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One thing this doesn't mention is the pay cuts that happen if you do decide to relocate to cheaper areas. Both me and my Wife's company have pay bands based on

One thing this doesn't mention is the pay cuts that happen if you do decide to relocate to cheaper areas. Both me and my Wife's company have pay bands based on geographical region(most employees know nothing about this and most companies employ these salary COL changes for relocation) and certain regions you can take a big pay cut. Say your salary in the bay area is 100k for example, move to the South, say Florida and it typically drops 30%(typically as low as they chop your salary) so your new salary is 70k, Denver area is 15% paycut etc. These numbers change somewhat from company to company but they do exist for most companies and should be factored in.

daenz 6y ago
What's the rationale for this?
- city41 6y ago
  From what I understand, the employee loses leverage. If you don’t like the lower salary, often your only option is another company in your area that will also pay an equivalently low salary. Hopefully if enough companies start hiring remote workers, our leverage will go up.
  - bhupy 6y ago
    I'm not so sure that the leverage will change. If remote work were to go mainstream and that became the norm, employers won't pay different salaries based on location: they will pay one salary based on the cheapest location. It's not that different from outsourcing work today — there might exist manufacturing workers in the Rust belt that are capable of doing manufacturing, but employers just shift all their supply chains out to cheaper countries, since there's little difference between a Chinese person's labor, and a Pennsylvanian's labor. Similarly, if everyone is remote, then the difference between employees that live in low COL areas and employees that live in high COL areas starts to really blur. There might be exceptions to this for extremely high skilled engineers, but they're marginal cases. If we move to an all-remote (or even a "most-remote") engineering culture, then software engineering jobs will simply be "outsourced" to the cheapest COL areas.
    - city41 6y ago
      I think this assumes all engineers are seen as equal. In some cases they may be. But in other cases companies are looking for good talent. If that good talent can show many remote companies are interested in them, they can likely command a nicer salary. But from what I understand today there aren’t enough remote friendly companies to make that work.
      - bhupy 6y ago
        If you're making the argument that good talent will always be able to command a high salary...nobody doubts that. This "good talent" is not the norm. Google has tens of thousands of software engineers, and only a handful of them (mostly the staff/principal/distinguished engineers) have the kind of negotiation leverage you're talking about, but they already get paid a lot in high COL cities anyway.
        city41 6y ago
        True. Very top talent can basically do whatever they want. But there’s a spectrum and I think a wider range can benefit. I think you and I are mostly disagreeing on that. I think today a lot of “good but not top” talent find themselves crammed into the very crowded Bay Area. I’m hopeful that can be relieved a bit. But I’m being pretty optimistic.
- TulliusCicero 6y ago
  They have to pay more in higher CoL areas to attract candidates -- either ones from that area, or ones who would be moving in. They don't have to pay more in cheaper areas to attract candidates, so they don't. I took a substantial paycut at Google when I transferred from the US to Germany, for example, even though I was doing essentially the same work.
- gamblor956 6y ago
  It costs someone less to live in a cheaper city so businesses don't need to pay as much to hire workers in that city. The employee's choice is to take the pay cut, or to take a lower-paying job at another company in their new home city.
- troydavis 6y ago
  Currently, the market for location-based labor is deeper than the market for location-agnostic labor, so employers assume that their competition is local - and often it is. That's less true for the top 20% or so of tech candidates. A person with known skills and a good network can obtain offers from multiple remote-friendly companies today. There's already a location-ignorant market for their skills (probably not at San Francisco comp, but also not at rural North Dakota comp). As more remote jobs are available, more people will receive multiple remote offers, that is, they'll find a deeper location-ignorant market for their skills. Over time, one would expect this location-ignorant comp to settle around the actual value added. (Longer explanation in a related thread: https://news.ycombinator.com/item?id=18900072#18903795 https://news.ycombinator.com/item?id=18900072#18903795)
  - daenz 6y ago
    Interesting, thanks for the reading. I am tempted now to get a higher salary in an expensive location, work on-site and then remotely from that location, then quietly move away without telling anyone. As long as my hours are the same and work quality don't change, nobody should be the wiser.
    - tyre 6y ago
      you have to have payroll run in the state where you work so you couldn't do this without either updating with HR or tax fraud
