Working from home puts salaries in question

Localised compensation: Could work-from-homers face pay cuts? Source: Getty

When Facebook CEO Mark Zuckerberg told his staff they could request a permanent work-from-home arrangement, there was one major catch: depending on where they lived, they could be up for a pay cut.

Staff were told via Facebook Live they would experience some salary fluctuations, most likely reductions, if they were to move state - which 75 per cent of staff indicated they would do.

“We’ll localise everybody’s comp [compensation] on January 1,” Zuckerberg told staff. 

The notion of localised compensation, particularly in the US, isn’t new: according to TechCrunch, other tech companies like GitHub that have distributed workforces have been paying staff different rates depending on where they live for a long time.

The theory behind localised compensation is this: the cost of living is different in each state, and therefore wages in each state should be adjusted accordingly. 

On paper, it makes sense: renting a 2-bedder in the Sydney CBD is going to cost triple the amount it costs to rent the same apartment in Adelaide CBD.

But according to Indeed APAC economist Callam Pickering, it’s unlikely remote workers who choose to move states would see the pay cuts happening in the US.

“The wage premium in different areas of Australia is quite different from the US,” Pickering told Yahoo Finance.

“You have certain cities like New York or San Francisco, where average earnings are incredibly high, and then there are other cities where wages are quite low. That’s really not as clear in Australia.”

But there isn’t as much of a wage variation as you might expect in Australia, Pickering said.

“For example, average full time earnings in New South Wales, Victoria and Queensland are pretty much the same, so if there was a situation where a worker from Sydney said they wanted to move back and work remotely from Melbourne, they should expect to receive pretty much identical to what they would get in Sydney.”

Being a remote worker also shouldn’t change the value of your work, Pickering said.

"While it might be common for a company to pay staff different wages based on the state they live in, it would be difficult for a company to cut an employee's wage if they move from a high-wage region to a lower wage one. Working-from-home shouldn't change that."

We would take a pay cut anyway

Interestingly, taking a pay cut to work from home doesn’t bother Aussies too much at all.

According to a survey by OnePoll and LogMeIn, more than one-in-four (27 per cent) Aussies would take a pay cut to work from home permanently.

An overwhelming amount of Australians (83 per cent) thought that saving time on their commute was the biggest winner of remote work. And it’s not just time, it’s money too.

According to Motley Fool’s Maurie Blackman, if you’re offered a $3,000 reduction in salary in exchange for doing your job from home, you might not notice at all.

“Imagine you're looking at a $3,000 reduction in salary in exchange for being allowed to do your job from home. If you currently spend $250 a month on a train or bus pass to commute to your job, or a similar amount in fuel, then you're effectively breaking even.”

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