What to Do When a Remote-Working Employee Moves to a Location With a Lower Cost of Living

When the remote working wave that the pandemic brought surged, workers fled expensive coastal cities by the thousands for places with lower costs of living. They left places like:

• Seattle
• San Francisco
• Los Angeles
• New York

And they migrated to more relaxed places, attracted by the slower pace and lower costs of living they offered. Cities like these have seen population booms:

• Boulder
• Bozeman
• Santa Fe

But, as workers have relocated to cities far less expensive than the ones where their office is, the situation has put small businesses in a bit of a pickle. Salary structures often consider the regional cost of living. So, what should business owners do when workers swap a spendy city for a much more economical spot in middle America?

The reality of the remote budget situation

Most workers likely left with the expectation of a continued salary. They probably planned on having the extra cash they’d have leftover after subtracting life expenses that are significantly less.

Companies like Facebook, Twitter, and Google were quick to remind employees of existing policies that those who move to thriftier markets could see up to a 25% pay cut as a result. But what about those whose companies don’t have a comparable policy in place?

Now those businesses are stuck paying a salary calculated for New York to a worker who now lives in Montana. It’s a delicate and tricky subject, but one that small businesses are certainly dealing with. Here are some tips, tricks, and considerations for companies navigating this sometimes delicate situation.

Take a look at your numbers and think about the long game

The first thing you should do is look at your numbers. Is paying the same salary to workers who have moved elsewhere really hurting your bottom line? If not, it’s probably best to not rock the boat—especially after your employees got your business through the pandemic.

You should also be sure that you’re not making any short-sighted decisions that will hurt the business in the long run. Every savvy business owner knows that hiring and training a new worker costs more than it does to hold onto an existing one.

If you tinker with someone’s salary, there’s a good chance they’ll start looking elsewhere for work. And with the high number of remote jobs and the talent vacuum created by the Great Resignation, perhaps now isn’t the time to do anything.

Plus, who knows what is and isn’t going to be permanent these days? What if your city slicker workers tire of their rural adventure and want to move back? Then you’ll be scraping to find the money you need to pay their “city salary” again.

Consider making other adjustments

Even if your numbers could use a boost, making salary adjustments isn’t the only way to remedy them. If workers are working from home, that eliminates their need to commute and, thus, means that you could get away with discontinuing commuter benefits instead.

Plus, having employees who work remotely could save you money in other ways. Last year the Wall Street Journal reported remote work is the new signing bonus.

Rather than offering cash signing bonuses, you can offer remote work instead.

Even if you’re still paying higher salaries, this is a sure-fire way to boost your bottom like at least a little bit.

If you do have to make salary adjustments, do it over time

Reducing your employee’s pay is a bold move that comes with a lot of risk. It could result in anything from employees negotiating hard against the changes to them up and quitting altogether. But, sometimes uncomfortable choices simply have to be made, and surviving the prolonged pandemic has undoubtedly been a difficult time.

If you decide that you have to reduce the pay of employees who have relocated to more affordable markets, be sure to be forthcoming about it:

• Explain the situation to them
• Work together to find a number that might be manageable for you both
• See if you can balance other benefits like more paid time off with a salary cut

Once you reach a conclusion, the process you use to phase in the difference is vital. A shift like this will be — at least in some ways — a challenge for your workers to absorb or adjust to. The worst thing you can do is drop a pay cut bomb on your dedicated workers. So, make it a collaborative process.

In an ideal world, you would set a timeline for their pay to bounce back once the business gets back on its feet. You could consider revisiting the numbers every six months, for example.

One solution size won’t fit all

None of this is easy to handle, and it’s all very delicate. Still, with the proper foresight and care for your employees front and center, you’re sure to get through it alright. And remember: Every company is different. Take these lessons and adjust them to fit the unique parameters of your business and the unique workers who comprise it.