As the COVID-19 pandemic wears on, employers are finding themselves having to make some tough decisions. And as more and more companies allow employees to work remotely, some workers are pulling up stakes and relocating, taking advantage of the green light to work from anywhere.
Yet from a management perspective, not all locations should be treated equally when it comes to compensation. For example, consider the situation of an employee who has lived and worked in the pricey San Francisco Bay Area but is allowed to work from anywhere remotely and moves to Tennessee. Since the cost of living is much lower in Tennessee than in San Francisco, the worker will likely not receive the same salary as they did previously.
Is It Time to Localize Salaries?
According to Business Insider, companies such as VMware and Facebook will be cutting pay for workers who leave the Bay Area or Silicon Valley. For instance, a VMware employee who moves to Denver may receive an 18% salary reduction, and an employee moving to San Diego or Los Angeles might have their pay cut by 8%.
Facebook plans to begin adjusting the pay of work-from-home employees depending on where they decide to live, and Twitter already takes a “competitive approach” to pay localization.
You might expect that most workers would view a pay localization policy as a negative. But a survey of 2,800 users of the workplace chat app Blind in New York, Seattle, and the Bay Area discovered that 44% of respondents would be willing to make less money if they move to a less expensive area.
Notably, 75% of those surveyed in New York said they wanted to leave the metropolitan Area. Twenty percent of Bay Area professionals suggested a willingness to relocate with a 10-20% pay cut, and 38% of employees working at Facebook would consider relocating with a pay cut.
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Using a Salary Calculator to Guide You
To help guide you through the decision-making process around pay localization strategies, Buffer offers a Transparent Salary Calculator to show employers and employees what a salary at Buffer would look like. Buffer’s methodology takes cost of living and career level into consideration, providing insights that can help companies determine the right salary level for different titles and locations.
As an example of how the Buffer Salary Calculator works, consider a Senior Engineering Manager who lives in a city with an average cost of living. Buffer provides the example of how much this role would earn at their company—$134,513—and breaks that down into two components:
- Role base, or the amount of money that a person in this role might earn in the 50th percentile in San Francisco. In the example above, the role base is $158,250.
- Cost of living, which is Buffer’s way of “normalizing salaries depending on how expensive it is to live in various cities.” In the example above, 0.85 (average) means 85% of the 50th percentile San Francisco benchmark. Buffer notes that most cities fall in the 85th percentile.
Remote Work and Moving Ahead
As companies rethink working from home and consider long-term implementation of remote work policies, employees may decide that moving to be near family, to save on housing costs, or for a change of pace is their best path forward. If your company has recently made the decision to move toward a remote work model and staff members want to relocate, you may have to keep their salaries in mind.
FlexJobs has been a leader and advocate in remote work since 2007. We work with companies of every size to provide support and advice for businesses that want to incorporate remote work. Whether you’re looking to fill work-from-home positions or learn more about how to successfully integrate remote work into your company’s long-term plans, we can help. For expert guidance, reach out today!
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