As companies move more to remote work and maybe even consider a work from home (WFH) or work from anywhere (WFA) option, the question of what is a fair salary practice emerges. In a recent post, we highlighted how some companies, like Twitter and Stripe, are tapping into the remote work concept and even offering to assist with "delocation" support, while also implementing a salary reduction. In another recent post, we explored whether "WFA" is now the biggest talent attractor for companies.
Looking at this article from The Economist, another company example is added to the list: VMWare. They have decided that for those wanting to delocate out of the Palo Alto (high cost) area and choose to work permanently from somewhere else remotely, the company will implement a pay cut of up to 18%. Employees get more house for less money and a lower cost of living, while the company saves costs on office space and salary.
The article dives into a deeper discussion around the perception of pay equity, fairness, legal considerations and corporate transparency. A particularly striking point in the article was around how pay equity is even more important than considerations around the cost of living. Erica Brescia, the COO of GitHub, explained, "You don’t want to have this situation where perhaps somebody was hired in a lower-cost area and then a ‘more expensive’ employee from San Francisco moves in. And then all of a sudden you have this disparity in pay.” This could have a demotivating impact on workers and the issue of fairness could lead to legal actions.
The article offers some ideas suggesting that there is more to pay than the cost of living and that the "principle of equal pay for equal work" is a safe practice. Another interesting idea is to use raises, as opposed to pay cuts, to equalize and create a system for assessing and paying for the value of someone to the organization. There is also a suggestion to consider the ultimate take home pay, as taxes do come into play at the state and local level. The final suggestion, which may be key to any good work culture, is to be transparent about whatever ultimate methodology is chosen and practiced. "Workers will forgive a lot — but not the feeling that they are not being respected."
Should you get paid a Silicon Valley salary if you live in Colorado? VMware, a cloud-computing company based in Palo Alto, thinks not. Employees who choose to work remotely forever must accept a pay cut of up to 18% if they move cities. Other tech firms, including Facebook, Twitter, Stripe and Slack, are also planning to adjust pay based on location. Should other companies follow suit? It is a question plaguing firms of all sizes and in all industries, in expensive cities across the world. Fundamental to the answer is the perception of fairness. Legal considerations matter, too.