January 18, 2021

WFH In 2021? Get Ready For Those Remote Salary Adjustments

I hate to be the bearer of bad news as we head into a brand new year but just in case y’all thought this WFH thing would mean potentially being able to upgrade to some huge rural property at your generous “city” salary … not so fast.

A recent Bloomberg article says it’s already happening in tech. Knowing what we know about accounting firms, it wouldn’t be all that shocking if they start to follow suit. Eventually, that is.

It introduces us to Rachel Musker, a former Brooklyner who moved to much cheaper Rochester, NY in March when the pandemic first started getting serious. It was originally a temporary move, but just like everyone else who made decisions back in March and thought “just give it two weeks and it’ll all be back to normal,” Musker and her husband ended up sticking around for months:

Like many people during the pandemic who could suddenly work remotely, Musiker had moved without figuring out all the details with her employer. One thing they hadn’t discussed was salary. Now that she lived in an inexpensive city, Redfin asked, would she be willing to accept a pay cut?

It’s a question that’s been foisted on many white-collar employees. In February only 8% of the U.S. workforce did their job entirely from home, according to research from the Federal Reserve Bank of Dallas. It spiked to 35% in May, as offices stayed closed and workers fled to less densely populated areas. The work-from-home rate has fallen a bit since and will drop further as vaccines are distributed. But a substantial number of workers are likely never going back to their old offices.

This shift has been especially pronounced in the tech industry, which has a high concentration of employees who can work from anywhere but are based (for now) in expensive coastal cities. Facebook, Microsoft, and Stripe have announced that more employees will be able to work remotely indefinitely. Like Redfin, those companies are also adjusting pay for workers who relocate. Musiker’s salary and bonus will go down about 20% next year if she stays in Rochester. She’s resigned to the trade-off, at least for now. “So much in the world is not how I thought it would be,” she says.

I’m curious how many of you would accept similar circumstances were your firm to approach you this way. Is it worth the trade-off to you?

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32 Comments

  1. Three thoughts:

    1.) Will these same companies just as freely give pay increases if employees decide to relocate to more expensive locations, even if it is solely for their own benefit/desire and not for the benefit of the company? What if I decide I want to move from Texas to Hawaii merely for the beautiful weather, or to the Bay Area merely because my spouse got a job requiring relocation?

    2.) Eventually the free market will nullify much of this. I could see this perhaps sticking some with employers like accounting firms, law firms, consulting firms, etc that were used to having employees doing similar things in different locations with different compensation levels based on cost of living pre-pandemic. However, eventually there will be one perhaps more budget-constrained tech company that will hire people in Texas or Utah instead of Silicon Valley merely so they can pay them 30% less. Once enough companies do this, it will force wages in these different locales to be more in parity.

    3.) This actually could solve the problem of housing unaffordability in areas like NYC metro and California. Time for NIMBY-ism to bite California in the butt!

    1. Almost perfectly describes my thoughts as well. I relocated as soon as I was given the go-ahead to work from home and won’t look back. I moved to a lower cost of living area (Baltimore, MD to Colorado), but many jobs similar to my current position pay the same or more. The only information I would add to your statement is that I would immediately start looking for a new position if a salary cut were to be imposed.

  2. Companies can find different ways to cut costs such as eliminating costly real estate or downsizing offices if they have reduced staff. They should not alter current pay to anyone already having accepted terms of employment for the role offered.
    I have already been on the opposite side of the situation where my position was remote for 7 years(as were many others) and then we were asked to start coming into a local office. They certainly did not offer to increase salaries despite the added costs associated with commuting to an office.
    I hope this trend will cease as it will only make it more difficult for employers to retain current staff and attract new talent.

    1. My thoughts exactly. Has anyone given thought to the changes in Company insurances? No employees in office, no cars in lot, low Electric, gas and water bills?
      How about increases to employees homes in electric and Heat/AC usage. Homeowners liability working from home?
      I think employers are lucking out financially and should be happy paying salaries as are. Im thinking local companies or Tech Savvy remote employers will snatch up those professionals who leave cheap companies looking to reduce salaries!

  3. What does where you live have to do with the ability to do your job?
    When they hired you they agreed to your wages at that time. You can’t change your mind because someone moved. Their location has no bearing on anything they do for the company.
    No one will want to work for a company they can’t trust. That says here’s your agreed wages but then we changed our minds because you changed your zip code.
    You pay for experience and ability to perform the job not their location

    1. The cost of hiring is affected by location since employees living and working in a more expensive locale require a higher salary since they have a higher cost of living. You can find 2 people doing the same job but if they live in different locations which differ in cost of living their wages are very often different – for the same job.

