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Should You Take a Pay Cut to Work Remotely?

Photo credit: iStock.com/maurusone

In our recent Twitter poll, we posed the following question to our community: “Would you be willing to take a pay cut or sacrifice vacation days for a remote role?” Nearly half of those responding believed it was worthwhile to give up part of their overall compensation in exchange for location independence, while 33% said, “No way!” to less pay.

While our sample size of 42 was far from being representative of remote workers worldwide, there’s enough evidence to indicate this is a hot topic in the community. So we pose the question: even if you’re willing to accept less pay for location independence, should you do so? Here we examine both sides of this ongoing debate.

Less Is More

Let’s face it—no one wants to be paid less. That said, there are some reasons why it may make sense for you to give a little in exchange for the ability to work from anywhere.

Overall Cost Savings

By working remotely, you realize cost savings that your in-office counterparts simply can’t, including:

  • Reduced transportation expenses. You won’t be filling up the tank as often, spending money on repairs, or needing to buy or lease a new vehicle as often.
  • Reduced day-to-day expenditures. Instead of having to spend money going out to lunch solo or with co-workers, you can prepare your meals at home and realize big savings.
  • Tax breaks associated with working from a home office.
  • Dry cleaning, laundering, and wardrobe. Even if you’re not working in your pajamas every day, working remotely means you can probably trim some of the costs associated with owning and maintaining a professional wardrobe.

In many cases, the savings you’ll realize will more than offset a reduction in your pay. And there is the unquantifiable but incredibly important peace of mind and resulting improved health that occurs when you don’t have to endure the daily grind.

Sharing the Risk

We are finally getting closer to debunking the myth of “face time,” where only employees within sight of their coworkers and managers can be trusted to get things done. That said, employers–particularly those who are new to the concept of remote work–may still be clinging on to old notions and therefore fearful that a remotely-based workforce will make it difficult for the company to meet its business objectives.

Showing flexibility in your salary discussion can help persuade an on-the-fence employer that you are willing to assume some of this risk. And if you take the time to educate your company on the many benefits of remote work, you may find that you’re giving up far less than you’d anticipated.

The Price of Living (and Leaving)

It’s unlikely that an employee relocating to a more affordable area will retain the compensation they may have enjoyed in San Francisco or London, particularly if the employer already has a presence in that location. Even less likely is the possibility a company will be willing to increase salaries based on a higher cost of living in a new area, especially if the move is voluntary. It’s far more common for employers to reduce salaries based on market, and potentially currency adjustments.

This is where you need to break down the real numbers. Your adjusted salary may be lower, but what’s your actual take-home pay? Taking that 10% pay cut to live in an area that is 15% less expensive may have you coming out ahead.

You also need to weigh the cost of obtaining a local job in your new locale. Your new salary, though reduced, may still be more than the going rate in that area. Add to this the time and stress associated with a job hunt, and you may find the benefits of location independence still far outweigh the lower pay.

More For Less

The benefits of remote work don’t fall exclusively on the side of employees. There’s an increasing amount of data to support some very significant advantages for employers of distributed workers.

This is clearly the more popular position. Here are some of the more compelling arguments made in favor of equal pay for remote workers:

Remote Workers Aren’t Any Less Productive

In fact, some studies—including this one from Stanford University—show that in many cases remote workers are actually more productive than their in-office counterparts. Why? No commute time, increased focus, less sick leave, and in many cases, an increased amount of work hours.

Cost Savings for Employers

The cost savings associated with remote work are also realized by employers. Accordingly to consultancy Global Workplace Analytics, a U.S. company rolling out even a modest remote work program can save more than $11,000 per employee per year. These savings are realized through the following:

  • Reduced Real Estate Costs
    • With office space coming at a premium in cities like San Francisco, New York, and London, the ability to reduce or even eliminate certain physical offices can be a huge boon in terms of savings for the company.
  • Increased Retention
    • Happier employees stay longer—it’s simple. And the quality of life increases for remote workers can lead to even longer stays.
  • Access to a Broader Array of Talent—for less
    • When companies open themselves to remote workers, they can go after top-notch talent rather than just focusing on local candidates. In high demand areas, this can make companies more competitive when it comes to recruiting the best and the brightest.

It can, in fact, be argued that there is a case for paying remote workers more than their in-office counterparts based on the total savings realized by employers.

Show Me the Money

This debate won’t be easily settled—there is simply a lack of empirical data to fully support either position. We need more information to move this discussion in a productive direction, such as:

  • Reliable salary comparison information to properly analyze the salaries of remote vs. onsite workers.
  • Increased transparency from employers. Unfortunately, very few are as open as the likes of Buffer or Stack Exchange when it comes to their compensation practices.

Until then, the debate will rage on.

So tell us: what side are you on, and why? And if you think we’ve overlooked something in this important debate, let us know. Please share your thoughts in the comments below, or tweet @Workfrom using #remotepay.


#careers #compensation #salaries

Comments

  • As a “no” voter in the poll, I’d like to pose some counters to the purported cost savings. Should we pay people less who work within walking or biking distance of the office? Should we pay people less who brown bag their lunch? It’s good you link to the IRS page. The requirements are fairly stringent and, in my understanding, increase your risk of an audit. Additionally, if you’re taking a mortgage interest tax deduction, you also need to reduce that reduction by the same proration you calculate for the office. And if you don’t use a home office, you may have co-working fees. Coming from the less formal tech industry, I don’t see a difference in the wardrobe cost, either. Ultimately, though, I say we should pay people by their value, not their choice of living situation.

  • I would never encourage someone to take a pay cut for a Remote role. Employees are paid to bring value to the company, not to sit an ass in a chair. If they continue to be high performers, why should they make less. It’s worse for women who feel “guilty” about going remote and we’re already trying to overcome a pay gap. This isn’t about cost of living. This is about being paid your worth.

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