Remote Work: I moved, my employer wants to reduce my pay

Question

I have been working for the same employer for just over five years in a senior-level position. I was hired on at their headquarters in City A, where I was living at the time, and worked as a traditional office employee for the first three years of my employment there. After that time, I started working remotely full-time.

Just recently, I moved to Canada to start a family. As this move was a personal decision and not a work-related decision, I did not ask for any relocation expenses (although I did discuss the move with my employer well in advance). My employer does have a business unit in Canada and, for legal and financial reasons, have decided to "move" my position to be sourced out of their Canada office. My job responsibilities, my title, and who I report to remains the same: I still do the same job for the office in City A. Further, the office in City A is still responsible for paying my salary. Except...

My employer now wants to adjust my salary based on my new physical location. Instead of drawing a salary based on the market in City A (where I originally was hired and performed the work), my employer wants to pay me based on the market, and also the currency, where I now reside in Canada. It is important to note that this is not to cover any additional costs incurred by my employer as a result of my move, this is simply what they're calling a market and currency adjustment. The net effect of this is a nearly 25% reduction in my base pay.

I have been upfront with my employer, informing them of my intentions for about 1.5 years in advance of this move. My employer offered their full support. Only now that the move has been completed is my employer approaching me with the stipulations detailed above.

I am having a difficult time accepting this. I made the decision to move and remain with my present employer based heavily on my drawing a US salary, and now my employer is trying to realize cost savings at my expense.

I did not confirm that my salary would stay the same nor did my employer give any indication that there would be an adjustment in the conversations we had leading up to this move. My previous market, City A, was not a premium market, but a second-tier city. I don't think the COLA between City A and the Canada office is that much different, so I didn't expect this to be a problem.

Does any other remote workers have any experience with an employer using a personal move to adjust your salary? Would you expect a salary adjustment if you did move?

Answer 1

There's a conflict here between two different things:

What's a reasonable salary for a remote worker in your location doing your job?

Assuming they really are adjusting correctly for the local market, the lower figure is a reasonable salary for the role. If the cut is too much then you could get a higher-paying job from someone else in your new location. So if they're just wrong about the market you could perhaps challenge their figures, but since they have a business there already they presumably have a pay scale to go with it.

What's a reasonable response to observing that you're overpaying a long-term employee?

Probably not to cut their pay. Sometimes that's the right thing to do, especially if the company is struggling, but generally speaking employees do not expect pay cuts, and employees given pay cuts start planning to leave even if the employer thinks they were overpaid before.

Furthermore,

When is a reasonable time to tell an employee that a decision they're discussing with you will result in a 25% pay cut?

Before the employee commits to the decision.

If you're in at-will employment then of course almost anything is "reasonable" so far as the law is concerned. They can require you to take a 50% pay cut and wear a clown suit if they like, and you can either find a smaller house and suit up, or you can quit and bad-mouth them on Glassdoor.

I think they should realise that you consider this to be ill-treatment in a number of ways and that you'll respond accordingly. But that doesn't mean they can't do it. This reduced salary might still the best gig available to you in your current situation, so you may be forced to treat this as a salary negotiation for the job as it is now, post-move.

Would you expect a salary adjustment if you did move?

I'm a remote worker, and I'd certainly be open to the possibility of a salary adjustment if I moved, in particular to somewhere that would make me less able to get to the office (which I do once a month or so), and especially to a different country with different tax rules etc. But I'd expect that to be discussed in advance because it's easily anticipated by the employer.

If I moved within the EU to another country with a lower cost of living (say for the sake of argument, Romania), then I would be surprised if they just assessed my new salary on the payscale for programmers in Romania. But if that was their best offer I'd probably have to take it or leave it -- my contract doesn't actually specify how far I can move before they have the right to end the employment because of it. Ultimately we'd be at the mercy of what some tribunal judge considers "reasonable", but I don't see how I could reasonably expect the job to hold if I was in Romania, or for that matter Canada, or anywhere else that's much more remote from the main office than my current location. The reason is that my remote-working job has always been on the understanding that I can occasionally get to the office, even at fairly short notice. Conversely I don't see how they could reasonably expect their obligations to end just because I moved within the same town. Somewhere there's a line, but it's a legal matter and I just don't know where it is.

Basically, I would expect to renegotiate my employment unless I had statutory protection for my existing terms and compensation, and then I'd decide whether to keep the old job under whatever new contract we came up with, or look for a new one in the new location prior to moving. If the change was dropped on me after moving then I'd treat it like any other unexpected pay cut -- I might be forced to lump it, and I might understand the factors that make it viable for the employer to do it, but I certainly wouldn't like it.

