These tech companies are paying workers the same rates in the US

Some big tech companies like Facebook Inc.

It was clear at the beginning of the pandemic that people who would move away from the bay area to less expensive cities would see a pay cut. The Stripe Inc. payment platform offered one-off bonuses for workers who moved from San Francisco, Seattle or New York and agreed to a pay cut of up to 10%.

But a pay cut for whatever reason can be bad for workers ’morale, said Jake Rosenfeld, a sociology professor at the University of Washington in St. Louis. Louis investigating wage determination. “Employers really have to do a little dancing to justify it to workers,” he said.

Workers who consider more flexible work scenarios are divided. A November survey of 600 technology workers on the job search platform, in fact, found that 60% of respondents would be willing to reduce their pay to work remotely permanently, while 40% said no.

Zillow, the Seattle-based real estate research firm, told its 5,600 employees in October that if they chose to move from their current city, their salary would not adjust. “We’re not making that change to save money,” said Dan Spaulding, CEO of Zillow. “We are making this change to build the loyalty of our employees.”

Since the announcement, about 50 employees have decided to move to a different state. The company has decided to test this salary model at least until the end of 2021. With new hires, Zillow plans to work with a nationalized salary scale over time.

“If people think the world will go back to where it was 18 months after the pandemic started, I don’t think it’s realistic,” Spaulding said. “Your best talent will have options that will come out of it.”

The social media platform Reddit, which employs about 700 people, made a similar move to get rid of geographically based wages in the U.S. in late October after seeing productivity remain high while people were fully away.

The company wanted to “eliminate the compensation that employees would have to make if we lowered their compensation if they moved to a lower-cost area,” said Nellie Peshkov, head of culture and head of Reddit.

Reddit previously had three pay zones in the United States, with the vast majority of its employees — those based in New York and San Francisco — making the most of them. Some Reddit employees in other cities are receiving pay rises as part of the change, Ms Peshkov said.

In addition to retaining current talent, Ms Peshkov said the company anticipates the measure will help develop a more diverse workforce.

Employers tend to combine the cost of living with the labor market rate in a given area, said Peter Cappelli, a professor of management at Wharton School at the University of Pennsylvania. “The reason they make a lot of money is because that’s where the competition is,” he said. “If you don’t pay them that much on Facebook, someone on the street on LinkedIn will hire them.”

While maintaining the same wages can help retain employees, Cappelli said, that people who moved sitting next to colleagues can’t be made to do the exact same job while earning less. Alternatively, people who stay in a high-cost area may be bothered by people who have moved while maintaining their pay.

“Employees might say,‘ Hey, you pay me similarly to someone who lives in a cheaper place, ’” he said. “His salary goes beyond what he does for me.”

Ms Peshkov told Reddit she has not yet heard complaints from San Francisco workers who consider the move unfair because of the high cost of living in the bay area.

“There was really no negative reaction,” he said. “They appreciate this general philosophy of paying people the impact and not where they live.”

Employee sentiment aside, paying workers regardless of where they live, can add a significant cost, according to Tauseef Rahman, Mercer’s workforce strategy and analysis partner.

“Because you pay national taxes, you may pay more than the local labor market would have demanded,” he said. Companies will need to determine if there is a financial advantage when it comes to being nationally competitive in terms of wages, he added. He thinks that one result is that companies locate payment only for some functions and not for others.

“The extent to which geography affects wages is not the same in all types of jobs,” he said. “If you think about types of high-demand roles where there are only a lot of people who can do something, you’re going to pay that current fee.”

So far, those who are eliminated from the geographical wage scales seem to be in the minority. Some do the opposite: in June, Slack Technologies Inc.

It went from two national pay levels to five, as the company expects more of its employees to be based outside of San Francisco and New York, a company spokesman said.

“We created these bands in order to provide transparency and fairness to our employees,” said Nadia Rawlinson, CEO of Slack. The company decided that adjusting the salary based on the local cost of living of the workers would help it to avoid inequalities.

Sahil Lavingia, founder of the e-commerce startup Gumroad, made up of 24 people, listened to hundreds of job seekers after tweeting who would no longer consider geography when determining wages.

However, even within his relatively small team – which has been completely remote since 2016 – the play was not without complications. He said he removed the higher salary level for future hires, that he had a father in an employee and imposed limits on the weekly hours worked to compensate for the salary increases of some employees.

Lavingia said many of the tech workers he has had news of are outside the United States: in India, Nigeria, Singapore and Eastern Europe. He predicts that as more people compete for completely remote jobs, the technological job rate will end up declining.

“In the long run, this leads to better rates for almost everyone in the world, but for a select few,” he said.

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