There’s much talk about Facebook, Google, Twitter, Coinbase, Lambda School, Shopify, Square, Upwork, Amazon, Box, Salesforce, Zillow, PayPal, Viacom and a host of other prominent companies offering their workers the option of continuing to work remotely for the foreseeable future—or indefinitely.
There is little discussion around the dark side to this trend. For instance, VMware—a California-based publicly traded software company that provides cloud computing and virtualization software and services— announced that employees who work remotely will get a pay cut if they move out of Silicon Valley to live in less-costly cities.
According to Bloomberg, “employees who worked at VMware’s Palo Alto, California, headquarters and go to Denver, for example, must accept an 18% salary reduction. Leaving Silicon Valley for Los Angeles or San Diego means relinquishing 8% of their annual pay.” Rich Lang, VMware’s senior vice president of human resources, offered a positive alternative. When a person relocates and works remotely, they “could get a raise if they chose to move to a larger or more expensive city.”
The work-from-home trend has proved beneficial for both the companies and their employees. Corporations can save money, as they will likely scale back expensive office leases. Employees benefit from being at home to attend to their children, especially as the situation for online and blended-classroom schooling is still challenging. The climate improves with less commuters and the quality of life is dramatically enhanced, as people will shave hours from stressful drives, bus, or train rides back and forth to the office.
There are some big catches with remote work that could have some bad repercussions for workers. Facebook CEO Mark Zuckerberg, back in May, followed the footsteps of Jack Dorsey, the chief executive of Twitter and Square, and promised to allow his employees to continue working remotely. Zuckerberg said, “We’re going to be the most forward-leaning company on remote work at our scale.”
However, he then added a subtle catch that may have been missed by many. Employees will have to tell their bosses if they move to a different location. According to Zuckerberg, those who flee to lower-cost cities “may have their compensation adjusted based on their new locations.” He added, “We’ll adjust salary to your location at that point. There’ll be severe ramifications for people who are not honest about this.”
This pronouncement also throws open the door for Zuckerberg to now search for talent across the United States and other countries. This could be bad for workers, as CEOs arbitrage the best and cheapest job seekers across the country and potentially globally. Facebook can source applicants who live in lower-cost places and pay them less than they would receive working in San Francisco.
Dorsey, although he’s known to be employee-friendly, was forthright about his new ability to recruit people who don’t live within commuting distance. “We can get talent anywhere. There’s a lot of folks out there that do not want to move to San Francisco. They feel comfortable working in a much smaller office or just home.”
Job seekers may have to contend with more competition. Whereas they used to worry about other people applying for the same jobs who lived within commuting distance, now they also have to be concerned with applicants from all over the United States. It does work both ways. People on the job hunt should also start applying to jobs that are based outside of their commuting distance in other cities and states.
There’s something else remote workers need to worry about too. You may be subjected to taxes levied by both your new state of residence and the one in which your company is based.
First published in Forbes September 2020