The Ramifications of Remote Pay Cuts
It was newsworthy, but not earth-shattering, when Facebook CEO Mark Zuckerberg announced on May 8 that the company’s 48,000 employees would continue working from home until at least the end of 2020.
Plenty of other companies have taken similar steps. Zillow Group, Microsoft and Amazon are just a few of the organizations that have told their people they can keep working remotely for a few more months. Or until the end of the year. Or indefinitely. (Most) Twitter employees will be able to work remotely in perpetuity.
It was one additional detail in Zuckerberg’s announcement that (no doubt unintendedly) drew more attention.
Facebook employees will be able to request a change in their jobs to allow them to work remotely on a permanent basis. The downside? Compensation for these employees will be determined by where they live, according to the New York Times and other sources. For some workers, this is bound to mean taking a pay cut.
Affecting the Employee Experience
The compensation approach that Facebook is taking isn’t new or especially sensational. Mark Englizian, senior strategy advisor for the Institute for Corporate Productivity (i4cp) and chair of i4cp’s Total Rewards Board, points out as much.
“Many companies already evaluate competitiveness by cost of labor, not by cost of living. The key is how you determine the ‘market.’ Is it local, regional, or national? For most professional roles, an employer will use national data and a discount or premium based on the job location.” (Minimum wage works in a very similar way. A minimum-wage employee working in Lincoln, Neb., for example, is paid the local minimum, not the local minimum in San Francisco.)
A recent internal Facebook survey found 40% of their employees saying they would be open to working remotely full-time, according to USA Today. Among this group, 75% said they might relocate somewhere else if given the opportunity to permanently work from home.
Some if not many of those considering relocation are surely weighing economic factors, i.e., the famously steep cost of living in the Silicon Valley area where Facebook is headquartered. Being able to earn the same compensation they’ve been earning in the Valley in another, less costly place would be a big deal to many employees.
And make no mistake, compensation is still very much a big deal to employees.
Consider the recent i4cp Next Practices in Employee Experience Survey, which asked HR professionals to rank 12 elements of the employee experience both before and since the COVID-19 crisis.
The largest number of respondents (36%) rated compensation as the #1 most crucial component of the employee experience pre-COVID-19. That number dipped to 24% when respondents were asked to rank the same dozen elements of employee experience since the pandemic began.
But compensation ranked #2 on the list post-COVID, second only to ensuring that employees have the technology needed to do their jobs anywhere, which shot up to #1 now after being ranked #8 in importance pre-COVID.
When you consider these findings, and the premium that employees still place on their compensation, it certainly will be interesting to see what effect potential pay cuts for relocating workers have on the overall employee experience. And whether or not they are worth it from a talent attraction and retention perspective.