      - daenz 6y ago
        Cost of living within a state can vary pretty greatly. eastern vs western Washington for example. Spokane vs Seattle: https://www.bestplaces.net/cost-of-living/spokane-wa/seattle-wa/150000 https://www.bestplaces.net/cost-of-living/spokane-wa/seattle...
- subsubzero 6y ago
  Sorry to be cynical but I assume its just profit driven, keep in mind not all companies employee these bands. For those that do their rationale is why pay a employee more than the region dictates? I think an employee needs to figure out if the COL drop still makes sense to where they move. Say you make 200k in the bay area and move to san diego, which I was told is about a 10% to 15% paycut, you still make 170k and a typical engineer there makes alot less than this, so basically its all down to how bad you want to move to an area and if it makes financial/career sense.
- mbillie1 6y ago
  The company feels it can decide your quality of life for you, instead of your compensation. It's kind of unethical (imo) but not uncommon. I'm fortunate that my current remote employer does not engage in this sort of thing.
- SpicyLemonZest 6y ago
  Most companies agree with the general consensus that SV software engineers are overpaid, at least a little bit. They aren't willing to pay that premium if they don't feel they have to.
- downerending 6y ago
  Theoretically, if they pay market, they can get someone to take the position. If you want over the market rate, there's a fair chance that someone with similar skills will under-bid you. Other factors are at play than pure rational economics, though, so that might or might not work out.
kevan 6y ago
In a world where a critical mass of companies that want top talent support full WFH I don't think this will be a huge issue. Google and Amazon already have offices around the country and Amazon's premium for SF/NYC vs all other markets only appears to be ~10%.
TrackerFF 6y ago
Higher income means higher taxes, and if you're in a high COL area, then there's the added expenses. Of course, if you've purchased a home in said high COL, that could be seen as an investment - and the high mortgage goes towards equity. I can only talk about my own experience is the living / working in low vs high COL area: When I live in a high COL area, most my money went towards housing. And while my salary was significantly higher, it was also added stress. I was absolutely dependent on employment, especially the first years. If I lost my job, and couldn't find a new job FAST, then that would effectively mean eviction or foreclosure. That kinda created extra overhead, knowing that you'd be bound to some work - no mate what - until your house was paid off. As for living in low COL, it was obviously much less stressful. Jobs weren't as plentiful, but finding a place to live was a non-issue. The downturn was that you actively needed to invest your money, because you knew that your home wasn't going to appreciate much in price. If you wanted to move from low COL to a high COL, sales from you home or whatever would be pocket change compared to the initial costs of getting started in said high COL city. But then again, the fact that you could be more selective about you jobs, and getting laid off wouldn't be the end of the world, was def. something that reduced stress. So purely from a financial standpoint, there are pros and cons to both.
- city41 6y ago
  I definitely feel that stress about living in a high COL area. The very large rent/mortgage is always looming. Even if you have a good emergency fund you’ll burn through a ton of money if it takes a while to find a new job should you lose your current one.
autokad 6y ago
I personally have always been against paying people different rates based on geography. if a person offers value, they should be paid for that value regardless. some people say, but shouldnt their cost of living be taken into account? yes previously, but not when we choose to live where we want. I feel like that whole argument goes away once we are choosing where we live. that being said, I would expect companies to muscle our wages down using this as an excuse. the good side is that there is financial incentive for companies to give us flexibility, as it costs ball park 1500$/month/employee to have a dedicated office space for them.
- bhupy 6y ago
  But we already pay people differently based on geography... If you are a software engineer and you show up to work in an office in Alabama, you already make less than the same software engineer showing up to work in an office in Manhattan — even if you are doing the same work for the same number of hours. This is already happening today. The only difference with remote work is that you don't show up to work in an office, you show up to work in your pajamas and the office is at home.
  - Wohlf 6y ago
    if you think the difference within a country is bad try being a developer in Russia, India, or China.
    - bhupy 6y ago
      Right, based on the value I provide to my multi-national employer, I ought to be able to buy a whole new house every year off of my salary, while living in India. It’s only fair!
- deleted 6y ago
  [deleted]
- benhurmarcel 6y ago
  > if a person offers value, they should be paid for that value regardless. That sounds nice on paper, but in practice I guess you wouldn't want to get paid what your equivalent in eastern Europe or Asia currently earns.
