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Should zip codes determine whether successful remote workers take a pay cut?

Companies and employees are at a crossroads. Nearly 18 months into the pandemic, return-to-office, remote, or hybrid plans are starting to solidify across the country.  Many of these organizations have been productive and successful with remote employees.  And employees, by and large, are demanding to remain at home, or at least in a hybrid environment.

In this position, several companies are considering ‘cost of living’ adjustment pay cuts for employees who decide to move to less expensive regions.  VMware was one of the first companies to announce that they would reduce pay for those employees who left the San Francisco Bay area. Recently, both Google and Facebook also announced that employees could have their pay cut based on cost of living, should they decide to move to a less expensive city.

The pandemic moved nearly a quarter of Americans out of their homes last year – by choice or by force.  Out of necessity, employees worked from home. Those who were successful and have maintained their work product effectively are demanding to work from home after proving their value to their organization.

The question is, why are many of these companies ready to cut the pay of their successful employees? Are they confident enough in their appeal as FAANG & Co., that they will easily find new employees should their current ones leave?  There is a real risk of alienating employees who have successfully balanced work and home life during one of the largest crises in their lifetime. 

Instead of paying employees what they are worth, they are effectively testing employee morale by assigning value to a zip code rather than skill. Cost of living adjustments aren’t unusual when you join an organization or move cities within a company. But these are expectations that have been set out and agreed upon from the get-go.

There is a real risk of demoralizing the very people who kept the organization going during the peak of pandemic chaos.  Additionally, many companies are opting to reduce their physical office footprint; creating savings that they would not otherwise have if their employees were at the office full time. 

While some of these large organizations may be confident in their ability to replace employees, there is a real threat to smaller companies who attempt to follow suit.

Additionally, while many low-tech workers might be willing to take a small pay cut to remain at home, the vast majority of IT professionals aren’t willing to take that cut – whether they physically change cities or not.  According to ZDNet, more than 60% of software engineers, DevOps engineers, data scientists, and product managers wouldn’t be willing to take any form of pay cut because they opt to work from home.

Companies who are not considered the number one stop for top tier engineers need to carefully consider how they change compensation structures for their remote employees. Employees are aware that reduced office footprints and in-office perks are saving their company money.  Is the cost of changing these salaries for productive & proven employees worth it? Is it worth experimenting with morale, the cost of lost employees and re-hiring for positions?

Furthermore – smaller organizations might be able to capitalize on recruiting top tier talent who decide that their big-company COLA pay cut isn’t worth it for the same work product output expected of them. If your organization is still unsure about how to address work from home plans, the Talener team can help advise you. By understanding how policy shifts like this affect your staffing and hiring processes, you can make more informed decisions.  Please reach out to our team today for more information.

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