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13 Sep 2020: Technology companies may cut salaries for leaving Bay Area

In light of COVID-19, many Silicon Valley companies have started offering permanent work from home option.

Now, Bloomberg reports that some tech firms offering this deal may cut their employees’ salaries – if they choose to leave the super-expensive San Francisco Bay Area for some other more affordable region.

Here is all you need to know about it.

Companies: VMware cutting pay of its employees

Software company VMware is set to cut the pay of employees who take up its offer of permanent remote work and then shift from the San Francisco Bay area, where its headquarters are located, to some other less-expensive region.

For instance, employees going to Denver will get an 18% cut, while those going to LA or San Diego will see an 8% pay deduction.

Reason: Cost of labor being adjusted, says VMware’s HR head

Rich Lang, the senior VP of HR at VMware, told Bloomberg that this pay cut is based on the cost of labor in different regional zones and benchmark salary variations set between firms competing for workers.

He claimed this system could result in a pay cut for some workers but also increase their salaries if they choose to go to a more expensive region.

Other companies: Twitter, Facebook also considering similar move

Along with VMware, Twitter and Facebook are also among the companies that have implemented or are considering implementing a similar salary policy.

Twitter’s spokesperson said that the company has a competitive approach to localize compensation, while Facebook has openly said that it may cut employees’ pay depending on where they choose to live to perform their work from home duties.

Short-term shift: Short-term relocation not likely to affect pay

Lang emphasized that VMware employees who would relocate temporarily to be with family et al, or for some short-term reason will not get the pay cut.

“We are asking employees to be upfront and honest, because that’s the expectation at VMware, but also the governments require you pay your taxes based on where you work,” he added in the statement.