triyambakam 6y ago
As another data point, the company I work for pays the same no matter where you live - from Montana to Hawaii - so it works out favorably for people wanting to live in a lower COL area.
- asdff 6y ago
  For now. As more companies start shifting to remote work, these geographic based pay rates will only get more widespread. It's always a race to the bottom.
aantix 6y ago
Push back on this. You deliver the same value from SF or Denver. They have the budget. They can (and will) pay you.
- bhupy 6y ago
  That works...right up until someone else in Denver is willing to do the same work for less. The salary needed to afford the median home in San Francisco is about $183,000. In Denver, the salary needed to afford the median home is about $87,000 [1]. What happens when another Denver software engineer is willing to accept what they would have accepted working for a firm in Denver, because it affords them a satisfactory standard of living? [1] https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...
  - aantix 6y ago
    And that's true to a certain extent. Especially if you're building commodity software. Or better stated, you're a commodity programmer. But if you're a talented engineer, you've been on a few large scale projects, can discuss architecture - scaling, algorithms, have a public portfolio, you're in a different group. The hiring company - their resources are finite. Time from other engineers to screen engineers. The may have infinite applications, but their time isn't infinite. And if they're going to filter you out because of comp requirements, they will do so in the beginning. The really senior devs take a long time to screen - so if you've gotten past the high salary filter and have gotten past the really hard technical screens, you now have the upper hand. It costs a company a ton of time (and money) to let a senior dev with an offer slip away. More succinctly - if you're a talented engineer, there are companies that will pay a premium for your services. Yes, even SF prices. Hold your ground on the salary. Take as many job calls as possible, tell them your number. You're filtering them as much as they're filtering you. It's the only way to test if it's too high. Look at levels.fyi, paysa, glassdoor, try to get a handle on baselines and the outlier deals. Filter out those companies that are trying to hire on the cheap. And then kill it in the interviews with the companies that remain.
csdreamer7 6y ago
There is also a cost to employment besides salary. Every state has their own laws and orgs to register to. (And every country has different social insurance taxes.) This means not only needing to hiring a lawyer to make sure they are in compliance with local laws, but paying an administrator to manage it. It is not just the employer pocketing wages in LCOLs. There is a cost. For larger companies; eventually they build out to a point in their main hq or want to provide jobs to get the support of that areas politicians in Congress; that these additional costs for hiring in another state are outweighed by the benefits. But this can be very prohibitive to startup or even medium size companies. Especially 'slow-growth' ones that do not take VC funding and do not have access to a VC's network of lawyers. If I move to Washington, with no income tax, but does have a revenue tax(B&O); does my remote employer now have a business nexus within that state? Do they have to pay that B&O tax that Washington levies (is it a tax for national revenue or just from all revenue within the state)? Not a lawyer. Taking a salary cut, when you also take a bigger cut to inflated property values and taxes; is not necessarily the employer taking advantage, or even a net gain for both sides. A better argument to me to staying in certain areas like the SV or NYC is losing the ability to easily network and find another company that would employ FAANG level skills. This ability is naturally diminished during COVID and I imagine many companies will take steps to keep their work decoupled from their offices in case another pandemic breaks out. I still do think about it as housing is just prohibitive here in CA where there are local tech jobs.
PenguinCoder 6y ago
Yeah, agreed. I don't appreciate this type of race to the bottom. I live in a Low cost of living area, but my work output is not dependent on geographical location. If I do less or worse work than someone on my team in a HCOL area, I would be up for a PIP or worse. I would be absolutely fine with getting paid less, if my company had an expectation of lesser output. But, as it stand, I am expected to deliver as well or better than my peers (stacked ranking). In this case, I do not agree with the lower salary with the same output requirements. If a company wants to pay less for the role, they shouldn't expect the same output. Geographic region is independent of the work required to be completed.
- bhupy 6y ago
  You should put that theory to the test. Just stop delivering at all if you live in a low COL area until your employer pays you more.
- benhurmarcel 6y ago
  And yet you still gets paid a lot more than your equivalent in a lower-cost country. Yet employees in Europe or Asia aren't expected to produce less either.
  - PenguinCoder 6y ago
    You are correct, and I still find that outsourcing to be a problem.

