Remote work, a new way to cut salaries?

[Yavin4]

Before everyone praises the new wave of working remotely, understand that corporations have another tool to lower salaries, esp. high paying tech salaries.

I can see corporations estimating wheter a particular on-premise service can be done entirely remotely. Once determined, that particular service can be officially re-located to a low cost of living state. For example, say an L.A. company can re-locate network help desk functions to Mississippi. They can give their employees the option to work remotely from any where, but they will be paid as if they live in Mississippi regardless of where they actually live. You can live in L.A., but you'll be working at a Mississippi rate.

This is already starting to happen:

Over the past six months, many employees living in major cities like San Francisco have uprooted their lives in favor of less densely populated areas with a lower cost of living and more space.

In response, major tech firms have begun scrutinizing the pay of employees who have permanently left the Bay Area. According to a recent report from Bloomberg's Nico Grant, Sophie Alexander, and Kurt Wagner, software company VMware has decided to reduce the salaries of those who have moved to less expensive cities. While employees can permanently work from anywhere, their salaries may now be lower if they leave the Bay Area — an employee who moves to Denver, for example, will see an 18% reduction in their salary, according to Bloomberg.

https://www.businessinsider.com/tech-companies-cutting-salaries-outside-bay-area-twitter-facebook-vmware-2020-9

[CrispyQ]

1. And now the company needs less office space, too,

so what a nice chunk of change to add to the spreadsheet. And who knows how many make work from home employees use their own equipment. Soon they will reclassify them as contractors & take away their benefits.

[underpants]

3. I've brought WiFi to several people and I seem to get a conditioned response

They say that them providing the WiFi on their dine is a trade off to work at home. I say that your employeer is getting it both ways - no building expenses and no WiFi (I realize that it’s cheap).

[Yavin4]

8. There are other on-premise expenses that the employees will have to carry

Basic office supplies, coffee, water, desks, chairs, etc. All of these will be on the employee/contractor to carry.

[SWBTATTReg]

20. These employees can deduct these expenses on their taxes if substantial enough, that is,

if the deductions are enough to offset the standard deduction each person gets (tracking of all of these expenses etc. can be tedious).

[underpants]

24. Standard deduction is now so high it's really hard to reach

deducting expenses.

[SWBTATTReg]

26. That's why I said if worth doing it, then itemize. It's literally a pain in the a** to do this,

I did this at one time, for years and years, tracking/monitoring/gathering all of the related expenses etc. (basically your household bills divided by the sq. footage of the 'business space', e.g., if your home office takes 10% of the livable space, then 10% of expenses, utilities, etc. all can be deducted).

And you had to fine tune this percentage too fairly regularly. In short, a pain. But, if you are working from home, you are entitled to it (the deductions). Take them.

Thing is, 10% is rather small. Business size in a home can be substantial, storage of business inventory, office space, shared telephone lines (or separate), separate internet (or shared), space in the bathroom, kitchen, stairs even, to get to the office workspace, etc.

[SoCalNative]

11. In California

employers are required to reimburse you for using your own equipment (internet, phone and personal computer).

[Yavin4]

17. What if the dept that you're assigned to isn't located in CA.

What if you're assigned to a dept that's located in Mississippi.

[SoCalNative]

25. I wasn't speaking for the other 49

only California. If you work out of an office in CA you get the reimbursement. Our counterparts in the NY office don't get the same consideration.

[underpants]

2. Eh. Okay so you still have recruitment and retention

Do you want people who want to live in poor states?

[Yavin4]

10. "poor" is a relative term

There will be people who will be okay to live in a "poor" state so long as their reduced salaries still makes them "wealthy" in that "poor" state.

Right now, there are people who live/work in Thailand and Bali because their U.S. salaries make them wealthy in those countries.

[Yavin4]

12. Also, you don't have to re-locate to Mississippi

You can live any where you want, but you will be paid based on Mississippi salaries.

