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The R&D startup my friend is working for is acquired by a big US tech giant after a long joint venture. She is coming from the 2nd world country, where the company is based too. She and her colleagues are working on the integration of the products with the American counterparts. They are basically doing the same work, for the same company (now), only at different locations. Yet they are still paid the same 2nd world salaries, which is like 5-10x smaller. I don't think it is fair, but she was told she won't get a raise, let alone to the same levels.

What is the best course of action to take to actually get some reward for the years of hard work? Said company is proudly an equal opportunity employer, but I doubt federal laws have effect overseas.

marked as duplicate by Lilienthal, paparazzo, gnat, Xavier J, Philip Kendall Nov 25 '16 at 0:03

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    One of the most common pieces of criteria used to determine salary is location, and current market value in that region. I'm not sure you can easily make the argument that these people should be paid 5-10x their regional average. – pay Nov 24 '16 at 18:13
  • One thing that can sometimes happen is that the 2nd world employees can negotiate a tour of duty for a couple of years at the US location. This can include an adjustment to salary to accommodate the cost of living in the US. – Michael Karas Nov 24 '16 at 18:33
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    Probably resolved adequately by the duplicate link, but can you clarify what the actual problem is? Because I'm not sure I'm following the logic here. A local company was acquired by a US company and you'd just expect them to start paying everyone by US standards? Yeah... that's not how that works. – Lilienthal Nov 24 '16 at 18:36
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    My US-based firm pays me a french salary for working in France, and that's just fair. – gazzz0x2z Nov 24 '16 at 19:06
  • So if the 2nd world company had bought the US company you think the US people should get 5-10x less? – paparazzo Nov 24 '16 at 20:13
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What is the best course of action to take to actually get some reward for the years of hard work?

She should move to the US where the company is paying 5x to 10x and see if she can get hired there.

Realistically, companies that want to hire locally, pay wages consistent with the locale. The act of being acquired doesn't change that.

And often acquisitions are made with cheaper overseas labor in mind.

I don't think it is fair, but she was told she won't get a raise, let alone to the same levels.

Said company is proudly an equal opportunity employer, but I doubt federal laws have effect overseas.

Let's lay out the facts here.

  • Your friend was making x.
  • Your friend's company was acquired by a US company
  • Your friend's work hasn't changed.
  • Yet you think the mere fact of being acquired means that she should make 5x to 10x more than she did before the company was acquired?

Fair or not, it simply doesn't work that way. And no, federal laws don't work that way overseas.

Imagine for a moment that an overseas company acquires a US company. Should the US employees expect to have their salary reduced to 10-20% of what they were making pre-acquisition? How do you think that would go over?

  • Federal wages laws don't even apply within the US, depending on how you view IT employment under the H1B program. – Peter K. Nov 24 '16 at 23:26
  • no, definitely not what I was trying to say! :-) – Peter K. Nov 25 '16 at 19:01
  • Federal law states that H1B visa holders must be employed at the same pay rates as their American counterparts. They are not. See, for example, google.com/amp/www.computerworld.com/article/2474994/… – Peter K. Nov 26 '16 at 14:59
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The price of labor is determined by supply and demand. The employer does not have to offer wages that are nominally the same as in the US because he can find local employees with the relevant skills that are willing to work for less. As others said, equal pay legislation does also not apply across borders.

Why is that? Why can't the employees negotiate for the same nominal wage when their work can be done remotely and their location does not really matter much? The costs of living differ from country to country. A wage of i.e. 35 lakh rupees per year in India may represent the same cost as 50k$ for the employer (tax considerations etc. aside), but not the same standard of living for the employee. While Indian engineers would surely appreciate the luxurious lifestyle that comes with 35 lakhs, there will be enough of them who are willing to settle for the reasonably good standard of living at 15 lakhs. This will become the market rate. The employer does not need to pay more.

Does that mean that Indian and Chinese engineers have no negotiation power even though they provide comparable work as their western counterparts? No, this is not true either. The wage gap between developed and developing countries is much larger for unskilled jobs than for skilled jobs. This can be seen as a result of this negotiation power. The nominal salary is still lower than in Europe/the US, but the perceived standard of living needn't be. As an anecdote: Multiple Indian engineers have told me that, in spite of their hugely increased nominal salaries, they feel poorer now in Europe than they felt before in India. They can afford smaller apartments and fewer aides for their household work.

reference material from McKinsey

  • In short, it's not just the dollar amount that matters. It is what you can do with that money. You can easily hire a bunch of workers using a tiny fraction of your salary in India, but you ain't gonna find anybody working for that rate in the US. They can just work at McDonalds at the local minimum wage instead. – Nelson Nov 25 '16 at 2:16
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Bottom line: she can't. If the US company wanted to pay US wages, they would have expanded their US operations. Part of the value of this deal for the US company is the cheap wages they can pay, and they're not going to erode that value unless the local employees can show that she can get more pay with another local employer.

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