The tussle over location-based pay

For some employees, choosing to remain fully remote is about feeling comfortable and productive in set-ups they’ve cultivated for two years. But for others, it’s a necessity – because they’ve moved too far away from the office to commute.  

In many instances, remote workers have left major cities for regions with a lower cost of living, such as rural areas, where they’ve been able to afford a home that would have been previously out of reach. Returning to the office would ultimately mean choosing between where they want to live and where they want to work.

Location has always been factored into wages.

Companies have the right to make a cost-of-living adjustment. It’s a practice that has been going on for decades and is a labour market issue: salaries today have a cost-of-living algorithm.

That’s the case for companies of all types, even early stage, fully remote start-ups: it still makes business sense to consider the cost of living when calculating salary for new hires.

If companies don’t reduce wages for employees in remote locations, then employees in the workplace are going to be upset. They’re going to pay higher rents, food and transport costs to live in Silicon Valley and come in for two or three days a week.

If an employee thinks they can save a lot of time and money by working fully remote, without suffering a pay cut, that will be attractive to them.

The embrace of location-based pay by Big Tech and other companies shows that they’re prioritising hybrid working for their businesses – and that they’ll incentivise workers to spend time in the office.

As the pandemic wanes, and companies look to bring workers back to the office on a hybrid basis, many will be wrangling with decisions like these. However, it’s unlikely that any plan will be fixed for good.