daenz 6y ago

What's the rationale for this?

city41 6y ago
From what I understand, the employee loses leverage. If you don’t like the lower salary, often your only option is another company in your area that will also pay an equivalently low salary. Hopefully if enough companies start hiring remote workers, our leverage will go up.
- bhupy 6y ago
  I'm not so sure that the leverage will change. If remote work were to go mainstream and that became the norm, employers won't pay different salaries based on location: they will pay one salary based on the cheapest location. It's not that different from outsourcing work today — there might exist manufacturing workers in the Rust belt that are capable of doing manufacturing, but employers just shift all their supply chains out to cheaper countries, since there's little difference between a Chinese person's labor, and a Pennsylvanian's labor. Similarly, if everyone is remote, then the difference between employees that live in low COL areas and employees that live in high COL areas starts to really blur. There might be exceptions to this for extremely high skilled engineers, but they're marginal cases. If we move to an all-remote (or even a "most-remote") engineering culture, then software engineering jobs will simply be "outsourced" to the cheapest COL areas.
  - city41 6y ago
    I think this assumes all engineers are seen as equal. In some cases they may be. But in other cases companies are looking for good talent. If that good talent can show many remote companies are interested in them, they can likely command a nicer salary. But from what I understand today there aren’t enough remote friendly companies to make that work.
    - bhupy 6y ago
      If you're making the argument that good talent will always be able to command a high salary...nobody doubts that. This "good talent" is not the norm. Google has tens of thousands of software engineers, and only a handful of them (mostly the staff/principal/distinguished engineers) have the kind of negotiation leverage you're talking about, but they already get paid a lot in high COL cities anyway.
      - city41 6y ago
        True. Very top talent can basically do whatever they want. But there’s a spectrum and I think a wider range can benefit. I think you and I are mostly disagreeing on that. I think today a lot of “good but not top” talent find themselves crammed into the very crowded Bay Area. I’m hopeful that can be relieved a bit. But I’m being pretty optimistic.
TulliusCicero 6y ago
They have to pay more in higher CoL areas to attract candidates -- either ones from that area, or ones who would be moving in. They don't have to pay more in cheaper areas to attract candidates, so they don't. I took a substantial paycut at Google when I transferred from the US to Germany, for example, even though I was doing essentially the same work.
gamblor956 6y ago
It costs someone less to live in a cheaper city so businesses don't need to pay as much to hire workers in that city. The employee's choice is to take the pay cut, or to take a lower-paying job at another company in their new home city.
troydavis 6y ago
Currently, the market for location-based labor is deeper than the market for location-agnostic labor, so employers assume that their competition is local - and often it is. That's less true for the top 20% or so of tech candidates. A person with known skills and a good network can obtain offers from multiple remote-friendly companies today. There's already a location-ignorant market for their skills (probably not at San Francisco comp, but also not at rural North Dakota comp). As more remote jobs are available, more people will receive multiple remote offers, that is, they'll find a deeper location-ignorant market for their skills. Over time, one would expect this location-ignorant comp to settle around the actual value added. (Longer explanation in a related thread: https://news.ycombinator.com/item?id=18900072#18903795 https://news.ycombinator.com/item?id=18900072#18903795)
- daenz 6y ago
  Interesting, thanks for the reading. I am tempted now to get a higher salary in an expensive location, work on-site and then remotely from that location, then quietly move away without telling anyone. As long as my hours are the same and work quality don't change, nobody should be the wiser.
  - tyre 6y ago
    you have to have payroll run in the state where you work so you couldn't do this without either updating with HR or tax fraud
    - daenz 6y ago
      Cost of living within a state can vary pretty greatly. eastern vs western Washington for example. Spokane vs Seattle: https://www.bestplaces.net/cost-of-living/spokane-wa/seattle-wa/150000 https://www.bestplaces.net/cost-of-living/spokane-wa/seattle...
subsubzero 6y ago
Sorry to be cynical but I assume its just profit driven, keep in mind not all companies employee these bands. For those that do their rationale is why pay a employee more than the region dictates? I think an employee needs to figure out if the COL drop still makes sense to where they move. Say you make 200k in the bay area and move to san diego, which I was told is about a 10% to 15% paycut, you still make 170k and a typical engineer there makes alot less than this, so basically its all down to how bad you want to move to an area and if it makes financial/career sense.
mbillie1 6y ago
The company feels it can decide your quality of life for you, instead of your compensation. It's kind of unethical (imo) but not uncommon. I'm fortunate that my current remote employer does not engage in this sort of thing.
SpicyLemonZest 6y ago
Most companies agree with the general consensus that SV software engineers are overpaid, at least a little bit. They aren't willing to pay that premium if they don't feel they have to.
downerending 6y ago
Theoretically, if they pay market, they can get someone to take the position. If you want over the market rate, there's a fair chance that someone with similar skills will under-bid you. Other factors are at play than pure rational economics, though, so that might or might not work out.

