Is Less Money for Telecommuters Fair?

I received a comment in my comments que this morning from a guy who’s planning to move and has been given the green light to telecommute from his current employer, but he has some questions about it. Instead of trying to answer in the comments thread, I’ve decided to answer him right here instead (easier on the eyes and a really, really good point to discuss I think)!

Here’s the note Brian left me at 10:30 this morning:

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Hi there, I have a telecommuting question, but couldn’t find the right place to ask it, so here goes:

I plan to move and I would like to keep my current job. My employer gave me the green light to telecommute, but they want to adjust my salary downwards to match the reduced cost of living where I am moving. Is this standard procedure for employers and telecommuters? I understand they will pick up some new costs in terms of flying me to the home office every once in a while, but at the same time the real estate and other savings seems like it would offset that.

What do you think?

Thanks in advance for your thoughts,

Brian
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Well, Brian, I’m a tad leery to give you advice because I don’t know any specifics about the company or your relationship in the company. Having said that… here’s what I think (I’m never short on opinions):

Kudos…

  1. To you for thinking to seek that solution in the first place instead of just looking for a new job in whatever city you’re moving to!
  2. To the employer for being open-minded enough to allow you to telecommute from your new location! Keeping good people however you can is just good business practice.

Adjusting Your Salary in Exchange for Telecommuting

This is where it gets tricky but I’d think you’re in a darn good position in this particular bartering instance. And I’d definitely barter until both you and the employer are happy!

From what I’ve seen personally and heard tell of, it is common practice for employers to want to adjust a salary for an employee who’s making the switch from working full time in the office to telecommuting full time. What totally throw me for a loop is that your employer says the adjustment is to off-set the cost of living between where you currently reside and where you’ll be residing after you move.

That’s insane! Does that mean that if you were moving somewhere where the cost of living was higher that they’d be giving you a raise for telecommuting?

Normally an employers’ stance is one that tries to offset the actual working time – ie – they don’t want to pay you a salary anymore at all, they want to move you to a contracting status where they’ll pay you an agreed amount per hour for work that you do for them. Since that’s a fair concern, most folks in your situation are hashing out a fair hourly compensation package… but I digress.

I’d stand firm on your salary, ask them if they plan to give you a cost of living increase raise if you move again, and point out that you were planning on the reduced cost of living to help you offset the need for a bigger house with plenty of space for the professional home office and all of the equipment you’ll be needing to purchase and maintain YOURSELF in order to telecommute productively.

Anytime the switch is made both the employer and the worker have some benefits and some hardships. But cost of living isn’t something that the employer should even consider in the agreement. I’d argue that the money they save in office space, parking costs, equipment you use, etc. should easily offset the amount of money they’ll spend if and when they ever want to have you back in the office for a day or two. But the list of actuals depends on the specifics of your job and your company and the specifics of how often they’ll want to have you back in person. There’s not a lot that can’t be handled with teleconferences, phone conferences, IM and similar tools so maybe it won’t be a frequent trip for you.

I’d also make sure that you have the telecommuting arrangement details in writing so that you are protected from changing rules in the near future.

Be sure to take what I say with a grain of salt since I don’t know all of the particulars. And be sure to let us know how the move and the telecommuting goes! And thanks for the question (I hope my answer helps some).

10 comments

  1. Actually, this is fair. When I moved from Canada to California, I asked for a raise in salary to adjust for the higher standard of living in this State. They gave it to me. The other way around should be applicable too. Why would my employer give me the same salary level in California if I decide to move to Buffalo, New York? Standard of living adjustments goes both ways.

  2. I’m always happy to see someone who’s allowed to telecommute and understand that lots of folks would be happy to take a cut in pay in exchange for the chance to eliminate their commute (or move but continue to keep their current job).

    However, no matter how I look at it, I still think it is not inherently fair to the telecommuter or the company to adjust a salary based on the cost of living of anywhere other than where the company conducts business. So while I understand that a company based in London can expect to pay a larger salary to an executive manager than a company based in Bend, OR, I don’t think that the place of residence for either of those executives should factor into their pay scale.

    What if I lived in the city and worked for a company for an annual salary but then decided to move to the suburbs where I could afford a nicer house. Is it right for the company to adjust (cut) my salary to that cost of living as well? I don’t think so. And what if I worked for a company based in Bend, OR, but then found out that my husband was getting transfered to London. Should that company be expected to adjust (raise) my salary because it’ll cost us more to live in London? I don’t think so.

    I understand that lots of other folks think it is fair, and the debate is definitely an interesting one so I did some more looking around and will share some of what I saw (and tell you I found it so you can find even more):

    A telecommuter named Mike Smith says:

    A final advantage that stems from mobility is the cost of living adjustment that I’ve been able to achieve. By continuing to receive my Boston-area salary, even after relocating to a small city in the Midwest, I’ve found it much easier to get ahead financially. While I was able to live comfortably in the Northeast, my salary goes much further now, particularly in the area of real estate, where homes cost roughly half as much. My relative wealth, as a result of this relocation, has increased significantly.

    An article from CNN Money that talks about extreme telecommuting says:

    There’s one big advantage of taking your job on the road: You can feel rich, even if you’re not. With no mortgage or rent, and given the low cost of living in many countries, a little money can go a long way. “I’ve managed to save a lot because I’m not living in London,” Page says. Taxes, of course, must still be paid. Professional wanderers file in their country of citizenship.

