your location entirely, so the discount no longer applies.
The companies hiring from everywhere but paying based on where you live are not doing anything illegal. But they are benefiting from a system that systematically transfers value from workers in developing countries to shareholders in developed ones. Understanding that transfer is essential to deciding what to do about it.