Of course, I'm using Mississippi as the edge case here not to be taken literally. There are other more likely states like Colorado or Utah.

[woodsprite]

4. I work at a university in IT and have been working solely from home since 3/13/20

They are just starting to talk about what our environment will look like when we me move back to campus. They are thinking we will work part from home, part from the office in a "hotelling" format where we reserve desk/internet/power connections as needed. No dept allowance for a dedicated home office setup and there are no tax deductions for a home office since we are not 'self-employed'. Both my husband and I work there, so in our house, we have lost the normal/regular use of both our dining room and my craft/hobby room AND we have provided most of our own equipment (laptops, monitors, printer, phones), and are using our own ethernet/wireless connections. If we need to use our desktop machines at work, we use VPN and Remote Desktop so at least we do not need duplicate software licenses.

Seems like a stealthy way to cut additional budget.

[Phoenix61]

7. That's not true about the office tax deduction.

Convenience of Employer Test
Employees may only take the home office deduction if they maintain the home office for the convenience of their employer. An employee’s home office is deemed to be for an employer’s convenience only if it is:
a condition of employment
necessary for the employer’s business to properly function, or
needed to allow the employee to properly perform his or her duties

The catch is the space can only be used as an office.

[Hoyt]

5. I've been pretty much working from home -- with some traveling -- for over 30 years.

Most of that time, I worked in my home on a computer. I'm fine with making less but not to have to fight traffic and BS in the office. Most of that time, I was a full-time employee. More recently, I work for a bunch of different people on "gigs."

Companies that want the best employees won't pay at Mississippi wages. They might pay less, but remote workers get a better quality of life too (unless they like the hustle of intown living, etc., like I did when younger).

This ain't a bad thing for most people.

[Yavin4]

15. I used Mississippi as the edge case.

The optimal state will be a combination of low cost of living along that's attractive to top employees. Think Utah, Nevada, S.C., parts GA, FLA, N.C. etc.

[Cosmocat]

21. Yep

been working out of home for the last 15 years.
Feel very lucky.

[Johnny2X2X]

6. I've been WFH for a full year

It's been great, my expenses have fallen significantly. Eating in my kitchen is cheaper than the work cafeteria. No gas and wear and tear expense for my car. Got a break on car insurance. No clothing expense. Commute to work is 30 seconds.

Sure, if someone working in San Fran works remote and moves to Nevada, you wouldn't expect their company to keep paying San Fran wages, that would be silly. But I think it could work in the reverser too, if I move to a more expensive area, I could get a raise.

We're going to go to a hybrid of WFH at office based on what works best for each individual. I'm thinking a 4/1 system will be best for me. Our business was skeptical, but has flat out seen productivity increase while expenses decreased, considering we're in Aviation, and industry that has been hit really hard, it's undoubtedly saved jobs.

[Generic Brad]

9. I've always been against pay scales based on location

Work should have the same value regardless of where it is done.

[Shermann]

13. Companies pay the lesser of two amounts:

1) What they think you are worth to them
2) How much they think it would take to keep you there

The WFH phenomenon is lowering #2, and possibly #1 to a degree due to the increased fungibility of the workforce. This is really the essence of how compensation works.

Note the following might be out of whack:

A) What you are ACTUALLY worth to them
B) How much other employees with a similar job function earn
C) How long you've been there
D) How much you actually need to live

See how this works? It's all about 1 and 2. A through D are mostly ancillary. This is capitalism.

[DenaliDemocrat]

14. The federal government has had locality adjusted pay scales

For forever. You have a base rate, then locality.

[Deminpenn]

16. Yes, they do

nt

[Hoyt]

19. Medicare pays physicians with a locality adjustment too.

[brooklynite]

18. We're not talking about Amazon customer service clerks...

If Silicon Valley tech firms attempt to proactively lower salaries, then:

1) they won't find people in Mississippi with the skill set they need

2) the people who's salaries are cut will move to another company that will pay them what they're worth.