kevan 6y ago

In a world where a critical mass of companies that want top talent support full WFH I don't think this will be a huge issue. Google and Amazon already have offices around the country and Amazon's premium for SF/NYC vs all other markets only appears to be ~10%.

TrackerFF 6y ago

Higher income means higher taxes, and if you're in a high COL area, then there's the added expenses. Of course, if you've purchased a home in said high COL, that could be seen as an investment - and the high mortgage goes towards equity. I can only talk about my own experience is the living / working in low vs high COL area: When I live in a high COL area, most my money went towards housing. And while my salary was significantly higher, it was also added stress. I was absolutely dependent on employment, especially the first years. If I lost my job, and couldn't find a new job FAST, then that would effectively mean eviction or foreclosure. That kinda created extra overhead, knowing that you'd be bound to some work - no mate what - until your house was paid off. As for living in low COL, it was obviously much less stressful. Jobs weren't as plentiful, but finding a place to live was a non-issue. The downturn was that you actively needed to invest your money, because you knew that your home wasn't going to appreciate much in price. If you wanted to move from low COL to a high COL, sales from you home or whatever would be pocket change compared to the initial costs of getting started in said high COL city. But then again, the fact that you could be more selective about you jobs, and getting laid off wouldn't be the end of the world, was def. something that reduced stress. So purely from a financial standpoint, there are pros and cons to both.

city41 6y ago
I definitely feel that stress about living in a high COL area. The very large rent/mortgage is always looming. Even if you have a good emergency fund you’ll burn through a ton of money if it takes a while to find a new job should you lose your current one.

autokad 6y ago

I personally have always been against paying people different rates based on geography. if a person offers value, they should be paid for that value regardless. some people say, but shouldnt their cost of living be taken into account? yes previously, but not when we choose to live where we want. I feel like that whole argument goes away once we are choosing where we live. that being said, I would expect companies to muscle our wages down using this as an excuse. the good side is that there is financial incentive for companies to give us flexibility, as it costs ball park 1500$/month/employee to have a dedicated office space for them.

bhupy 6y ago
But we already pay people differently based on geography... If you are a software engineer and you show up to work in an office in Alabama, you already make less than the same software engineer showing up to work in an office in Manhattan — even if you are doing the same work for the same number of hours. This is already happening today. The only difference with remote work is that you don't show up to work in an office, you show up to work in your pajamas and the office is at home.
- Wohlf 6y ago
  if you think the difference within a country is bad try being a developer in Russia, India, or China.
  - bhupy 6y ago
    Right, based on the value I provide to my multi-national employer, I ought to be able to buy a whole new house every year off of my salary, while living in India. It’s only fair!
deleted 6y ago
[deleted]
benhurmarcel 6y ago
> if a person offers value, they should be paid for that value regardless. That sounds nice on paper, but in practice I guess you wouldn't want to get paid what your equivalent in eastern Europe or Asia currently earns.

triyambakam 6y ago

As another data point, the company I work for pays the same no matter where you live - from Montana to Hawaii - so it works out favorably for people wanting to live in a lower COL area.