      1. May have already been said but employees are actually subsidizing an employers costs for brick and mortar or eliminating them altogether. Additionally, employees have to pay for more internet, electricity, and generally are bearing their employer’s real estate and energy costs. Something that should also be considered.

    2. There’s the rub. Take your pay cut or find another job. The company will most likely be able to find a good replacement in Nebraska that will sign o. For significantly less.

      This is the new outsourcing

  4. I’m not surprised. Especially for larger companies, employees are paid a base salary + cost of living % increase based on where they live. At my company, a fortune 100 company, if someone moved from a higher cost city to a lower cost city their base pay would stay the same but their % cost of living would change.

    And honestly, those % cost of living increases are not that great. Living in a more affordable city takes your dollar a lot further – even if you’re making 20% less (compared to a coastal city.)

  5. Not a chance in hell, you burn me like that, I burn back. Get rid of your un necessary overhead, high level and executive positions that don’t benefit the company. Send them packing. You’ll save millions per year, duh….

    1. Totally agree. Seriously?? Those who would involuntarily accept a pay cut living at home at high cost of living places like Austin TX, please raise your hand or…. rush into your supervisor’s and beat him/her to the punch by…..offering to take a much needed pay cut.

  6. There will be a new market equilibrium. WFH will relax geographic constraints on both sides. My employer decides to cut my salary due to my local cost of living? That will complete with opportunities across the country (and world) rather than neighboring companies in the current metro area. 20% salary savings is less than what it costs to hire replacements.

  7. The company is already saving by not having to spend $100 per square foot per month on my 5×5′ cubicle in a downtown hi rise. That’s $30k a year. You’re welcome. Also you don’t have to pay that $200 a month commuter stipend, or pay for coffee and snacks…. hell, I even pay for the electricity for my laptop and monitors. It’s literally saving the company money by having me at home.

  8. If anything wfh is a cost transfer from employer to employee. Employee has higher power, internet, water, sewage, office amenities costs. Employees cutting cost by relocating to a cheaper locale is exactly what companies do. Therefore companies should encourage, not discourage this.

    Companies should downsize their real estate footprint and simply change cost of living increases to “we will reimburse you for home office expenses”

  9. A 20% salary cut because she moved? I’ve been working from home since 2008 and have moved twice as well. Never once was I asked to accept less money because MY personal cost of living was possibly reduced. At home employees pay a bit more for home insurance, business class internet, utilities, etc. Companies save so much money having at home employees. I see what the media is trying to do (bring on the programming) but working remotely is not a new concept… This story needs a re-write. Perhaps the insensitive companies who feel like they own their employees should stay in their lane and stay out personal matters- you how they do when you have real deal crisis/issues but can’t tend to them because “you’ve used up all your days.” Bad writing and terrible message trying to get people used to the idea of accepting less pay.

  10. Don’t inform the company of any moves. Get a PO Box pre-move and receive mail there from your workplace.

    1. Companies should revisit their rents, office spaces etc to minimize cost..are they going to pay employee’s electricity etc for wfh? They’re also mentioning taxes..everyone just want to dip their hands where it doesnt belong for $…maybe we should start demanding more rights and benefits for wfh..

  11. Wow unbelievable that any company would even think about cutting pay for any employee when the employee is still doing their job while remote!

    Think about it. The company is actually set up to make even more money with staff working remotely while keeping wages the SAME! They don’t have the overhead of a building for everyone to work at so potentially no rent, taxes, mortgage. No utility bills, no office furniture, ect… I could go on and on. Especially a large corporation. They have millions invested in large buildings, and they are worried about a few thousand or hundreds that somebody may save in a year by working remotely! Just another insult to peoe who work for a company to earn a much smaller piece of the pie and apparently now a even smaller piece!

  12. It’s funny because when you live in a city and apply for a job, I always simply thought that your rate of pay was based on experience, education, etc.- not necessarily your location. Why should your salary change if your job functions do not? Will your tasks also be lessened since your pay is being lowered? I do understand that cost of living is different depending on where you reside, but I think the discussion should be shifted back to the employees value- their contributions to that organization. What that employee brings to the team, how they aid in furthering the mission and vision of that organization. I really dislike how everything is so focused on “where” you are working from. Why should that matter if you are an excellent employee that goes above and beyond to do your job well?