[Cosmocat]

22. I can see good and bad on this - on average working from home is a win

Been doing it for 15 years now, at the early stages of working remotely.

This is not a horrible development.

[Yavin4]

27. It may have been good in the past, but that might not be the case going forward.

I have no doubt that a lot of corporations will use remote work to reduce salaries.

We're all paid based on what it will cost to replace us. Replacement costs depend on the geographical location of the workforce. For instance, if I'm a NYC based company and I want to replace someone who lives in the NYC area, the cost of that replacement depends heavily on the cost of living in NYC.

With remote work, my replacement costs are lower since it may no longer be dependent on geographical location of the workforce. That NYC employer can replace a NYC employee with someone who lives in Cinn., OH and pay that employee at cost of living rate for Cinn., OH which will be much lower than NYC.

[fescuerescue]

29. In that case it's a win for Cincinnati and a Loss for NYC

overtime, this would mean that salaries in the US would start to even out.

And in turn rents would begin to even out.

That's not a bad thing.

What is BAD however...is that one can work from home. Then someone else can work from India. Or China.

[Yavin4]

32. And be a Reds fan?

Come on.

[fescuerescue]

28. For me it's the reverse

I've been working remotely for about 2 decades.

Occasionally I'll take on short term work that is office based. Well I did before COVID.

I would always demand a larger fee if I had to be in person. The cost of commuting and being away is substantial.

Frankly, most people would be MUCH better off making 10% less and working from home, than spending all that money on cars, fuel etc etc and making 10% more.

And good lord. The Bay area? Many people could take a 50% cut and move away from there and STILL be ahead.

[MineralMan]

30. It's happening in NYC, too.

One of my wife's regular editors has moved to New Hampshire, as have pretty much all staff members at that mostly online publication. He didn't take a pay cut at all. In fact, the decreased cost of maintaining Manhattan office space led to a raise for him.

Apartment vacancy rates in NYC are going up. Prices haven't gone down much, though...yet...

A lot of companies are looking to go to more compact facilities. Commercial rental properties are in trouble.

This may be the next wave out there.

[Yavin4]

31. Implosion of commercial rental properties is just the tip of the iceberg

Think of all of the ancillary businesses that support on-premise work:

1. Clothing retailers
2. Dry cleaners
3. Bars and Restaurants (full service dining to coffee shops to food trucks)
4. Transportation industry (less need for cars, taxicabs, and public transportation)
5. General retail stores like card shops and pharmacies

If most of the work force works from home, it could forever alter the economic landscape.

[MineralMan]

33. Yes. There will be changes.

Serious issues, as well as new opportunities.

Should be interesting, but the changes will be hard to predict.

[Hekate]

34. Ya think?

[Tree Lady]

35. My daughter in San Antonio works for

A world wide accounting firm. Since her two boys 13 & 15 were also at home until this past month she put a desk in a wide hall in front of closet with her washer & dryer 😛

She has 3-4 monitors for all her various clients, she is in the section working for banks long hours now with taxes.

After they bought the boys who were home more a fancy computer gaming area after school her wifi wasn't strong enough so company gave her an expensive hot spot just for her. She said few employees got them.

She only went into the office once when she needed something, all meetings etc are online. She had idea to do a birthday meeting for fun once a month 15 min to help moral, they said great idea do it! So now she sets up silly games like getting everyone's baby pic or pet and everyone has to guess who it belongs to.

At recent meeting they said going back to office in August, she wanted to stay home and they told her she could 3 days a week.

She thinks its funny to wear yoga pants all week with a nice blouse only for meetings.

They used stimulus money to remodel daylight basement which now looks great with windows to backyard where she moved desk, mini kitchen area with frig and microwave. Like a small apt down there with door so its quiet now.

She barely qualified for stimulus but only because she started job last summer. She was studying fulltime for CPA exams for long time before that.