Why IT Professionals Moving Away from Silicon Valley to work remotely face pay cuts

Tech workers leaving the San Francisco Bay Area to work remotely in the midst of the pandemic are being forced to witness a harsh reality: pay cuts.

In the course of recent months, Covid-19 has transformed customary ideas of where employees can work. In Silicon Valley, which has a generally expensive cost of living and a workforce that has access to high tech, ultra modernistic remote work tools, organizations are formulating plans for a future with decentralized staff. At times, changes can incorporate cutting pay rates by 15% or more varying upon where someone shifts. In an era, where remote work is being frequently endorsed through coding boot camps, and by tech start-ups such as Gaper, it is baffling that some Silicon Valley organizations choose to pay their workers based on geographical locations rather than their skills.

The nascent pay-cut movement will create problems and tension among some of the most successful companies in the world and talented employees who enjoy high salaries.

Organizations call attention to the changing of pay based on the local cost of living is a normal practice for many organizations, including the federal government—with choices to raise or lower pay rates related to lodging costs and different variables. Letting somebody take a San Francisco pay to Wyoming could be viewed as out of line to present and future remote recruits in less expensive urban communities who may get a lower wage.

Pay grades

In most U.S cities, tech worker’s pay was closer to their peers in San Francisco than for workers overall. However, most Silicon Valley companies have spent decades going above and beyond general corporate norms to make their workers feel loved and cared for. In an age where firms court their employees with free food, yoga studios, and massages, the harsh reality of geography-based pay risks alienating the same employees.

Companies adapting to the change

In May of 2020, Facebook Inc. announced that they would be shifting towards a substantially remote employee base over the span of 10 years, and that location would be a major factor affecting the compensation. Twitter Inc is among one of the first major companies that are going to allow workers to operate remotely permanently. However, they have also adopted a competitive approach to pay localization.

More organizations have resorted to adopting remote IT work. Microsoft said a while back that it would offer some of their employees to work remotely on a permanent basis. Some will be allowed to shift anywhere within the U.S-pending approval- but the benefits and pay will alter according to the company’s compensation scale of the location.

Stripe Inc, a payments company has started offering employees moving from San Francisco, New York, or Seattle a one-time bonus of $20,000 to relocate, but they would have to suffer a significant decrease in their pays. The cut can be as much as 10%. For employees at VMware Inc., a cloud software provider, moving from the Bay Area to Denver could mean a cut of as much as 18%.

The Corporate Perspective

If we take a look at this from a corporate perspective, salary reductions based on geography are a matter of simple logic. San Francisco is far more expensive than Idaho, Boise, or Topeka, Kan.—and anyone moving to a low-cost city would have trouble finding a local job that pays San Francisco wages.

But as remote work becomes a large-scale, long-term practice amid Covid-19, the ailments caused by the new coronavirus, some hiring headhunters, and hiring consultants are questioning the idea that salaries should be tailored to a cost-of-living calculator. They resist the notion employees should be paid less to do the same job—even if the work is done from a lower-cost location.

The Impact on Remote work

Many IT workers are adamant about renegotiations in their contacts if they are forced to take a salary reduction to relocate to a less-expensive city. They believe that one-time bonuses such as the one offered by Striped are not beneficial for the employees in the long run.

If the overall pay band for engineers decreases by a range of 10% to 20% over the next several years because of relocations tied to remote work, then the impact on careers of future engineers can be quite negative.

Conclusion

It is still hard to figure out the exact number of people who have left the Bay Area or what is going on with wages across the industry as they leave. Some companies, such as Facebook, have asked employees to notify the companies of plans to move by Jan. 1. According to the preliminary results of an October survey of 240 U.S. tech companies by tech consulting firm Sequoia, 33% are undecided about their policies for employees who relocate permanently. About 22% of those surveyed said they are readjusting salaries and 20% said they won’t.

The move to cut pay also can backfire on employers. Cutting pay for workers who want to move to cheaper areas can lead to unhappy workers who quit in high numbers