asdff 6y ago
For now. As more companies start shifting to remote work, these geographic based pay rates will only get more widespread. It's always a race to the bottom.

aantix 6y ago

Push back on this. You deliver the same value from SF or Denver. They have the budget. They can (and will) pay you.

bhupy 6y ago
That works...right up until someone else in Denver is willing to do the same work for less. The salary needed to afford the median home in San Francisco is about $183,000. In Denver, the salary needed to afford the median home is about $87,000 [1]. What happens when another Denver software engineer is willing to accept what they would have accepted working for a firm in Denver, because it affords them a satisfactory standard of living? [1] https://www.hsh.com/finance/mortgage/salary-home-buying-25-cities.html https://www.hsh.com/finance/mortgage/salary-home-buying-25-c...
- aantix 6y ago
  And that's true to a certain extent. Especially if you're building commodity software. Or better stated, you're a commodity programmer. But if you're a talented engineer, you've been on a few large scale projects, can discuss architecture - scaling, algorithms, have a public portfolio, you're in a different group. The hiring company - their resources are finite. Time from other engineers to screen engineers. The may have infinite applications, but their time isn't infinite. And if they're going to filter you out because of comp requirements, they will do so in the beginning. The really senior devs take a long time to screen - so if you've gotten past the high salary filter and have gotten past the really hard technical screens, you now have the upper hand. It costs a company a ton of time (and money) to let a senior dev with an offer slip away. More succinctly - if you're a talented engineer, there are companies that will pay a premium for your services. Yes, even SF prices. Hold your ground on the salary. Take as many job calls as possible, tell them your number. You're filtering them as much as they're filtering you. It's the only way to test if it's too high. Look at levels.fyi, paysa, glassdoor, try to get a handle on baselines and the outlier deals. Filter out those companies that are trying to hire on the cheap. And then kill it in the interviews with the companies that remain.

csdreamer7 6y ago

There is also a cost to employment besides salary. Every state has their own laws and orgs to register to. (And every country has different social insurance taxes.) This means not only needing to hiring a lawyer to make sure they are in compliance with local laws, but paying an administrator to manage it. It is not just the employer pocketing wages in LCOLs. There is a cost. For larger companies; eventually they build out to a point in their main hq or want to provide jobs to get the support of that areas politicians in Congress; that these additional costs for hiring in another state are outweighed by the benefits. But this can be very prohibitive to startup or even medium size companies. Especially 'slow-growth' ones that do not take VC funding and do not have access to a VC's network of lawyers. If I move to Washington, with no income tax, but does have a revenue tax(B&O); does my remote employer now have a business nexus within that state? Do they have to pay that B&O tax that Washington levies (is it a tax for national revenue or just from all revenue within the state)? Not a lawyer. Taking a salary cut, when you also take a bigger cut to inflated property values and taxes; is not necessarily the employer taking advantage, or even a net gain for both sides. A better argument to me to staying in certain areas like the SV or NYC is losing the ability to easily network and find another company that would employ FAANG level skills. This ability is naturally diminished during COVID and I imagine many companies will take steps to keep their work decoupled from their offices in case another pandemic breaks out. I still do think about it as housing is just prohibitive here in CA where there are local tech jobs.

PenguinCoder 6y ago

Yeah, agreed. I don't appreciate this type of race to the bottom. I live in a Low cost of living area, but my work output is not dependent on geographical location. If I do less or worse work than someone on my team in a HCOL area, I would be up for a PIP or worse. I would be absolutely fine with getting paid less, if my company had an expectation of lesser output. But, as it stand, I am expected to deliver as well or better than my peers (stacked ranking). In this case, I do not agree with the lower salary with the same output requirements. If a company wants to pay less for the role, they shouldn't expect the same output. Geographic region is independent of the work required to be completed.

bhupy 6y ago
You should put that theory to the test. Just stop delivering at all if you live in a low COL area until your employer pays you more.
benhurmarcel 6y ago
And yet you still gets paid a lot more than your equivalent in a lower-cost country. Yet employees in Europe or Asia aren't expected to produce less either.
- PenguinCoder 6y ago
  You are correct, and I still find that outsourcing to be a problem.