Millions switched to remote work during the pandemic and even though life is slowly inching back to normal, many workers are still working from home. Some companies like Facebook and Slack are offering permanent work-from-home options to employees — but this benefit comes with a pretty hefty catch — possible pay cuts.
Mark Zuckerberg, CEO of Facebook, announced in May that the company would adopt a permanent policy allowing all employees to work remotely. Many other tech companies have followed suit, offering remote work for the foreseeable future. This has also prompted companies to adopt a market rate style of pay — which varies depending upon where you’re located. As businesses across the country determine the future of their workforce, those offering remote work are expected to follow suit.
Why your location impacts your pay rate
During the pandemic, many Americans reevaluated where they were living, how they were spending their money, and other general values and priorities. For some, this meant leaving crowded cities to move to suburbs and more rural areas to be closer to family, pay less in living expenses, or gain more space.
For many, moves have spanned across the country while others might have been just a few miles. Regardless, many companies are realizing that workers’ priorities have shifted and adjusting company policies to fit these needs.
Since different locations have varied costs of living, companies are beginning to update their salary structures. According to SHRM (Society for Human Resource Management), most companies currently employ localized pay structures — determined by the city or metropolitan area where the office is located. Now that many employees won’t be reporting into a central office, companies plan to make comparable pay adjustments depending on the employees' new location.
How low of a pay rate should you expect?
Of course, the amount of the pay cut (if any) will be determined by each company, but pay cuts are more likely if you’re moving away from Silicon Valley or New York City — two major tech hubs in the United States.
However, pay cuts may not be as severe as expected. A recent study posted on LinkedIn analyzed recent pay rate data for major companies in Silicon Valley and found that pay decreases were not as low as expected. For instance, a remote worker leaving San Francisco and moving to Puget Sound, Washington could expect a 13% pay cut based on market pay rates. However, in reality, pay cuts were closer to 6% or less.
That said, every company has its own mechanisms for structuring salary bands. But if you live in a more rural community now and your company is discussing pay cuts for remote work, you may be able to negotiate less of a decrease.
Remote pay cuts could lead to more competition
What remains to be seen is the result of cutting the salaries of workers in top tech and business companies across the US. With job pools essentially opening across the country, allowing companies to hire from a much larger pool of candidates, job competition could increase, and pay rates might tick back up.
More companies across the country will now have access to top talent, which could lead to pay increases or less noticeable
remote salary decreases.
How to plan for a pay decrease
If you work remotely and suspect your company might decrease your salary, it’s important to do your research. First, find out what the salary ranges in your new location are, so you can be prepared ahead of time. Then, determine how you might be saving your company money by working remotely. Lastly, pull together a list of your accomplishments for your current company and have this ready before any salary discussion.
For instance, if you’re a marketing professional who left New York City with a salary of $90,000 and now lives in an area where marketing salaries average $70,000, you shouldn’t automatically expect to lose $20,000 a year. While your company might discuss paying you less — say $75,000 — be courteous and ready to negotiate. Perhaps you have been more productive and have the numbers to prove it while working remotely. Come armed with facts and data to improve your chances of increasing your new salary.
But ultimately, be realistic. If you would not be able to make more money in your current area and your new cost of living offsets a lower salary, then accepting a smaller figure might not be a deal-breaker. For example, if you were paying $1900 a month for rent in New York and now pay $800 a month, you’re saving $13,200 a year on rent alone. This doesn’t include savings on utilities and public transportation. Figure out how much you’re saving and how much you need to make realistically before going into any salary negotiation.
You can also ask for compensation in the form of benefits. Some companies are even offering work-from-home stipends to help employees purchase home office equipment like monitors, standing desks, ergonomic chairs, and other helpful supplies. Be sure to talk through what remote work means for your company to fully understand your new salary offer.
Are pay cuts for remote workers fair?
There’s no easy answer to this question and many workers and companies fall on either side of the debate. Perhaps you loved working at an office but your company shut down the one near you and now you’re hearing talks of remote pay cuts. This might seem less fair than a remote worker who chose to leave a high-paying area to move to a more rural, lower cost of living town.
Should I expect a pay cut if I work remotely?
Right now, there’s no universal answer. Remote work is becoming more common and every company is adopting its own policy as we head out of the pandemic. Ultimately, deciding how you want to work and if you’re willing to accept a pay decrease is up to you. Crunch the numbers, figure out how much salary you need, but always negotiate if your company approaches you about a decrease.