The Covid-19 epidemic has revolutionized how and where people work. Despite the fact that it is tough to forecast long-term trends as a result of this, it is clear that many tech workers would like to relocate away from expensive city centres.
Spotify announced in February that its 6,550 employees will be able to choose where they want to work in the future. It makes no difference!
In 2020, Dropbox promised that they would provide a “virtual first” work environment. Employees will generally operate from home (or wherever they choose), but they may also utilize Dropbox’s previous offices, which have been renamed as Dropbox Studios.
Other firms, such as Meta (which is Facebook to you and me) and Salesforce, have also followed suit. This mass relocation of employees has produced a slew of problems. One of the most serious concerns right now is whether workers should be compensated differently based on their location.
What is geo-differentiation in pay?
When tech giants begin to depart the urban hubs where they were founded, the issue of pay begins to arise. If you’re no longer living in close proximity to high-cost tech clusters such as Silicon Valley or Shoreditch, should your compensation reflect that?
Take Meta for example employees are required by law to notify the firm if they relocate so that their salaries can be adjusted accordingly. Mark Zuckerberg agreed.
There’ll be severe ramifications for people who are not honest about this.
Last month, Facebook announced plans to relocate its European headquarters from Dublin to Zurich. Employees who move will receive large pay cuts.
According to Bloomberg, if someone moved to Denver, they might lose 18% of their income. Google even released a Work Location Tool “to help employees decide whether relocating or working remotely has an impact on their compensation,” according to a spokesperson.
Is this a common practice?
The simple response is no. It appears that every firm is attempting to work it out on their own. Spotify will use a geo-neutral payment structure, for example.
According to Spotify, you will be paid San Francisco or New York salary rates based on the sort of position you have.
Iterable, a marketing firm that provides tools for data scientists to find the relevant keywords in massive amounts of data.
The company said it would be adopting a similar compensation plan. Employees living in the United States will be paid based on the most competitive market, the Bay Area, while those in the United Kingdom will be paid according to London.
How are businesses making this decision, then?
The advantages of a geo-neutral compensation package
While the advantages of a geo-neutral salary for employees are self-evident (workers may relocate to cheaper residential areas while earning the same amount of money), there are also advantages for employers.
One reason why technology firms may be moving away from geo-differentiated pay is that it’s easier from an administrative standpoint. When organizations have varied compensation systems, determining wages might quickly become complicated.
Having a national rate makes payroll much simpler to manage. HR specialists must simply figure out the national market rate for the position and the employee’s level of experience.
Employees can live in Manchester while being paid a London wage. Millennials and Generation Z members who are leaving high-cost cities in large numbers find this an appealing option.
Employers can now choose from a larger talent pool than in the past. Instead of recruiting individuals from a restricted talent pool, they may now hire people all over the world.
What will the future hold?
Geo-neutral salaries are becoming more common, albeit not yet the norm. In between 20 and 30 years, a national pay scale is anticipated to be implemented in some parts of the world.
Meanwhile, businesses may overspend in specific regions but may they really afford to overlook it when there is such a competitive hiring climate?
Subtly charming pop culture geek. Amateur analyst. Freelance tv buff. Coffee lover