The Tech Companies That Want to Cut Remote Workers’ Salaries
By: Nick Kolakowski
Tags: Remote Working, Technology, Salary, Silicon Valley, Job Hunting

The Tech Companies That Want to Cut Remote Workers’ Salaries

Setting up a future battle between employees and management.

In the wake of the COVID-19 pandemic, many companies may decide to make work-from-home a permanent option for employees. After all, remote work offers benefits to employees and employers alike. However, some of these firms may attempt to force those remote workers to take a pay cut of some sort, and it’s an open question how those workers will react.

VMware is the latest company to offer its employees the chance to work from home, even after the pandemic subsides and employees nationwide begin heading back into the office. However, if those employees choose to move to a place with a lower cost of living, they’ll face an adjustment in pay. According to Bloomberg, which quoted anonymous sources within VMware, an employee moving from Palo Alto, California (where VMware is headquartered) to Denver would need to take an 18 percent salary cut; moving to Los Angeles or San Diego would translate into an eight percent cut.

VMware senior vice president of human resources Rich Lang defended the practice by saying that employees who move to more expensive cities could get a raise to compensate for pricier rents and mortgages. When it comes to the U.S., though, Silicon Valley and San Francisco are generally viewed as the most expensive places to live (with New York City close behind), so any adjustments will likely be cuts. Will employees who previously made a certain salary in Silicon Valley see any kind of adjustment as fair?

ServiceNow, which makes cloud-based enterprise software, is also considering whether to adjust the salaries of employees who move from Silicon Valley. The company’s CEO, Bill McDermott, defended the potential to cut salaries. As quoted by Bloomberg:

“I don’t believe we should have an environment where management is not involved with those determinations, because what you could get into here is a situation where employees then become the decision-maker in working literally from anywhere, and you would have a hard time organizing and holding together a culture if that was the case.”

If we’re following McDermott’s logic correctly, not cutting salaries for remote workers in cheaper cities would somehow translate into a weakening of corporate culture.

Meanwhile, Facebook was one of the first tech giants to announce that its employees would no longer have to head into the office on a daily basis; it also stated that employees who moved away from Silicon Valley might need to take that cost-of-living cut. Contrast that with Twitter, which announced its own remote-work plans at roughly the same time — but hasn’t yet said whether employees will see their paychecks reduced if they move away from the West Coast.

And here’s where things get interesting: According to Dice’s ongoing COVID-19 Sentiment Survey, technologists everywhere are very highly opposed to taking any kind of pay cut in exchange for remote work, especially since the majority have already been doing so for months. In survey after survey, roughly 3 percent have said they’d be willing to take a 15 percent salary cut, while only 1 percent would take a 25 percent cut. Around 76 percent, meanwhile, have said they wouldn’t take any kind of cut in exchange for remote work.

Those numbers suggest that any company trying to take pay away from remote technologists will have a fight on its hands, especially if those technologists have in-demand skills that a company can’t afford to lose. Combine that with the cost of living on the rise in many cities, and things get really complicated.

“It doesn’t matter that ‘pay is always based on location,’” an anonymous technologist at Hulu recently told Blind, which surveys technologists about current issues. “That old way of thinking needs to die because it exploits labor. The employee’s labor provides the same value regardless of working location. The circumstances changed, so we need to force things to change as well. Don’t accept a pay cut for changing your location. Ask the company tough questions. Is my value to the company less if I live in North Carolina or Colorado? If they won’t budge, quit.”

But some technologists are willing to consider a company’s offer of lesser pay for more geographical freedom. “I’ll gladly do this,” a VMware employee also told Blind. “It’s only a reduction on base, and base makes up half of my TC [total compensation]. So a net 6.5% decrease in my TC to move to a place where houses are 20% of the price and taxes alone make up ~5–6% difference? Sign me up.”