I have heard a number of stories on my LinkedIn page and work conversations regarding companies moving to fully remote and what that will look like. People living in some of the countries most expensive cities for their jobs - NYC, San Francisco, LA, Silicon Valley - have moved away once remote work was granted. What does that look like for the companies though? Salary often reflects cost of living, so it was a conversation bound to happen soon.
Below I have linked a Bloomberg article referencing a number of companies that have decided to “localize wages” for their employees that have moved. Facebook, Twitter, and VMware, among other tech companies, have taken this approach.
A direct quote on VMware is referenced below:
“But employees who worked at VMware’s Palo Alto, California, headquarters and go to Denver, for example, must accept an 18% salary reduction, people familiar with the matter said. Leaving Silicon Valley for Los Angeles or San Diego means relinquishing 8% of their annual pay, said the people, who asked not to be identified discussing internal policies.”
What are your thoughts on this? These people are still likely saving money in the long run moving away from these expensive tech centered cities.
I would be pretty upset if I learned that I might get a pay cut by moving to a less expensive area. I think companies that are doing this will see their employees looking for work at companies that can offer a more competitive salary that don’t care where you are located physically. These large companies that are allowing people to stay remote will end up saving a lot of money by moving to smaller offices or getting rid of their offices altogether. So in my mind they will have more money to play around with so there’s really no reason that you shouldn’t instead be investing that back into your employees, but if you are cutting expenses AND cutting salaries that will not work out well in the long run when your talent all leaves for competitors with foresight.
I also would anticipate a lot of people trying to move without letting their employer know if they can get away with it. I know if I was given the option to move but at a lower salary chances are I would stay put, unless the difference in salary vs cost of living is still a gain in the end.
I think companies who lower the compensation for employees who relocate to lower cost of living states are making a big mistake. They are poking into affairs that don’t concern them, where does it stop ? Will they one day monitor your spending and lower the salary of those employees who choose to live frugally compared to those who spend lavishly ?
You pay for the worth of your employee and his contributions to the organization. Not dictated by where he lives.
I think it’s actually pretty common. There are a few companies out there that publicly post salaries and their equations for finding them - they generally have a “cost of living” variable that is factored in. I agree that you pay for your employee’s worth, but cost of living is undeniably a factor in salaries. A living entry level wage in a remote town is going to be much less than that of a city, and salaries generally will reflect that.
However, I agree - I wouldn’t be very happy if I received a pay cut. I’m sure this will result in more “secret” moves that aren’t disclosed to their employer. So in order to keep their employees satisfied, these employers should absolutely tread carefully. They need to ensure if they are lowering salaries that the pay is still very competitive, and that the take home after rent/mortgage/etc is still the same or better. egallagher, that’s a great point about smaller offices or no office space all together. That’s a savings, so with that in mind a pay cut seems unnecessary and also a bit selfish. I think it would be fair to assess future employees salaries based on location/cost of living, but continue to pay current employees as they have without cuts.
I agree with that
When you bring on a new employee, you offer a compensation package. He has the right to take it or leave it
When you have an existing employee, they signed up for a compensation package. Just because they moved does not give you the right to lower their salary
In an extreme hypothetical case, let’s assume an employee was hired today because he received a certain offer and his home address was NY city
Tomorrow he moves to a small town in upstate NY. Will you cut his salary one day after he accepted your job offer ?
This is an interesting topic and something I’ve definitely thought about. For the sake of conversation, what if the opposite were the case and someone was moving to a city with a higher cost of living - would they have the right to demand a higher salary?
That’s a good question! I personally don’t think you could ask for more money if it is a personal move, unless you can quantify the value that your move would bring to the company. I do think that the variance in cost of living will play a larger part in company hiring efforts moving forward if remote works becomes more “standard practice.”
I have actually taken a job at a lower salary to get out of a city that I did not enjoy living in. My job is virtual, I worked from home many times before it became a necessity like it has for many, particularly when the kids were younger, but ultimately there were also many days in the office. For me, it was an easy decision. My cost of living went down, the welfare of my kids improved (better schools, more open space to play in, etc.), crime and other unplesantries (vagrants, drugs, etc) are reduced so my wife feels safer, we went from 2 cars to one and get by quite nicely (I don’t miss driving to work at all), etc. Best decision I ever made. If money is your only motive I can understand some of the opinions voiced above but for me, money is just something that makes the rest of my life possible. As long as I’m still making enough to be living the lifestyle I want, I’m happy, content, and on and on.
I commend rvinson3 on his decision, but the important distinction is that the choice was his to make.
He “took a job at a lower salary” which means a different assignment that allowed him to work virtually and enjoy the other benefits with his family. And it was voluntary (I assume)
That is a little different from : you keep doing the same work, shoulder the same responsibilities, be responsible for delivering the same results and we will still cut your salary because your spending went down.
That is not correct. It is not about money. It is about being paid for your worth and your contributions.
Paying you just enough for what you actually need starts to be borderline communist philosophy.
I guess a clarification is needed. Yes, my move was voluntary. I saw an opportunity for a better life by moving as being more advantageous than staying in a place I didn’t really care for and no longer wanted to raise my family in.
Second, your closing line infers I took a lower-level job; in fact, I took on more responsibility and I’m more productive than ever. No more time wasted in mindless meetings, no office politics, no water cooler gossip, etc. Without all the distractions I actually produce more than I did while working in the office.
Lastly, I’m not getting paid “just what I need”. I’m a Sr Project Manager, my current “reduced” salary is about 12% lower than when I was working in the office. On the other hand, because I took on moe responssability abd have contributed more to the success of the company I expect my bonus this year will be larger than last year. While I don’t expect it will totally offset the reduction I took, it will certainly narrow the gap.
I did the math and my actual net income is actually higher (not counting the bonus because it has not been awarded yet so that is just gravy) despite my gross income being lower. More spendable income plus a better life. It’s not for everyone but it is certainly worth doing the math, deciding what is actually important in your life and then making the best decision based on what is most important to you.
OBTW, I have a well established reputation in my field of expertise; I typically get 2-3 headhunter calls a month. So far, no one has made a better overall offer; I’ve been offered more money but as I said, money is just a means of living the overall life I already live.
I am so happy for you and I respect you for getting your priorities right and making the right call for you and your family
Congratulations on the enhanced role with greater responsibilities
And I completely agree with you about the water cooler gossip and mindless meetings. I have been working from home since the pandemic as well and I find I am far more productive, like you.
I do wish you all the success in your future