Pay cuts/"localized pay" based on where you live, not the job you do?

Great Debates
1

I read an article yesterday about how some employers are essentially requiring workers to take pay cuts to work remotely, or in other locations.

So if you had worked for a San Francisco company, and during the pandemic while you were working remotely, you moved to say… Kansas City, some employers are requiring workers to take pay cuts.

Personally, I think it’s absolutely shitty to do this retroactively. It’s one thing to advertise remote jobs with a different pay schedule than in-person jobs, and it’s also another thing to have different salaries for jobs in different cities- the labor market may be different in both cases.

But it’s another thing to require people already hired under one scheme (the in-person model in a specific city) to take a pay cut if they move elsewhere and work remotely. Some companies even go so far as to organize cities into tiers, where they pay differently based on where you live, for working remotely.

Did their job expectations or workload change? If not, then what business of the company’s is it where they do their remote job from? This whole thing seems like a way to put the screws to workers just for the sake of saving a dime here or there.

https://www.bloomberg.com/news/features/2020-12-17/work-from-home-tech-companies-cut-pay-of-workers-moving-out-of-big-cities

2

It of course depends on the job. We have people working remotely for over a year who chose to do it in another state since they could not come into the office. But their job requires them to design cars and physically test parts and drive vehicles. That is what they were hired to do. For them to say that they did their job fine remotely during a crisis may true, but once the crisis is over they cannot change their job requirements. Either take a lower paying job, move back or quit.

And then you have people who really don’t need to be in the office. If that is true then the company should not penalize them. But it could make career advancment more challenging.

3

Personally, I don’t have a problem with it. What happens if an employee is asked to move from Kansas City to San Francisco? Shouldn’t the employer give them a cost-of-living adjustment (i.e., more money)?

4

You left out a third piece - someone is hired to work in person in a specific city ( New York, San Francisco, Peoria, Dubuque) They get paid based in part on the city where they work and live ( which is very common) so that someone who transfers from the Dubuque office gets what is effectively a raise when they transfer to NYC ( I say “effectively” because for some employers, “location pay” is a separate line item from salary or wages on your paystub) . So in March 2020, everyone goes remote. At some point, you move from NYC back to Dubuque. Should you be paid more to do the same job from Dubuque than your coworkers who never left Dubuque get for doing the same job remotely? Does it matter if it was separated out as location pay?

And perhaps more importantly ( in terms of my thinking) suppose it had been the reverse. Suppose instead of you wanting to transfer to NYC, the company transferred you involuntarily to the NYC office from Dubuque. Would you have accepted " I get paid for the job, not the location" if it meant that you got Dubuque pay in NYC? Even though the cost of living in NYC appears to be more than double that of Dubuque? I find it difficult to believe anyone would actually be OK with that - but if you want to keep NYC money when you move to Dubuque you have to be OK with keeping Dubuque money when you move to NYC.

5

It was already really common for employers who have multiple locations to have salary bands that adjust with cost of living. What changed is that tons of companies ended up in that position all of a sudden without planning for it, and now they’re trying to figure it out.

There are of course employers who don’t care at all where you live, just what job you can do, and I strongly suggest seeking them out.

6

I think there are a couple of distinctions that need to be made, here. First, if a job is such that it can be done entirely remotely, then it’s perfectly reasonable to pay less for that job. It’s even reasonable to renegotiate the pay of existing employees, if it turns out that, unknown to anyone at the time of hiring, the job can be done remotely. Being able to work remotely is a perk of the job, and that can be balanced out by the lower pay. But beyond that split between jobs that can and can’t be done remotely, I don’t think it should be any of a company’s business where a remote worker chooses to live. If someone can work remotely just fine, but still chooses to live in New York City just because they like it there, it makes no sense for that person to be paid more just because they, essentially, have expensive tastes.

Second, a distinction should be made between moving at the worker’s choice and moving at the employer’s choice. If you’re in a job of the sort where your physical location matters, and your employer dictates what your location is, then that deserves some compensation. If you were working in New York, but your employer decides that they absolutely need you as their regional manager in the Dubuque office, and your choices are move or be fired, then they should actually be paying you more for that (though they probably should have first asked if any of the managers specifically wanted that job, because they wanted to leave new York for cheaper environs).