On the other hand, if my employment was as a full-time contractor with no obligation to ever go to the office, then firstly I'd be paid through my own UK company, secondly I wouldn't consider it really any of my employer's business where in the world I was located except perhaps as concerns data protection and other such legal matters, but thirdly my employer/client would have none of the obligations of a permanent employer. Granted this is an extreme end of the range of employment situations, but in that case I wouldn't expect cost of living to play any explicit part in my rate, or for my rate to change every time I got on a plane. You need to work out whether your situation as a remote worker is more like a "normal employee" who happens to be off site most of the time, or more like a contractor whose sole responsibility is to turn in the work.

Answer 2

I know that this is not an extremely popular line of thinking, but I can not stress it strongly enough: Your pay must be derived from the value your employer derives from your work. Any other means of determining your compensation is immoral. Your employer does not pay you a salary as a favor. You earn it. And the current economic situation of the industrialized world is such that you actually earn radically more than you are paid. This is true for everyone except senior-level executives. I am stunned how short-sighted, at the least, your employer is. I would have serious reservations about staying with the company even if they agreed to maintain your present salary. The argument that they could hire someone else in the city you now live in for a lower price, therefore you must accept a lower price, is an underhanded, manipulative lie. You have domain-specific experience which is worth far more than what your employer pays you. If the company were to let you go and hire someone at that lower price, it would, first off, cost them thousands, probably tens of thousands, just to find someone. Hiring, especially in the tech industry, is hard and not cheap. Then, assuming they find a perfectly adequate candidate on the first try (which is very difficult, especially if they insist that the person live geographically close enough to their offices to go in person occasionally, a really moronic way for a company to abandon the primary benefit of hiring remote workers - having a global talent pool), they have to deal with probably at least a year of the person not being terribly productive while they learn the employers domain.

Employers primarily view their business as a game, and you are seen only as a pawn. Some of them feel very strongly that they must be as ruthless and dishonest as possible to get ahead (they rationalize it by supposing that someone else will do it if they won't). That isn't as bad as it sounds. You just need to understand how it works. There is a surprisingly ancient quote which sums up the situation perfectly: 'Make game of that which makes as much of thee.' Yes, there are actually some employers who are such unremitting scumbags that they actually feel society owes them cheap, manipulable, loyal workers even if they show no loyalty to them. Do not work for those people. Most are honest, and are not seeking to hurt anyone. They see the whole situation as a game, and will not be offended if you play them that way. But they're not saints. If you refuse to play, they will take full advantage of that. Your boss is clearly of that opinion at least.

And just to assuage any anxieties you may have: You are not a bad person for believing that you deserve to be paid more. You are not a bad person for not setting aside your personal concerns for yourself and your family in deference to the company. You do work which has real value - a value much larger than you likely even could guess (how much would it cost you to hire someone to do the exact same work you do? How much would you be able to earn selling the product of that work? You should really try to find these things out, they are the only way to get an honest idea of what you should expect to be paid. It will also give you total confidence when negotiating.) Your employer uses the product of your work to generate revenue for the company. If the company is not losing money, that means they get more for the work their employees perform than they pay their employees. That's where profit comes from. Profit is, of course, not inherently bad, but situations can rise to the level where they are actually exploitative. Especially today, this is very common.

Also, it is important for you to keep in mind that you are in a sellers market when it comes to your skills. Companies everywhere are positively desperate for competent tech talent. I have friends who do hiring for local contract software companies and it is stunning how difficult it is for them to find applicants with any of the skills they need. Hiring and retention is a huge problem in the tech industry right now, and it will continue to be so for 15-20 years (according to Forbes and some studies). Don't let your employer devalue your work or manipulate you. They need you more than you need them, end of story.

Answer 3

This is not unusual. Most employer try to pay market rates and market rates fluctuate significantly with location often because cost of living is a strong function of location as well. The whole concept of "local market" hasn't caught up yet with remote workers, so it's a tricky situation. If a local employee in city A makes the same money as a remote employee in city B and cost of living is substantially lower in B than this isn't exactly fair either.

Moving to a different country adds more complications: legal requirements, tax & benefits can be very different which makes it hard to compare. For example health care in Canada my be substantially cheaper than in the US which is part of your total compensation.

