4 things you should know before accepting a location-based salary cut

By Sabine Cherenfant

April 01, 2022

4 things you should know before accepting a location-based salary cut

For many office workers, the pandemic has ushered in greater flexibility when it comes to where and how they work. While some companies have decided to let employees work remotely permanently, others have taken more of a case-by-case approach to deciding who gets to work outside the office. 

Several large tech companies, including Meta and Google, announced that employees moving to cities with a lower cost of living would be taking a pay cut. For instance, Google employees moving to cheaper cities or outside of the office hub could see a cut—as high as 25%—in their compensation.  

Location-based pay is not a new workplace policy, however. “Most companies have always had geographic pay ranges,” said Jason Walker, managing partner and founder of Thrive HR Consulting.

But prior to the pandemic, it also wasn’t as common to have employees work remotely. Two years into the pandemic, many white-collar employees are still working remotely full-time. Gallup reported that approximately 41% of white-collar employees were working exclusively from home in September, with 91% of workers hoping to work remotely to some degree in the future. And since the pandemic started, many workers have moved to places with a lower cost of living.

If you’re one of the many employees who has permanently relocated, you may be wondering what to do if your company announces plans to adjust your pay. Here’s what you need to know: 

Understand the value of your skills

Many experts warn against location-based pay cuts for employees, as it can demotivate current hires and lead to more turnover. But that hasn’t stopped this practice at some companies. “In the past, companies somewhat had the upper hand,” says Walker. “They were more in control of the employment market, and there were more available people to hire from the hiring pool.” But during the pandemic, that has changed. Workers are quitting in droves, and the hiring pool is dwindling.

This has helped put power back in the hands of workers. With demands for talents soaring, the value of certain skills, especially STEM skills, goes up. Therefore, if you want to go into a conversation with your boss about your pay, assess the value of your skills and how in-demand they are.

 

“Now … employees are saying I have a valuable skill set, and this skill should be worth $180,000, whether I work in Ohio or San Francisco,” said Walker. “[Employers] are going to have a hard time filling this job no matter what. I shouldn’t be punished for having the skills that are in demand because I am going somewhere else.” 

Research the tax difference

Before entering a conversation about salary negotiation, you should figure out how much of your salary will realistically be affected. There are currently eight states with no income tax. So if you are moving away from California (which has the highest income tax in the country), to a state like Texas, you may not end up taking much of a pay cut at all, in addition to benefiting from Texas’s lower cost of living. 

Always negotiate your salary

Employees are often reluctant to negotiate their salaries, with 59% accepting the salary that they were offered when hired. If you’re told that your pay will be adjusted because of your move, you should use this as a chance to have a conversation with your manager about your compensation.

The best strategy is to have this conversation when you request moving to another region. Set up a meeting with your manager, says Walker. List the reasons why you want to move, and talk about why you do not want your salary to be affected, by laying out what you bring to the company. 

The start of the conversation could look like this:

“I’ve really thought about this. I would like to move to Houston to be closer to my family. I believe I can continue to bring value to this company, and I would like your support in this move.”

Similar to promotion and raise negotiations, some guidelines remain the same:

  • Leave your emotions off the table: Come prepared, level-headed, with confidence and a professional attitude. You’ll get your point across better this way. 
  • Focus on yourself: Avoid comparing yourself to others. The conversation should be built around you. Even if you’re aware that another employee was able to keep their initial pay when they moved, don’t bring it up in the meeting.
  • Talk about your accomplishments: Make sure to highlight projects where you’ve gone above and beyond, but also focus on the future. What can the company expect from you?

Walker explains that it comes down to how good of an employee you are. If your employer wants you, they will work with you to not lose you. “Explain that … you shouldn’t be penalized for the value you bring to the job because you are moving,” says Walker.

Address concerns. Will you still be able to work the same hours? Will you still be able to lead certain projects?

Be prepared for the word ‘no’

‘No’ may be the last thing you want to hear, but, sometimes, it happens. If it does happen, you might be tempted to negotiate other benefits, like tuition reimbursement, or additional time off. But Walker suggests that if you hear “no” from your manager, it should provide a moment of further reflection. The question becomes: Are they interested in you in the long-term? 

“I know for a fact that if somebody is really good and came forward and said, ‘I am moving, you need me and I don’t want my pay adjusted,’ most companies would say, ‘You’re right. We’re not going to adjust your pay. What else can we do for you?” he says. “My belief is that if you’re told ‘no,’ chances are you’re probably not really in their future plans.” 

In those cases, you’re given a chance to reevaluate your standing within the organization. If this company does not value your skills and is not afraid to lose you, then you should contemplate looking for another job.

Fast Company , Read Full Story

(6)