7

Remote work has benefits for both employee and employer, and it’s not obvious to me how that surplus should/will be split. Employers don’t have to provide office space or other on-site amenities for remote employees. That’s not a trivial reduction in costs.

8

The employer may not encounter non-trivial cost reduction right away. They can’t easily sell a building or break a lease just because they don’t need as much space. In many cases the job will also require periodic travel to the main office for the employee. The airfare combined with hotel accommodations and other expenses can be very high.

9

Another employer concern is the additional HR costs of filing payroll in states they don’t currently have employees. While it wouldn’t effect someone like Amazon there are lots of companies that are only in a single state or multiple states that aren’t in every state.

I’ve also read some concern about either different interpretation of current laws or new laws when companies would have to pay state taxes based on income earned in the state and changing to definition so that money is earned where the employees are.

10

One point I have to add is that from my personal experience over the past year’s lockdowns — getting a group of people to solve a large, complex task, or training new hires, when we’re not co-located in the same building just friggin’ sucks, man. There should be some cost imposed on those who choose to permanently work remotely even after offices reopen, for putting this hassle on the rest of the team.

More of a rant born out of frustration than anything. I’m open to having my point of view changed by arguments to the contrary.

11

There are loads of laws that come into play with out-of-state remote workers - in addition to the issue of setting up tax withholding when you suddenly have employees in states where you didn’t previously have employees , unemployment and workers comp policies would have to be set up. And then there’s the cost of learning and complying with labor laws in (possibly multiple) new states. For example, if a company has an employee working remotely in a state that requires paid leave, the company will have to provide that paid leave. That might not be a problem for most employers who have remote workers - but in some states, overtime at time-and-a-half is required if a nonexempt worker works more than eight hours in a day or works seven consecutive days, even if they don’t work more than forty hours over the course of the whole week.

And then there’s the possibility that a single remote worker will create a sales tax nexus.

12

Good points, both.

I still expect that long-term remote employees probably cost will less than on-site employees in expensive metro areas. Like, a remote employee flying to NYC and staying in a hotel room for, say, 4 trips and 2 weeks a year total is almost certainly going to cost less overall than an employee occupying office space in NYC 50 weeks a year.

A good friend of mine lived in NYC until pandemic times, then headed upstate, and his company is dealing with exactly this situation. His newly remote coworkers pointed out that in addition to office space, the company buys dinner for employees every day. That’s not a tremendous amount compared to NYC software developer salaries, but it’s not nothing either. And he’s still in-state, so no additional

I am full-time remote. Planned pre-pandemic, but Covid started a few weeks earlier than planned. Real estate at HQ is not cheap, and there are other employees already in the state I’m in, so as far as I can tell it’s a net bonus to my employer and a net bonus to me. It’s ok for this to be a win-win scenario, and I’m not that focused on capturing every last bit of surplus, because I’ve captured the quality of life surplus that I wanted. But I would also be sort of annoyed if my employer tried to ding me on salary. My work is as valuable now as it was when I lived close to the office.

But, hey, it’s a new world. Things are going to change, and I’m going to try to roll with it.

13

At the beginning of lockdown, my gf was concerned about her job. Anytime there had been discussion about working from home over the years, management was very much against the idea.

When there was no real choice, working from home was instituted. My gf loved it, so she approached her bosses with a proposal that would allow her to continue to WFH until retirement with a pay cut (she saves significant money not driving 2 1/2 hours daily).

An agreement was reached. Over time it became obvious she was kicking ass working from home, routinely putting in 12 hour days. Her original WFH agreement has since been modified to her previous salary plus a bump.

14

Sounds reasonable to me. Especially for those who promote concepts such as a living wage. If one chooses to live less expensively, well, you need less money. Employers know that.

Even in a scenario where labor is based upon market value it makes sense. With remote working you have a much larger potential market to draw upon.

