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Mark Zuckerberg touts pay-cuts for Facebook employees working from home based on cost of living

James Titcomb
Mark Zuckerberg - Reuters

On Thursday, Mark Zuckerberg predicted that within a decade, half of Facebook’s employees will be working from home

The social network became the biggest company to announce a large-scale and permanent remote working plan, leading to predictions that many other companies will be forced to follow, and that employees will embark on a mass exodus out of cities.

But for Facebook staff that planned to take their six-figure salaries, move out of their expensive Silicon Valley lodgings and bank the difference on a Mexican beach, Zuckerberg had news. Move somewhere cheaper, and your salary will be cut.

As of January 1, Facebook employees working remotely will have their compensation adjusted depending on where they live, with those in cities where living and labour costs are higher receiving more.

In reality, this will mean pay cuts for almost all who move. Facebook’s headquarters are located in San Mateo, America’s sixth-wealthiest county, so relocating will almost certainly mean pay reductions. 

“We’ll adjust salary to your location,” Zuckerberg said. “If you live in a location where cost of living is dramatically lower, cost of labour is lower, salaries tend to be somewhat lower in those places, even though you can have a better quality of life than some of the bigger cities.”

Cheating the system, meanwhile, would result in “severe ramifications”, Zuckerberg said Facebook would monitor the internet addresses of people logging in remotely, to ensure they are not lying in an attempt to boost salaries.

If other companies follow, it could dramatically reshape house prices and job markets around the world.

“Guess our pay is gonna crater,” said one user on Blind, an anonymous app for tech workers, predicting a drop in salaries across the industry. Others predicted slumps in San Francisco’s overheated housing market.

Companies have always adjusted pay based on where workers are, reflecting different housing and labour markets. But that has been because they needed to be physically near an office.

With employees working from home, the calculus might appear different. If a worker is just as productive in Liverpool as in London, they are worth the same to the company, so why should they be paid less?

“It’s a very hard sell to employees, it’s hard to make the case that I should be paid more because I live somewhere,” said Julia Pollak, a labour economist at jobs website ZipRecruiter.

Zuckerberg denied that the push to remote working was related to cost savings. He said occasional travel costs to in-person events, the need to provide benefits such as IT equipment and internet connections, and the potential need to hire more staff to deal with remote working meant that it would not necessarily be cheaper. 

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However he admitted it was possible that working from home could reduce Facebook’s costs, potentially through reduced office rents as well as salaries and benefits.

Other tech companies embracing working from home are yet to make the same policies on costs. A spokesperson for Twitter, which said last week that it would let staff work from home permanently, did not comment on pay for remote workers. Shopify, which said on Thursday that the majority of Shopify staff would work remotely from next year, said it was still working out details on compensation.

But if Zuckerberg’s proposal becomes the norm, and working from home becomes significantly more popular, it could lead to potential tensions between staff. 

Employees who have moved to the outskirts of cities for quieter neighbourhoods or cheaper housing could see pay cut, while those in the centre of cities could be paid more, despite both working at home. Job applicants in expensive parts of the country might fear losing out to cheaper alternatives based elsewhere.

Facebook said that three quarters of employees interested in remote work expected to move if they were allowed to work from home. Tell them that could mean cutting their pay, and it might get a different answer.