    TJobs.com (another great site for telecommuters) does point out that telecommuters can take advantage of their lower-cost-of-living location when vying for jobs against others:

    The cost of living drives salary demand. TeleCommuters who live in lower cost of living areas have an advantage because they can offer substantial salary savings to employers with offices in one of the high cost of living areas. To get an idea of the savings you could offer an employer, use the Salary Wizard to compare the salaries for your position in both a high and lower cost of living location.

    And there’s a decent small debate here at a city-data.com forum that might interest you.

    The biggest name I can think of in telecommuting is Gil Gordon, an acknowledged expert in the implementation of telecommuting and telework (online at that location since 1995). Here’s what I found about telecommuting and the cost of living at his site.

    It is far from customary for telecommuters to give up 10-20% of their salary for any reason, whether it’s because of the reduced commuting costs, reduced meals and clothing expense, etc. Your salary is provided for the work you produce, and of course also reflects the local labor market and cost of living – that’s why an executive working in Chicago earns more than a similar executive working in a small town in Montana, for example.

    To find even more information and opinions try searching telecommuting and “cost of living” on search engines, like this Google Search or this Yahoo search.

    The thing about telecommuting is that it’s not exactly main stream for corporate entities and as such, it’s still finding its way with policies and implementation of telework programs. So far as I know, companies are free to institute their own telecommuting policies as they see fit – or not to at all as many see fit. In the changing world of technology and with the rising cost of doing business (not to mention the difficulty in retaining good employees), company’s who ignore the movement for a more flexible work/life balance are likely to get left in the dust by the ones who are willing to adjust and adapt to the times.

    The bottom line really, Brian, is to determine what you’re willing to do… what you’ll be happy with or can live with. If what your company’s offer sounds fair to you, take the deal. If it doesn’t sound fair, deep down in your heart of hearts, put your concerns on the table now so you don’t regret it later.

  3. I agree completely, Lisa. The idea of dropping a salary arbitrarily for conditions that don’t affect the employer whatsoever… well, that’s just nuts. In fact, the employer stands to gain more than just a lower salary – lower taxes collected to pay the new municipality’s taxes, for starters.

    I like your suggestion. If the salary is adjusted down for a move to a less expensive area, it should also be adjusted up when moving to a more expensive area.

  4. In general, I’ve noticed that a lot of companies try to pay work at home people less.

    I haven’t been in this particular situation before. I do know that I have worked for companies that have people on site and at home. The people on site make double what the work at home people make. I don’t think this is right. Considering that as a work at home person you have to provide the computer, internet, phone, etc.

    This was a great article.

  5. There’s absolutely no way I could take my work home (repairing semi trucks in the front yard might raise some concerns with the neighbors), so I’ll give you an outsider’s view. I think that an employer who tries to lower someone’s salary to adjust for cost of living is just plain crazy, telecommuting or not. If your production rate is the same from home, your salary should stay the same regardless of where you live. The company is still making the same amount of money off your production, so why should your salary be decreased? It sounds like Brian’s employer is trying to see what they can get away with. They’re bluffing. If he pushes back just a little bit I think they’ll fold. Great advice–telling the company what costs he would incur working from home.

  6. Yeah, there are some important jobs out there that don’t lend themselves to telecommuting. You repair ’em and my better half drives ’em for a living. And all those drivers all over the country make the same wage, regardless of where they call home. The sad truth in life is that people and companies do tend to see what they can get away with…

  7. Hi all,

    Thanks for advice, comments etc. Here is how the situation was ultimately resolved:

    We met half-way between my company’s proposed cut and my current rate of pay.

    I think that this scenario was a slightly unusual case in that the move was being initiated by me. Thus the company did not feel obliged to accommodate me in a lower cost of living area, but if I was moving at their behest then they likely would not have cut my pay or would have offered an increase to match the new area.

    In the end, though I’ve always been advised to never take a pay cut, I agreed in order to experiment with being a full time teleworker. It was worth the drop for me to make an attempt at a lifestyle that I could not have established otherwise.

    I do believe that the cost of living argument is a generally specious one – there are too many scenarios where it doesn’t make sense. However it is still early days in terms of establishing policies regarding virtual work so exceptions must be made.

    Thanks again,

    -Brian

  8. Brian,
    I’m SO glad you let us know the outcome of your situation and that you and the company came to terms you’re both happy with!
    I wish you the best of luck and try to keep in touch.
    ~Lisa

  9. I’m disappointed to see that Brian took a pay cut. There are rumors at my company of adjusting salaries downward for those that telecommute. I will fight it tooth and nail. To me it looks like a company trying another angle (a very poor one) to reduce expenses. My cost of living as a telecommuter should matter little to my employer. My output is higher as a telecommuter, I tend to put in more off-hours work and I don’t use the resources of the company office building (I actually spend more money on business expenses as s result of telecommuting; internet, heating the house during the day, water, etc.). Furthermore, cutting salaries for remote workers will scar morale and cause many of the dozens of employees who work remotely to look elsewhere for employment, even during these difficult economic times. I think it’s a poor career move accepting a pay-cut of this kind. Good luck trying to recover that portion of your salary in the future; it’ll be like squeezing blood from a stone.

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