15

But it is a whole new market dynamic and the business has to stay cost effective with its competitors.

If I have an office in NYC and need to hire 50 people, I have to find qualified people willing to relocate to the area and pay them a wage which will allow them to enjoy a moderate lifestyle. So does the other company I am in competition with in NYC.

When the dynamic changes and I can hire anyone in the world, basically, who can work from their home in Montana, I don’t need to pay that additional wage. And even if I was a nice guy and wanted to, I would get soaked by my competitor who didn’t.

16

Or you hire from among the people who already live in NYC or within commuting distance. In short, you may not need people to relocate to NYC.

17

You still have to pay them a wage that continues to allow them to live in NYC or within commuting distance.

18

In addition to payroll issues, the company needs to follow employment laws for the state their employee works from. Which, like with payroll, may not be a problem for larger companies but might be a problem for smaller ones. There are other legitimate concerns such as the possibility of wanting employees to be able to show up in person if required. Though that doesn’t seem to be a concern in the OP’s particular situation.

That’s something to consider when deciding if, when, and how many employees you want working remotely either full or part time. We’ve had some problem with managers who just don’t know how to manage a remote workforce. And before anyone gets up in arms, I don’t mean petty micromanagers aren’t adapting but that decent managers were having some difficulty even communicating with their workers. For a lot of them, working remotely was a whole new paradigm.

19

I’m okay with the concept of localized pay. If I was in charge and I was willing to accommodate permanent work from home from a different city I’d negotiate any change in pay as part of that agreement. So if you move from SF to rural Idaho you’ll know before the move that your pay would decrease by 30% or whatever and could decide if it was worth it or not. I wouldn’t spring a pay cut on someone after they’ve moved if I hadn’t made it clear before they moved that it was coming. And I’d make it clear if it was allowed to be a permanent arrangement or not. If I want people in my SF office when the pandemic is over I probably wouldn’t bother with a pay cut if they happened to WFH out of Idaho when everyone has to WFH anyway, but the expectation would be that they’d move back when we opened the office.

20

Well, yeah. Same job done remotely- shouldn’t matter in the least bit WHERE you’re doing it from. And if they worked out your pay ahead of time, then that’s where it should stay- I think it completely sucks that they’d say “Oh, you’re doing a great job on this job, but you happen to work somewhere different. So we’re going to drop your pay. Not because you’re doing a bad job, or because we can’t afford it, but because we think you don’t need to be paid so much based on where you’re living while you work remotely. If you lived somewhere more expensive, we’d pay you more for the same exact job.”

That’s entirely craptastic. It’s a different situation if someone is hired to work remotely- in that case, you make it clear that a lower salary is the tradeoff for having the freedom to work wherever you choose, AND you make that salary the same across all locations. You want to work remote? You get the freedom to do it from Dubuque, Miami, North Platte, or downtown San Francisco, but we’re paying you the same. The choice is up to you.

I guess where I get tripped up is on the tiered salaries for remote work, combined with people who were effectively forced into remote work and who are getting their pay cut based on where they’re living, not on their job performance. I mean, that’s kind of the point of remote work- you can do it from anywhere, so the location shouldn’t factor into pay at all.

I’m entirely fine with presenting existing workers with the choice of in-person at your current rate, or remote at some lower rate. That’s fair. And I’m fine with salaries being different for in-person work in different cities as well- workers rarely have as much choice in that matter either.

But the idea that someone working remotely from San Francisco is paid more than someone working remotely from rural Kansas for the same exact job and performance, just because THEY choose to live in San Francisco sticks in my craw. It seems almost like the employer is sticking their nose into the type of lifestyle their employees choose to live, and subsidizing people who choose to live in more expensive environments.

FWIW, I’m pretty against the idea that someone transferred from San Francisco to Dubuque involuntarily should have to take a pay cut because Dubuque is cheaper- that’s part of involuntarily transferring people, IMO. You pay them the same or more (if it’s somewhere more expensive), and you don’t deliberately screw them because “they don’t need it”.