WFH Salary Adjustment

[LivingAlmostLarge]

Chatting with friends this weekend and again I am stumped by people's financial intelligence. Keeping up with the Jones (KUWJ) said that their company said if they relocated to Raleigh, NC they would take a 25% paycut. I said great you'll come out ahead. According to multiple websites it says around 40% COL decrease with the move. KUWJ said no go. She refused to move not because she didn't believe the numbers. But she said no one wants to wrap their head around a 25% paycut. It's just too much. Even if they will be able to buy a cheaper house and live on less she and her coworkers just can't wrap their heads around a 25% paycut. She said it's a no go and they were seriously considering it because it's cheaper and near her brother and parents.

I can't help but wonder when companies do this salary adjustment for WFH if people will refuse because they only look at the paycut. Not at what it really costs to live where they are thinking about moving. KUWJ made a bigger more valid point. That moving and working remote permenently could stifle one's chances of promotions, or switching companies. To her that could be a big deal for people hoping to climb the ladder quickly.

What have you guys seen?

Let me add the 25% paycut is moving to Raleigh NC from Seattle and it's 40% cheaper according to multiple COL websites and calculators. Second if you WFH completely 100% they will adjust you based on where you are moving to. They picked Raleigh because that's where family is. Hope this clears it up. That there will be bigger than 10% adjustment because it's not just working from home, it's "moving" to a different locale.

[bjl584]

I've not experienced this.
Everyone at my company who has been working at home is still making full salary.
The intention is to not make this a permanent thing.
Eventually they will be coming back

[rennigade]

The government has this. I think it's called cost of living locale. When my wife goes 100% remote, she'll take around a $10k cut due to location. Although, there has been chatter about dropping that due to everyone working from home at the moment. The government has been losing good employees because of this and other reasons. Either way she'll come out ahead by a long shot.

[riverwed070707]

I'm not sure I'm totally following your question. I took a 10% cut to continue working from home when my company brought employees back to the office 100% June 1 last year but I didn't relocate so my living expenses didn't change aside from some gas and fewer meals out. While I think chances of finding another WFH job are much higher in the current environment and possibly going forward, I do think unless your company has fully embraced a remote structure promotions would be tough. In my company, employees with direct reports don't WFH - they're expected to be in the office to manage their onsite employees.

[disneysteve]

Chatting with friends this weekend and again I am stumped by people's financial intelligence. Keeping up with the Jones (KUWJ) said that their company said if they relocated to Raleigh, NC they would take a 25% paycut. I said great you'll come out ahead. According to multiple websites it says around 40% COL decrease with the move. KUWJ said no go. She refused to move not because she didn't believe the numbers. But she said no one wants to wrap their head around a 25% paycut.

I can understand this being hard to process. Unless you have lived or at least spent some time in the new location, it's hard to comprehend how cost of living varies. We all have costs internalized for our daily lives - gas, groceries, movie tickets, home repairs, dining out, whatever. I think we all just assume that that's what things cost everywhere.

I also think we tend to fixate on an income number. No matter what may change with location or cost of living, we have a tough time agreeing to drop our income from 100K to 75K. We know that a lot of the costs of life are fixed. We buy a lot of things online. Those prices are the same no matter where you live. Vacation costs are the same no matter where you live. So I would certainly be concerned about how that 25% pay cut will impact our lifestyle. Even if some costs might be lower, will that be enough to offset the lower pay? You really won't know until you're actually living it, at which point it might be too late to do anything about it.

As for taking a pay cut for WFH, that's a different issue. It's fairly straightforward for many folks to know what they're saving by working remotely - gas, parking, tolls, meals, clothing, dry cleaning, etc. and decide if the pay cut is reasonable compared to their decreased spending.

[myrdale]

Just to clarify, WFH means "Work From Home" not "Waffle House" correct?

Also your pet name for your friend is "KUWJ" correct?

Does she keep her full salary where she is now, or is it being reduced or her job eliminated if she doesn't move?

The drop in salary also potentially means a drop in retirement savings. This could be hundreds of thousands of dollars difference in 30 years. But I guess it could mean more savings as well if the cost of living are that much lower.

[Jluke]

I had very similar thoughts as DisneySteve

I could add
Doesn’t it cost the employer less if you work from home?

Since there are less overhead costs that would be there if you were in the office.

is the employer paying for relocation costs?

Also your electric and other utilities could be higher since you are now home all of the time.

id have a hard time accepting that deep of a cut just because I relocated.

[disneysteve]

The drop in salary also potentially means a drop in retirement savings.

Great point. Sure, maybe the COL in NC is lower so the salaries are lower, but if your friend still plans to retire in their current location, they need to save accordingly, which they won't be able to do on a 25% lower income.

[ua_guy]

I think we don't know enough about KUWJ's situation to be able to judge. Cost of living in the new locale may be 40% lower and the pay cut may only be 25%, but how that translates into actually realizing that 40% cheaper COL and still accomplishing goals on 25% less pay isn't as clear cut. Housing may be cheaper, but taxes may be more or less, and other goods often cost about the same. There's also the issue of how the new locale may potentially affect future employment opportunity (and availability!).

DH and I have considered the possibility his job may go fully remote, and we would so love to finally move away from a large city. The more we analyzed it, the more nervous we became that if he lost his job, or if the WFH tide changed again, we would be forced to move for opportunity again.

[disneysteve]

how that translates into actually realizing that 40% cheaper COL

I think this is the big unknown. It's easy to throw out a stat that the cost of living is 40% lower, but that will mean different things to different people. We do a lot of our shopping online. Amazon doesn't care if we live in NYC or rural Nebraska. The prices are the same. We like to vacation in Disney World every year. The cost of a park pass is the same whether we're from Baltimore or Louisiana. Our cell phone bill wouldn't change if we moved. Lots of costs are fixed. So would we really see a 40% drop in expenses? I doubt it.

