Google and other tech giants, such as Facebook and Twitter, have either cut the pay of thousands of remote workers who relocated to lower-cost areas or plan to do so.
Some corporate leaders, such as Morgan Stanley Chief James Gorman, are eager for their employees to return to the office. Gorman recently said he would be “very disappointed” if workers weren’t back in the office by Labor Day. He had also previously scoffed at the notion of paying New York City wages for remote workers who moved from the area.
“If you want to get paid New York rates, you work in New York, none of this ‘I’m in Colorado, working in New York and getting paid like I’m sitting in New York City,’” Gorman said at a June investor conference. “Sorry, that doesn’t work.”
Facebook CEO Mark Zuckerberg warned remote employees back in May of “severe ramifications” if managers caught them lying about where they lived.
Workers are paying a steep price for cheaper housing
Some workers may pay dearly if they insist on continuing to telework from a remote location.
“Screenshots of Google’s internal salary calculator seen by Reuters show that an employee living in Stamford, Connecticut — an hour from New York City by train — would be paid 15 percent less if she worked from home, while a colleague from the same office living in New York City would see no cut from working from home,” Reuters said. “Screenshots showed 5 percent and 10 percent differences in the Seattle, Boston and San Francisco areas.”
Most workers are “at will” employees, giving their supervisors broad discretion to change the terms of their employment, according to Elisa A. Filman, managing partner at Rodman LLP, a Boston-based employment law firm.
“If the job changes, the job changes,” Filman said. “If somebody says, ‘I want to move to a place where it’s less expensive to live, and the employer says, ‘Well I’m gonna pay you less now,’ that’s probably fine.”
Still, by some estimates workers are willing to accept reduced salaries in order to work remotely.
An August 24 GoodHire.com survey of 3,500 workers found that 61 percent of all Americans would take a pay cut to continue to work from home. Some workers told the employment screening company that they would accept a 50 percent reduction in compensation. Almost remote job if they had to return to their office full-time.
“As our study shows, companies who do not offer any remote work might also struggle to find top talent and retain current employees,” GoodHire Chief Operating Officer Max Wesman said in a statement. “If large companies start cutting salaries for remote workers or demand in-office work, and smaller businesses embrace the remote work trend, it’ll be interesting to see how many people look for new opportunities elsewhere.”
Few companies base salaries on worker location
Roughly 20 percent of the companies who factor a worker’s geographic location into their compensation are considering “modifications to their current approach,” according to a survey released in May by Pearl Meyer, an executive compensation consultancy.
Only 4.3 percent of respondents said they based compensation on where their employees lived, and 56.5 percent said geography played no role. The remainder were uncertain of their next steps and indicated that cases would be decided on a case-by-case basis.
“At this juncture, when companies are allowing — or encouraging — remote work and it is going well, it appears there is some hesitancy to disrupt the talent pool,” Bill Dixon, Pearl Meyer’s managing director, said in a statement.
Given the tight labor market, many workers who are dissatisfied with the compensation they are being offered by their current employer may be able to find a deal more to their liking.
“We are also seeing a big shift in where employers are hiring from as a result of the ‘work from anywhere’ model,” Adrienne Altman, managing director at Willis Towers Watson, a consultancy, said in a statement.
“This means that employees will have far more choices in who they work for and the potential to drive up pay levels in locations that historically have been considered low-cost labor locations,” she continued. “In the future, we might see more of a ‘national labor market’ for certain roles, which might eliminate the differences in pay by geography. So with all of this in mind, we would strongly recommend to our clients to hold off on any pay cuts.”