Most companies care mainly about "fairness and equity" and try to avoid situations where people doing the same job at the same level get very different compensation, especially if they sit side by side. If the going rate for your job in Canada is 25% lower than in the US, it would be hard for the company to justify paying you 25% more than the other Canadian guys doing the same work.

Your compensation is NOT an absolute reflection of your work and value. It's very normal for people doing the same work and adding the same value getting different absolute compensation simply because the markets or cost of living are substantially different.

Answer 4

I did have one job where I chose to relocate for personal/family reasons, and offered to say on as a remote employee. The company agreed, but wanted to decrease my salary (~5-10%) to offset the costs of flying me back to the corporate office on a quarterly basis and other "risks" of making this arrangement. Unfortunately, I moved to a more expensive areas, but was made a larger offer by a local company after nearly a year.

I realize your situation is different then a typical salary negotiation. Although local norms and personal financials may determine what I'm willing to accept, I would not favor a company that wants to take some "socialist" stance and tell me they're going to pay me less after I win the lottery or marry someone with a lot of money. It's none of their business. Ask them if you move to a more expensive neighborhood and buy an expensive car, will they increase your salary? Basically, they're saying we can get someone in that area as good as you. You're right back to having to make the same defense as anyone else as to why you are worth what you're getting paid to the company. They could argue that you are for all practical purposes getting a raise due to your move.

Negotiate based on what you're able to demand. Deducting you salary is just going to make you feel punished and although it may not decrease your performance, you're more likely to look for another job even if the salaries are similar. Working for a company that is going to do this just makes them look bad.

Answer 5

Is it ethical for an employer to reduce your pay because you relocate?

In most cases no, unless you expect the quality or the quantity of the work you do to decrease as a result of your relocation, or unless as part of your relocation you'll also transition to working on a product that is marketed and sold exclusively in your new locale.

Assuming neither of those caveats apply, then why should you accept less money for doing exactly the same work? Your compensation should be a reflection of the value you provide to the company, not an amount that's tailored to lock you into a particular rung on the socioeconomic ladder. If the nature (and therefore, the value) of your contributions are the same before and after the move, then your compensation should be too.

Is it common for an employer to reduce your pay because you relocate?

Unfortunately, yes. There are certainly employers out there that implement fair compensation for remote employees. However, those are still the exception rather than the rule.

Most companies will still adhere to the notion that if a developer working in 'Place X' would receive $Y locally, then $Y is what they should pay. And there's a grain of truth in that perspective, insofar as an employee working on a product that would be primarily marketed and sold in 'Place X' should be compensated at the market rate for 'Place X' because it's the same market that determines how much value can be attained from the product (which in turn determines the developer's value to the company).

However in a modern context (and particularly where software development is involved), it's increasingly common for products to be marketed globally, or nationally, or at the very least, in a market that is not the same as the developer's locale. So the grain of truth is rotting away, and the perspective that it's always fair to pay an employee in 'Place X' the market rate for 'Place X' is rapidly becoming outdated.

Still, that's the perspective that many employers will advocate. If for no reason other than that it's cheaper for them overall.

Could there be other factors in play?

It sounds like you're talking about an international relocation. That can introduce other complications. For instance, tax laws may make it problematic for you to continue to draw your salary in US dollars. Differences in tax/payroll/accounting laws may also mean you cost the company more living in your new country than in your old one in terms of overhead.

Or your business may maintain a separate corporate entity in your new nation, and as a matter of policy may require all employees to be allocated to and compensated by the relevant corporation for their country. And there may not be consistent compensation from one corporate entity to the next (so you may be getting a paycut not because you moved, but because you moved to a completely different country).

International moves are more complicated than, say, moving from New York City to Birmingham, Alabama. Expecting nothing whatsoever to change with your compensation when relocating internationally is probably asking a bit too much. At the very least, you should probably expect your compensation to change from USD to CAD.

With that in mind, to answer your specific questions:

Does any other remote workers have any experience with an employer using a personal move to adjust your salary?

My salary, no. But I did see it happen to others, and I used that as an opportunity to strongly (and successfully) advocate moving to a compensation policy that was closely modeled after Stack Exchange's to ensure the problem would never happen again.

Would you expect a salary adjustment if you did move?

No, and I would argue hard against any such change. I would explain the inherent unfairness in paying me less money to do exactly the same work, point out that my relocation in no way impacts upon where, how, or for how much money the product(s) I'm working on can be sold, make it clear that I expect my compensation to reflect the value I create (and that the value I create does not vary according to what location I work from), and so on.

