Location-based salaries

Employers see an opportunity to reduce salaries when an employee or candidate relocates from a major city to a less expensive area, but employees are now pushing back

The world of human resources has faced interesting challenges in the past year and a half. Professionals have had to navigate changing protocols for in-person work while establishing new standards and support for remote work. Those responsible for recruiting and talent acquisition have faced even greater hurdles, as norms continue to change and people reassess their situations and next moves. More flexibility, improved work/life balance and greater passion for the work they do are higher priorities for many, and those considerations are informing their employment decisions like never before.

Along with these factors, we’re seeing increased attention on salaries and compensation. With low unemployment comes greater competition for high-quality candidates, and of course, a competitive salary is important for making any job attractive. This has always been true, but a new consideration is whether that compensation should include adjustments based on where the job is or where the employee lives.

The legal industry is certainly not alone in its practice of geographic location-based salaries. The cost of living in San Francisco or New York City is different from the cost of living in Des Moines or Spokane, and so employees at all levels have historically been paid in accordance with where they are.

But now, thanks to permanent remote work options, people are living where they want to rather than living where they work. This includes relocating from urban markets with their higher cost of living to lower-cost areas and taking their market-adjusted salaries with them. What are the impacts of this, or of employers enacting salary adjustments for employees who choose to live somewhere other than where the position was originally located?

Forbes contributor Jack Kelly addressed this issue in an article published June 28, 2021, titled “Why Should You Earn Less Money Just Because of Where Your Live? It’s Time to Question Location-Based Salaries.” In the piece, Kelly opens with the argument that, “If you are great at what you do, why should you be forced to earn less than what you’re worth just because you live outside of a major city? Doesn't it seem reasonable that a person should be paid what they’re worth regardless of where they live?”

Kelly goes on to reference several large companies including Google, Reddit, Morgan Stanley and Facebook in offering examples of the variety of approaches currently in place, both with respect to expectations around in-person versus permanent remote work environments and the related issue of location-based salaries.

The consensus among those cited is that there isn’t one. Different companies and their leaders have different viewpoints that are informing how they are handling the issues of where people work and whether or how that determines compensation. But that doesn’t mean the issue is permanently resolved.

This topic is likely to remain a hot one for the foreseeable future, and every organization will decide for itself how to structure its salaries – at least until market forces dictate otherwise.