[Like2Plan]

I find that a little confusing as to why the company demands a pay cut for WFH. It should be irrelevant to the company how much you spend on dry cleaning, gas, parking etc. You could choose to buy a very expensive home near your place of work and ride a bike to work or you could share an apartment with 4 or 5 others--would they cut your pay under those circumstances? While you might save some money on commuting expenses for WFH, you will also need to provide and equip your office--communication lines, paper and ink for your printer, etc. Also, the company is saving money--because they don't need as many sq ft in the office or as much equipment to support employees.

But, the company sets the rules.

On the other hand if the company wants to attract folks to work in corporate headquarters in a HCOLA, I think they would be forced to pay more to attract people to work there.

On the pay cut to move to Raleigh, NC. I think there could be a lot of factors that would make that unattractive--maybe the pay cut is a smoke screen? Suppose you lived in a HCOLA that doesn't have a state income tax moving to a state that does. You've owned your home for 20+ years-maybe you own the home outright. So, the overhead costs might not be the same as someone who just bought a mega expensive house in the area. Then, there are life style changes. Suppose you live in a very moderate climate and you move to Raleigh that gets its share of hazy, hot, humid days in the summertime (I think that would be a big adjustment). Suppose you love going to Hawaii in the wintertime. It's not as far from the west coast.

[LivingAlmostLarge]

I think we don't know enough about KUWJ's situation to be able to judge. Cost of living in the new locale may be 40% lower and the pay cut may only be 25%, but how that translates into actually realizing that 40% cheaper COL and still accomplishing goals on 25% less pay isn't as clear cut. Housing may be cheaper, but taxes may be more or less, and other goods often cost about the same. There's also the issue of how the new locale may potentially affect future employment opportunity (and availability!).

DH and I have considered the possibility his job may go fully remote, and we would so love to finally move away from a large city. The more we analyzed it, the more nervous we became that if he lost his job, or if the WFH tide changed again, we would be forced to move for opportunity again.

It's 40% lower cost of living according to at least 5-6 websites I checked last night. I clarified it's a paycut because it's a location move not because it's WFH. It is WFH because they are moving away from the office to a location that may not HAVE any office. They are choosing a different location than where they currently live.

It is not 25% WFH in same location. That is not what they are saying. I should have clarified the post better. You can live and WFH remotely anywhere. But when you choose to move outside of your current location then they would take a 25% paycut to live in Raleigh NC.

[LivingAlmostLarge]

I think this is the big unknown. It's easy to throw out a stat that the cost of living is 40% lower, but that will mean different things to different people. We do a lot of our shopping online. Amazon doesn't care if we live in NYC or rural Nebraska. The prices are the same. We like to vacation in Disney World every year. The cost of a park pass is the same whether we're from Baltimore or Louisiana. Our cell phone bill wouldn't change if we moved. Lots of costs are fixed. So would we really see a 40% drop in expenses? I doubt it.

First off DS I know a big one is property taxes. The property taxes might be a factor in moving from your location to somewhere else. You pay like $10k/year on your property? What if you moved and it went to my parents $1500/year property taxes? Food is another. You can see a huge variation in food prices and I know my parents are astronomical comparatively in hawaii. California has very cheap food for some reason. Even eating out. And traveling I can definitely see a large discrepancy in food prices.

Another big ticket? private schools. Where we live run $25-30k/year. Where we used to live? $40-50k/year per kid. Other places? like $10k/year is a lot for "private" and that likely affects COL. And utilties. We pay $150/month water, $150 electric/gas. Before I used to pay $200/month water, $600-700 for electric/gas for a smaller townhouse. Better insulation and heating/cooling where we live compared to where we used to. So our cost of living is way lower than it used to be. Childcare where we lived was highest in the country. Out where we are? Meh it's only like $1500-2000 versus $2500-3000. And I know california you can get away with $1500.

So yeah cell phones and tickets, but it's also a lot easier to get ahead with cheaper overall living. And our car insurance before was about 3x what we once paid in CA and double now. State regulated insurance made it prohibitive. Even health insurance non-employer provided varies and I believe in LCOLA it's cheaper. So it's not just a couple of things. I believe it's a lot of things that add up that make the overall cost of living cheaper. Why live HCOLA?

Lots of reasons but a big one is the job. My DH still thinks that people will be able to work remote. But they'll be career stalled. He believes that go-getters and promotion people will want to be in headquarters and in office being seen and heard. That also if cuts come remote workers will be targeted more and managers will not care as much for a face on screen versus a person they have to fire in person.

[jenn_jenn]

To be honest, I get it. If all things were proportionate. I’d rather have a high salary in a high cost of living area than a low salary in a low cost of living area. We live in a global economy and a dollar is a dollar. When I’m traveling, it doesn’t matter what my expenses are back home. When I order something online, it doesn’t matter what my location is (except for maybe tax or shipping). This of course doesn’t account for the intangible value of living closer to family but I wouldn’t be so quick to judge their decision.

[LivingAlmostLarge]

To be honest, I get it. If all things were proportionate. I’d rather have a high salary in a high cost of living area than a low salary in a low cost of living area. We live in a global economy and a dollar is a dollar. When I’m traveling, it doesn’t matter what my expenses are back home. When I order something online, it doesn’t matter what my location is (except for maybe tax or shipping). This of course doesn’t account for the intangible value of living closer to family but I wouldn’t be so quick to judge their decision.

But a 25% paycut in a 40% LCOLA? People only considering it were moving somewhere they want to be obviously. But if why do people seem to get so much further ahead in LCOLA and lower salary than those in a HCOLA and higher salary?