And if my employer insisted on reducing my salary by 25% over my objections, after I had clearly explained all the reasons why it is unfair of them to do so, I'd find a new employer. An employer who insists on paying you less because of where you live is essentially saying "we don't want you to actually get ahead in life; we want to keep you exactly where you are". And I've no interest in working for that sort of employer.

Answer 6

I'm not that surprised that a person going from the US to Canada would run into this. Salaries in the US, even in second-tier cost of living cities, are significantly higher than in Canada (25-50% more).

In addition, you're not just moving from one state to another. You're changing countries, tax codes, and very likely, organizational units. They are probably moving you under the organization in Canada.

Think of it this way...say the division they move you to has 8 programmers earning $75,000 US (all US dollars to avoid confusion). All of a sudden, you arrive earning $125,000 US. The division now has a huge impact on their budget, to say nothing of the fairness issue if you are all of relatively similar skill.

I totally agree that this should have been discussed with you, and long before you moved. Your options are limited at this point. I would have a polite discussion with them, and compare net salary (not gross). You may find the difference is not as bad as you think, after accounting for taxes, benefits, etc. They may also find a way to meet you in the middle.

If they will not, then you'll have to decide what to do. I would suggest sucking it up and staying, and beginning the job search for a new job. However, you may well discover that local salaries are even lower than your downward-adjusted salary!

Answer 7

There can be bureaucratic reasons for this choice

• They may need to pay more for you in taxes; reducing your salary saves them on the taxes they need to pay and recoups the cost of the increased taxes. (Ex. Say if they paid 5 USD in taxes per 100 USD they paid you, now they need to pay 10 USD per 100 USB so they want to pay you 95% of the amount so that the cost of employing you remains the same to them).

• Perhaps you are now WAY outside the Canadian pay brackets for your company (especially with the currency exchange). My company bases all their Canadian pay ranges off of [Large Canadian City] but the USA pay ranges are .... "more" to put it lightly. So while you make the point that you're doing the same work and they're asking you to take a pay cut; keep in mind that someone on their Canadian staff may be doing the exact same job as you (but better!), is at the top of the payscale for the position, but earning less than you

Answer 8

Continuing to work for your company in country A while receiving the standard compensation from country B is usually referred to as an expat arrangement. This is typically expensive for the parent company. It is very common to move employees in another country to a local employment contract with local conditions. Imagine that you instead had moved too country with a higher of living? Would you have expected a raise based on that? Have you checked if you are receiving other benefits in Canada that are partially offsetting your lower salary? Are they offering you a competitive salary for your region in Canada?

Answer 9

For larger companies like yours HR is sometimes overly dependent on actuarial tables that determine what the pay rate for your position is and what cost of living adjustment should be applied for the location. I suspect you are running up against this. There's also some flexibility when applying an offset for new hires.

Talk to your manager and see what they can do to maintain your current pay. Switching positions or teams can allow for renegotiation of that offset or starting on a new pay scale entirely. That doesn't have to be a promotion, it can be a lateral switch. If your manager hasn't dealt with relocation before they may not have been aware of the pay cut until it happened.

Answer 10

Instead of debating the merits of various theories of labor, I propose approaching this like a scientist: the theory with the most explanatory power is the best answer. In that spirit I propose the following conjecture. Your pay is primarily dependent on two things:

1. The level of responsibility you hold.

2. How easy you are to replace.

Pretty much every other consideration boils down to one of these two: e.g. cost of living figures in to how difficult it is to replace you, ditto any particular special skills you might possess.

This explains why managers make more than their subordinates despite producing less (or in many cases no) direct value to the company (they hold more responsibility). It also explains why janitors are paid little despite contributing a fair amount of value (they have few responsibilities and are easily replaced).

Is it fair? Guess that depends on how you define fairness. But that's the way it is (bar the obvious edge-case exceptions). So in the calculus of business (according to my conjecture) your job responsibilities didn't change, but in the eyes of your company you are now easier to replace with cheaper local talent.

If you question the pay decrease, make sure you do so on the grounds of how integral you are to operations and how simply replacing you with a cheaper employee will not manage to squeeze a square peg into a round hole.

Answer 11

What your employer does makes sense to me. Try to put yourself in the shoes of a coworker who still commutes to the office. The commute costs him valuable family time and gas money. Plus, everything is more expensive for him than for you (assuming your Canadian location has a lower cost of living.) You tried to gain profits by going remote, didn't you? Well, it's catching up to you. Life is sometimes fairer than you'd think.