Tech workers and employers alike are beginning to question location-focused pay scales. A handful of companies are moving to abandon them altogether.
In setting pay without regard for location, tech companies including Reddit Inc. and Zillow Group Inc. are making a potentially expensive gamble to retain talent and gain a hiring edge. The move can entail maintaining relatively high salaries of employees who are relocating, and adopting a revised scale for new hires. Though it is early, the move challenges a long-held, but not universal, notion that where people live should determine what they make.
Some big tech firms including Facebook Inc. were clear early on in the pandemic that people moving away from the Bay Area to less expensive cities would see a pay cut. Payment platform Stripe Inc. offered one-time bonuses for workers who moved out of San Francisco, Seattle or New York — and agreed to a pay cut of up to 10%.
But a pay cut for any reason can be bad for worker morale, said Jake Rosenfeld, a sociology professor at Washington University in St. Louis who researches pay determination. “Employers really have to do a bit of a dance to justify it to workers,” he said.
Workers considering more flexible work scenarios are themselves divided. A November survey of 600 tech workers by the job-search platform Indeed found that 60% of respondents would be willing to take a pay cut to work remotely permanently while 40% said they wouldn’t.
Zillow, the Seattle-based real-estate search firm, told its 5,600 employees in October that if they chose to relocate from their current city, their pay wouldn’t be adjusted. “We’re not making this change to save money,” said Dan Spaulding, chief people officer of Zillow. “We’re making this change to retain our employees.”
Ticker | Security | Last | Change | Change % |
---|---|---|---|---|
ZG | ZILLOW GROUP INC | 138.34 | -5.52 | -3.84% |
FB | FACEBOOK INC. | 277.00 | +9.60 | +3.59% |
Since the announcement, around 50 employees have decided to move to a different state. The company has decided to try this pay model through at least the end of 2021. With new hires, Zillow plans to work toward a nationalized pay scale over time.
“If people think the world is going to snap back to where it was 18 months after the pandemic starts, I don’t think that’s realistic,” said Mr. Spaulding. “Your best talent is going to have options coming out of this.”
The social-media platform Reddit, which employs about 700 people, made a similar move to get rid of geographically based salaries in the U.S. at the end of October after seeing productivity remain high while people were fully remote.
The company wanted to “eliminate the trade-off that employees would have to make if we lowered their compensation if they moved to a lower-cost area,” said Nellie Peshkov, Reddit’s chief people and culture officer.
Reddit previously…
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