  13. My thoughts exactly! I expect to be paid for the job I do, not where I live. If I move, in order to having less expensive housing, that is MY business. A company paying my wages for my labor and expertise should not expect me to take a pay cut. This rationale by any company makes no rational sense. I would consider it penny wise and pound foolish and strongly reconsider who I worked for.

  14. This is the next phase of the pandemic. Companies were quick to praise the high productivity rates of their WFH employees.

    Employees were happy to not make long traffic clogged commutes to people died buildings risking covid infection and the inevitable death that was sure to follow (so says the 6 o’clock news)

    Now here we are have a viable vaccine is being rolled out soon to be to the masses. Most companies gladly saw the opportunity to give back expensive real estate, lower utility costs assuming they aren’t part of the lease.

    But here is the cold hard reality. Employees are COMPENSATED with the cost of commuting, housing and the general cost of living. Regardless of what savings a company may realize by the real estate it doesn’t translate into profit necessarily. It drives down overhead which in turn is expected to be reflected in more competitive rates.

    Why should the company continue to compensate based on all the pre covid cost of living?

    This is going to happen. That will in turn lead to lower productivity, because employees will feel they are being taken advantage of and without supervision they will slack off.

    That will lead to post pandemic cycle back to on premises workforce.

  15. Civil service federal employees receive locality pay in addition to their regular salary. Since the pandemic, most are working from home. Only semi industrial federal employees on DoD military installations have been working steadily as you can’t R/R aircraft or tend to facilities maintenance or provide service to government fleet vehicles in your backyard. If you live in DC and are a federal employee, your locality pay is much higher than a federal employee doing the same job, same grade at field office in Alabama or Mississippi.
    Also, a DoD employee, same grade, at Camp Pendleton same job description will be receive not only a higher salary, but additionally higher locality pay than an employee at Camp Lejeune in North Carolina. If you relocate from Camp Pendleton to Camp Lejeune as a civil service employee, you get “safe pay” for one year, then your pay and locality pay reduces to that of North Carolina.
    The private sector is just catching on.

  16. As a home office veteran, this is ridiculous. Companies save quite a bit of money with remote verses brick and mortar. The biggest cost was during the pandemic quarantine when companies had to rush to virtual all at once instead of the long term plans. That is the cost they are trying to recoup. The cannot think people will work for less when the investment the companies made will eventually pay off.

  17. It is wrong for companies to expect employees to take pay cuts for working from home. The employees assume many of the costs that employers had to pay to maintain office space – utilities, internet, office space, peripheral equipment and furnishings.

  18. I don’t think they should be cutting people’s salaries, but those who moved to a lower cost area, should be prepared for a couple years a minimal raises to get pay inline with the compensation for the job in that area. People who live in high cost cities should receive high compensation. I live in Los Angeles and if I moved to Nevada the difference in cost of living would equate to me receiving a 35 percent raise and there is no reason that I should compensated at a 35 percent high rates then I would in Los Angeles. As much as some you would like thing because of COVID we can all work remotely so we don’t need to have as many people work in the most expensive parts of the country it just isn’t true. Once COVID is over our clients are going to expect that we meet with them again and will want local service teams. Also, the pay in the expensive markets is justified by the amount of money earned in those offices. If you were to take the major metropolitan areas revenues, add them up, and compare them to the revenue of firm they would make a up a huge amount of that percentage of the firms revenue at a higher rate per hour.

  19. Well isn’t this the biggest “up yours” move ever!
    When 2020 couldn’t get worse, now forced pay cuts due to perceived lower lifestyle costs that employees choose?
    Ok, then vice versa. I’ll move back to Los Gatos, throw my kid back in private school, and stick it to the employer to foot the bill?
    No, this is NOT OK. For someone making a lifestyle move, whether more frugal or more extravagant, is none of the employer’s business, and the employer has no right to sever salaries due to their bias on this.
    I’ll gladly send the bill for my home remodel as well, since I would love to have a custom working desk, better lighting, sound system, and housekeeper and chef on-site at home.
    Total BS.

  20. What I am amazed is that people do not see remote work as a huge risk. I work for a large financial institution in a major city, during covid huge departments of people got replaced by outsourced companies because they are much cheaper and now that the management saw that the work can be done anywhere they have no reservations outsourcing as many of it as possible. I am in IT and the outsourcing companies charge fraction of the cost for developers, can we compete with that? Pre-covid being local was an advantage in getting jobs, now in IT we literally have to compete with global candidates. Unfortunately we cannot work globally whereas corporations can hire globally. Americans should fight for their right to work, not to work remote.

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