You may have heard about the big catch in Mark Zuckerberg’s remote-work announcement last week: Facebook employees who move away from Silicon Valley might be in for a salary cut.
The company will adjust its pay according to an employee’s new hometown.
After all, $10 in Rock Springs, Wyoming will get you a few more drip coffees than $10 in West Hollywood.
Sound tricky? It is
There’s some precedent for Facebook’s approach. Take the minimum wage: In general, companies only have to pay the minimum wage where an employee works — so your accountant in Iowa City is paid the local minimum, not NYC’s.
But TechCrunch outlined a few potential problems with the “pay the local rate” model. A city’s cost of living can fluctuate quickly — as any Miami resident will tell you — and keeping up is not easy.
Let’s say you’re a company based in Chicago with a huge remote workforce. You could:
- Base salaries on your HQ’s location. Everyone gets paid Chicago rates no matter where they live.
- Localize the salaries. This is Facebook’s approach: Adjust employee pay according to the local cost of living.
- Use national averages. Pay everyone according to a country’s trends, regardless of where they live.
There are loopholes in all of these approaches. WordPress’s parent company, Automattic, doesn’t factor in location when it pays its global workforce — but with national currencies in constant flux, it’s tough to get the equivalencies right.
Just a little off the top, please
Tech workers might be able to stomach a small loss if it means fulfilling their dreams of strapping on a cowboy hat and becoming a ranch hand. According to one poll, 35% of Bay Area tech workers said they’d move out even with a salary reduction.
But there are limits: Of the workers OK with a pay cut, only 6 percent said they’d accept a reduction above 30 percent.
