Google's Salary Cuts for Remote Workers Renew Location-Based Pay Debate

Earlier this month, tech firm Google told its employees their pay will be lowered if they switch to working from home permanently and the remote location has lower labor costs than where their former offices are located.

Google will not change employees' pay if they work fully remotely from the same city. But if they previously commuted from a location an hour away with lower costs and now plan to work from home permanently, for instance, their pay would be reduced.

"Our compensation packages have always been determined by location, and we always pay at the top of the local market based on where an employee works from," a Google spokesperson said.

The announcement has reinvigorated debate over the fairness of geographic-based pay for remote workers and the effects such pay policies have on employee hiring, retention and engagement. For more information, SHRM Online has gathered the following articles on the issue. 

Calculator Shows How Pay Changes

Among social media firms, Facebook and Twitter also cut pay for remote employees who move to less expensive areas, while smaller companies including Reddit and Zillow have shifted to location-agnostic pay models, citing advantages when it comes to hiring, retention and diversity.

In practice, some remote employees could experience pay cuts without changing their address, if they live in and formerly commuted from areas with lower labor costs. Screenshots of Google's internal salary calculator, which allow employees to see the effects of a move, show that an employee living in Stamford, Conn., an hour from New York City by train, would be paid 15 percent less if she worked from home, while a colleague from the same office living in New York City would see no cut if working from home.

One employee considering remote work decided to keep going to the office despite a two-hour commute, explaining: "It's as high of a pay cut as I got for my most recent promotion. I didn't do all that hard work to get promoted to then take a pay cut."

(Reuters)

Fair Policy or Punitive?

"Some may question if it's fair not to cut employees' pay if they move to a less expensive city, particularly if workers originally based in the less pricey location have been making less money," wrote Kara Alaimo, an associate professor of communications at New York City's Hofstra University, in an opinion column. "It's a reasonable question," she added, "and I understand why geography plays a role in salary. … But the problem is that staffers who once opted for long commutes and lived outside the cities where their offices were located could be subject to pay cuts if they go 100 percent remote—even if they haven't moved. That's not fair."

She added, "as Google and other tech companies cut salaries in a competitive job market, they may soon find that their staffers' search terms include new jobs."

(CNN)

Gender Gap Risks

Women—who most often provide care for small children or ailing relatives—are likelier than men to choose full-time remote work. And there's evidence that working from home full-time puts you at a disadvantage when it comes to promotions and raises.

With more women than men working remotely full-time, female salaries will likely fall even further behind those of their male colleagues than they already are. Google will tack on a pay cut that disproportionately affects its female employees.

(Inc.)

Demoralizing Remote Workers

In the U.K., it's a fundamental part of employment law that employers cannot alter aspects of contracts such as rates of pay without the consent of employees, or without terminating those contracts and renegotiating them, said Emma Bartlett, a partner at employment law firm CM Murray.

From an employee perspective, it would be demoralizing to be paid less for doing the same job, she said.

(BBC)

Reducing the Talent Pool

"We know there's been some level of worker migration from high cost-of-living areas to lower-cost markets, yet it appears that the number of companies that are considering changes to an individual's salary as a result is fairly small," said Bill Dixon, managing director at compensation data and advisory firm Pearl Meyer.

The firm's 2021 survey of 349 U.S. companies showed that one-third of respondents currently apply "geographic differentials" to their salary structure.

When asked about reducing workers' cash compensation if they move to a lower-cost geographic area and work from home, just 4.3 percent said they would do so, while 56.5 percent said they would not;  the balance were uncertain or would decide on a case-by-case basis.

"At this juncture … it appears there is some hesitancy to disrupt the talent pool," Dixon said.

The desire to keep pay policies simple is another factor. "Multinational companies are already well-versed in the practice of differential pay policies at a global scale," wrote Brett Christie, managing editor of WorldatWork's Workspan Daily. However, for companies with offices exclusively in the U.S., "the prospect of overhauling pay structures to account for geographic differences might seem daunting."

(SHRM Online)

[Want to learn more? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]