Should some workers earn less than others based on what city they live in?

  • Your pay can be based upon a variety of factors, not just position and performance.
  • Salaries may be offered based on an employee’s location.
  • Many companies are still deciding work-from-home policies.

Today your pay isn’t based only on your title or how well you perform your job. It could be based on your location too. As more companies let employees work remotely, it comes at the cost of lower pay if you move to an area with a lower cost of living.

It doesn’t seem right that a person should be penalized for moving to a different area, but it’s a trend that big companies like Google, Stripe, and Facebook have adopted.

If current employees choose to work from home, they must disclose their location, and their pay may be adjusted according to where they’ve moved.

Is it fair?

Most people have differing opinions. If you look at it from the company’s point of view, they reduce salaries for those moving to remote areas with a lower cost of living for a couple of reasons. First, employees that don’t have to commute have fewer expenses, and if they’re living in a lower-cost area, they’ll save even more money. Also, the savings can help a company reach other goals, including expanding and taking on more employees.

Companies paying those who stick close to metropolitan areas near the office provide greater convenience for the company. They are available more, and management can collaborate with them more easily and more often because they’re physically near the office.

Looking at it from the employee’s point of view, though: Why should someone doing the same job they were doing before, or the same job as someone else in the office, makes less money? Their location shouldn’t make a difference, and it can lead to feelings of inequality, which causes a lack of uniformity throughout the company.

However, employees working in the office may find it unfair to make the same amount as employees who’ve moved to another state or less expensive area. Employees working in the office have a higher cost of living plus the cost of commuting.

There is no standard yet

Many companies today are in a transitional period. They struggle with deciding if they should let employees work from home or if everyone should be required to come back into the office. And the pandemic is far from over. Some workers aren’t comfortable or physically can’t come back into the office because of the risk.

There isn’t a one-size-fits-all answer; many factors go into relocation and salary decisions. If it’s the difference between your company closing or staying open by cutting salaries back, it’s a no-brainer. But if everything else is equal, it may not make sense to upset the balance just yet.

Right now, it seems like most companies are watching the battle-zone, taking notes of what other companies do, and gauging employee reaction.

As we move further into the pandemic and our ‘new normal,’ it may become more normalized to see location-based pay, but for now, it’s a new idea and it’s still controversial.