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Enjoy WFH? Here’s Your Pay Cut


Image: Nuthawut -
The WorkSpace Connect team frequently talks about the emerging trend of people moving out of big cities and how that might impact the future of work. We wonder: How many people will abandon urban living, and for how long? Whether this is a short- or long-term trend is unclear at this point, but some companies are beginning to respond to the move of employees away from their headquarter locations — with pay cuts.
Facebook, Twitter, and VMware, to name a few, are among companies that reportedly implemented pay-cut policies for employees who opt to relocate away from the urban offices they had worked in previously. Largely, these companies are headquartered in Silicon Valley, which remains one of the most expensive places to live. You might find the policy absurd, but their argument boils down to: Why do I need to pay you Silicon Valley wages, if you live in Dallas now?
I don’t think it’s that simple though. In so many ways, this reminds me of The Honeymooners episode where Ralph Kramden’s boss visits him at home. In preparation for the visit, Kramden spruces up the house and buys pricey liquor and caviar — only for the boss to tell him at the end of the visit that it looked like he was living well, maybe too well, and might need a pay cut.
In responding to the pandemic, companies have asked their employees to do all kinds of things this year to ensure safe operations. Employees who are moving away from the city aren’t making this decision in a vacuum; they understand the situation and are doing what’s best for their health and their families, in addition to the economics. Do companies implementing such relocation policies risk looking like Kramden’s boss tapping at the door, looking for any excuse to justify a pay cut? I’d say yes — and this must surely be a hit to the employee experience and overall morale.
Considering the potential hit on employee experience and morale, I don’t see the value, especially when taking WFH savings into account. According to a Global Workplace Analytics report, an organization should expect to receive about an $11,000 savings per person/per year for employees who WFH at least 50% of the time. For even a small organization, WFH can save them millions in expenses in just one year — maybe not as much as an 18% pay cut, as VMware proposes, but it should close the gap.
This isn’t to say that some businesses will need to make cuts ensure their long-term success. But tying it to WFH seems a bit — well — low, and maybe, trading one problem for another (meager cost savings for tanking employee engagement/morale). I’m not the only one thinking this, either. In its coverage, The Wall Street Journal discussed how the WFH pay-cut policies are stoking tension in the tech industry. Throw general burnout on top of relocation pay cuts, and employees might start looking for the neon flicker of the exit sign.
Despite my disagreement with these policies, I do think it points to a broader truth: Work has forever changed. Nicholas Christakis, a physician and sociologist at Yale University, shared on PBS Newshour last week that even with a vaccine we won’t jump back to pre-COVID-19 lifestyles until maybe 2024. And if it does take that long, organizations will have to recalibrate not only how they use office space (if at all) but how they compensate, and frankly, value talent. But to hit employees in their pocketbooks, after they’ve already been beaten up by 2020, doesn’t seem to be the answer to me.