Google’s cuts to regional wages for employees who work from home may backfire

Google’s recent bet 2 billion dollars That her New York workforce would be back in the office. But to encourage its employees to actually benefit from its massive real estate investment, some say the tech giant is using sticks, not carrots: Google employees who are moving to less expensive areas of the country They could witness a salary cut. In June, the company launched a tool for employees that showed how much they would get paid less — anywhere from 5 to 25 percent, According to Reuters If they move from somewhere like the Bay Area or New York City to a lower-cost location.

Many companies employ estimator 13% of workers in the United States Those who are still working from home due to the epidemic are expecting this They open their offices back up in January. Google is one of several high-profile tech companies, including Facebook and Twitter, that have enacted controversial plans to cut salaries for remote workers who have moved away from expensive areas where they are headquartered. But there are indications that these policies may backfire.

While the potential ramifications of worker pay cuts may not be immediate, humans are highly susceptible to loss aversion — losses are more painful than pleasurable gains — and wage cuts may cause workers to leave or resent the company. Putting away your current workforce is always a bad idea, but it’s especially bad when Tech companies are already struggling to find the workers they need.

Although Google is a highly desirable employer, 53 percent of 230 verified Google workers said in a survey by Recode. Community Workplace Application for the Blind, that they would consider leaving the company if they moved and cut their salaries. That’s just below 68 percent of all blind professionals who said so, but it’s still high. Google employees (30 percent) are also more likely to have moved out of their metropolitan area since the pandemic began than professionals in general (22 percent), and some Googlers have already shown a willingness to leave the company due to what some have called Hypocritical teleworking policies.

Of course, there are other reasons why people work for tech companies like Google — prestige, innovation, paychecks, so big pay cuts don’t matter — but they may not be enough.

So why are tech companies coming up with this idea in the first place?

Google, like many companies, says it always depends on people’s salaries based on where they live. But one could argue that adjusting salaries for existing employees down was a rare case before the pandemic, and that with an increasingly dispersed workforce doing the same work, location-based pay is a thing of the past. Thanks to remote working technology like Zoom and Slack, employees have been successful in working remotely for over a year and a half. During that time, Google logged in record profits. In contrast, employees had better work-life balance, shorter commutes, and the ability to do so They live in places where their salaries can go much further. Telecommuting has gone from a feature they willingly pay for to an expected benefit.

And most other companies got the memo: About 95 percent said they wouldn’t cut remote workers’ wages entirely, no matter where they lived, according to Survey of 753 organizations By company payroll compensation data. This is because it is widely understood that wage cuts are harmful to workers’ morale, performance and retention. This makes technology companies like Google with notable outliers.

In addition to what these companies say, experts have a few theories as to why they have held up so far.

Above all is that companies know office work. Although they saw that their workforce could be equally productive working from anywhere in the short term, they were still unsure of the long-term effects of remote work on innovation.

“If all you care about is daily productivity, remote work is great,” Adam Galinsky, professor of leadership and ethics at Columbia Business School, told Recode. “But if you care about long-term commitment to an organization and interpersonal collaboration, remote work is a problem.”

Pay cuts — or even the threat of wage cuts — may help maintain the status quo by discouraging people from moving to places they can’t go to the office. But it also likely has some unintended negative consequences for commitment and collaboration, which is exactly what these companies are trying to keep by inviting people who come into the office.

“It’s ironic because the whole reason we want people back in the office is because they are more committed, engaged, effective and collaborative members of the organization,” Galinsky said. “But if we force them into the office because of pay cuts, they’re going to come in hostile, resentful, and potentially emaciated.”

There’s another reason why site-based payment policies persist: equal compensation. For example, not paying a worker who is moving from San Francisco to Boise, Idaho, may seem unfair to someone in Idaho who is already underpaid.

“What am I supposed to do, pay more for a boyz or pay less for you?” said Paul Rubinstein, chief personnel officer at Visier, which helps companies make human resource decisions based on data.

Then there is the economic rationale: location-based wage models not only guarantee a consistent rationale for paying tech workers in certain areas less than others but also to save the company money. Not paying lower wages to workers based in Idaho or India could end up being too costly for a global tech company.

“Once you start doing that, it’s like pulling a string on a jacket: Why do we pay people less than other markets? Why do we pay people less anywhere? Should there be one universal salary for everyone?” Rubinstein said.

In fact, the pandemic is making location-based wages obsolete, according to salary comparison firm Payscale, which has also found that most companies don’t plan to cut salaries for remote employees.

“What we expect to see more broadly is a shift from employer- and location-based pay strategies to pay strategies that can better accommodate a remote or distributed workforce,” Payscale CEO Scott Tory told Recode.

This means that rather than setting wages based on where a company’s headquarters are located and adjusting to decline if people live elsewhere, more companies are adopting a national average wage for each position.

It’s not happening faster than technology, according to Gabriel Luna Ustasky, co-founder of Braintrust, a user-owned talent platform that connects businesses with technologists, exclusively remotely.

“There is now a global market for their skills,” he said. “Institutions will pay top dollar no matter where these individuals are located.”

In addition, smaller tech companies can pounce with more generous policies remotely as way to punch above their weight.

That’s all we’re saying that employees, especially those at technology companies, have other options than cutting their salaries. Employee turnover is also very costly, costing the company about a third of an employee’s salary, according to CEO Kent Plunkett. Add that to the fact that he said 50 percent of workers – compared to the typical 25 percent – are considering quitting their jobs, and it seems like a very bad move for companies to reduce workers’ wages.

Given the situation, Google seems to feel it has the strength and motivation to keep as many people as possible near its offices. However, many of the experts we spoke to also aren’t convinced that companies like Google will persist with these changes in the long term, or might apply the policy selectively just to exclude people they don’t want.

“I don’t think that’s what they’re really going to do when it comes to keeping their top that wants to go,” Plunkett told Recode. “You won’t let your best talent out of the $15,000-a-year salary differential door.”

Although Google told Recode that it has always adjusted employee pay based on location, the current damage to employee morale may already have been done. “Just because you work in technology doesn’t mean you are magically enlightened in management techniques,” Rubinstein said.

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