pay remote workers

Is It Fair that Corporations Pay Remote Workers Less?

I recently read a story that gave me pause. And then I looked around and unearthed more. Remote employees may have their salaries cut simply because of where they work. Hmmm.

After all we have learned about remote working from the pandemic, I hope that organizations are inspired by the findings. Many leaders who have trust issues and fear around a remote workforce were forced to try something new. And, overall, remote working took off!

However, a new trend may be arising with corporate giants like Google, Twitter, Facebook, and LinkedIn that seems ridiculous. They are finding ways to pay remote workers LESS than those who come into the office.

Thought leader Jill Christensen states: “Every organization must decide how they will manage post-pandemic salaries. Will you pay the same regardless of where employees live or cut pay based on the employee’s geographic location? Only you know what’s right for your firm, but I advise that you think long and hard about the true cost of slashing pay. You may end up losing much more than what you save in payroll dollars. Employees may disengage, costing you productivity, retention, quality defects, creativity, sick days, and customer satisfaction. Is it really worth it?”

According to The Remote Work Pay Cut Class War, “Reuters reported that one employee, working from a county outside of Seattle, would see a 10% pay cut if they chose to work remotely, and someone would get a cut as high as 25% if they lived in Lake Tahoe. Specifically, those who choose to work remotely but live near the office wouldn’t see a pay cut, despite not going into the office.”

Is it fair?

With the excuse of “cost of living,” this decision will be justifiable to many. However, is this truly fair to pay remote workers less? The article explains: “This may make sense for a local business selling to locals, but it doesn’t make sense if someone is doing work on the computer – and it doesn’t make sense when you’re deciding to pay someone less money to do exactly the same work.”

Is this move all part of a bigger picture about deeming some employees worth more than others arbitrarily? We all know that it’s more expensive in San Francisco than in Houston. But when it’s the SAME job, does it matter?

“If you pay people working remotely the same amount of money as they’d make in the Bay, you likely can’t justify the lower salaries you likely pay in Detroit, or Chapel Hill, or Pittsburgh,” added Zitron.

In the world of work, we have taken giant strides toward fairness, flexibility, and freedom. This seems like a giant step backward. Do you deserve more pay just for parking in the lot at the expensive headquarters? (It’s argued in the comments of Zitron’s article that companies like Google have sunk so much money into their campuses that they are seeking justification for filling them up again.)

The new class

It’s also being defined as creating a new class system–defining team members as “in the office” or “remote.”

“They are deliberately creating a class system within their companies, both in the division of who is and who is not in the office and who makes the most money and one has to wonder if elder Googler Urs Hölzle will take a 25%+ pay cut now that he lives in New Zealand,” adds author Ed Zitron.

The back-and-forth rationale of this topic can be quite thought-provoking. However, it still just doesn’t seem fair to me. And what about the sustainable nature of non-commuting? Saving gas, energy, and precious time are often hailed as “wins.”

Suddenly those are forgotten benefits because someone decided they want bodies in seats again. Hmmm.

We are not past pay inequality.

Pay inequality has long been a hot topic. Very recent research indicates that it still needs to be top of mind. I obviously can’t address pay inequality all in one go, but it’s important to look at the big picture.

According to the Pew Research Center, “In 2020, women earned 84% of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full- and part-time workers. Based on this estimate, it would take an extra 42 days of work for women to earn what men did in 2020.”

An article posted by SHRM states, “PayScale analyzed differences in earnings between white men and men of color using data from a sample of 1.8 million employees surveyed between January 2017 and February 2019.”

“On average, black men earned 87 cents for every dollar a white man earned. Hispanic workers had the next largest gap, earning 91 cents for every dollar earned by white men. On the other side of the earnings spectrum, Asian men typically earned $1.15 for every dollar earned by a white male worker.”

“Cost of living”

I found a very informational piece by NoHQ on how to pay remote workers, which explained some critical economic factors that play a role in remote workers being paid less. One was Compensating Differentials.

“’Compensating differentials’ is a term in labor economics that refers to the relation of wage rates and the tolerance of undesirable conditions of a job. For example, some countries or cities are naturally more desirable (or undesirable) than others–due to weather conditions, real estate prices, local culture and diversity, and infrastructure.

“The likeability of an area will impact a worker’s pay tolerance to live there. When it comes to remote working, compensating differentials may have less influence on wage rates, as remote workers can move wherever they like. Exceptions apply when remote workers can only move within a certain geographical zone in order to work remotely.”

They also pointed out that while it may be cost-effective to adjust salaries, it could appear discriminatory and unjust. This can result in poor employee morale and weaker loyalty–something to watch out for!

Key takeaways

It’s a significant challenge to measure the “cost of living.” Yes, there are governmental and research resources, but it’s very personal and ever-changing. Have you seen the real estate spikes in places like the Denver metro and Miami? I wonder if everyone there is getting a pay raise. Hmmm.

I genuinely hope enormous, powerful companies set the right precedent. They should pay remote workers equally because other companies will use them as an example. It is inevitable.