Taking a pay cut to work remotely

Hrishikesh Pardeshi

Hrishikesh Pardeshi

Just under half (45%) of UK employees would be interested in taking a pay cut to continue working remotely long-term, according to research by Owl Labs.



Here's what our users had to say:

  • Lucas Wagner said "Interesting numbers, Hanadi. Clearly, there are arguments for and against such a proposal. But, one question that baffles me is- why should a person be paid less for doing the same amount of work remotely? 🤔"

  • Jordan Seeley said "Hi Lucas,  Employers have a built-in level of feedback when someone is present in a workplace, that just doesn't exist remotely.  If someone is in the office everyday they know what time they arrive and whether they spend most of the day working, or most of the day procastinating. This is an issue of trust, and is why you will rarely see someone transitioning from office based work to home based work at the same company taking a pay cut - they have already built that trust. A new hire on the other hand comes with increased risk, someone who isn't meeting your standards in the office can be managed, it's more difficult to identify and deal with such issues with a remote worker. Additionally, it's easier to develop someone you have constant informal contact with. This is offset by the increased costs of having someone physically in an office, but you'll find the issue of trust is one that will lead a lot of managers to make lower salary offers for remote workers.  In short, a remote worker is a bigger risk, so that is built into their salary."

  • Karthik Sridharan said "Hey Jordan, I really like this explanation of saying that the salary given is an expectation of the amount of risk :) If we were to extend this premise though, do you think: 1. Companies could tackle this with a higher component of variable salary instead of reducing the total salary? 2. If companies don't do 1., then is there a correction let's say 8-10 months later (or say in the 1-year appraisal) when they feel that the person they have hired is truly trustworthy. I guess, there should be because now the cost of losing a good person is high for the company too. 3. If we accept 2., candidates can possibly take the pay cut knowing that there will be a correction just a year into their tenure in the company?"

  • Jordan Seeley said "Hi Karthik, My recommendation would be for the candidate to push for an agreed payrise upon completion of a probationary period. This takes away the risk for the hiring company, as they can terminate the contract during the probationary period if the employee isn't performing. The candidate is basically saying, I believe I am worth X, and I'm so confident that you will agree after 3/6/12 months, that I'm prepared to take a pay cut until that point."

  • Karthik Sridharan said "Well said Jordan. Makes a lot of sense."

  • Hanadi said "HR's traditional approach to compensation is broken - like talent acquisition, it was stuck in the past. This vertical in HR is begging for a radical shift in thinking and innovating new models that align and support new work models going forward."

  • Karthik Sridharan said "Overall, I agree that HR as a department is a bit sluggish to move with the times, Hanadi. But in this context, are you in agreement with what Jordan is suggesting?"

  • Boris Borisov said "From my observations in hiring people,people typically consider equally good to work on-site vs. remote with 10-20% pay cut. However, in practice when making job offers, it's hard to convince people to change a job, and it is hard to convince people to go down in salary. So in practice, I've noticed that 20% salary increase works well to motivate people to change their job. Of course, this is quite rule of thumb advice, for example, if you have a great employer brand, it will be easier."

  • Ermira Krasniqi said "Agreed, Boris. I think most people living in large cities would be much more interested in taking a 10-20% pay cut to work remotely than in other regions."

  • Hanadi said "agree with you Boris - throw in incentives like cheaper cost of living, healthier lifestyle, closer to nature or hometowns,"

  • Frederick said "I would, as long as this would be fully remote. If I can live in a cheaper country working remotely, I'd probably take the pay cut. Really interesting numbers though. I wonder what that would look like in hte rest of Europe and Canada and the US."

  • Ashley Thomas said "I am surprised people in UK are ready to take the cut when the country has some of the most expensive cities & a high cost of living. I am guessing the stats would be skewed towards people who're planning to live in their hometowns instead of cities."

  • Hanadi said "companies in the US are also going down that route - tech companies like VMWare, twitter, Facebook were among the first to announce compnesation change plans https://www.businessinsider.com/tech-companies-cutting-salaries-outside-bay-area-twitter-facebook-vmware-2020-9"

  • Hanadi said "correct Ashley - the new state of remote work is sparking a reverse migration from cities to villages across all countries so people will be willing to take a pay cut if it means they can keep their job and be closer to hometowns at the same time."

  • Bashar Abdullah said "Lovely topic, though I'd hate it if companies use the answer to lower salaries. I've personally been working from home for over 10 years now on my own business, and a lot of people told me to get an easy government job while keeping my own work. One of my main issues was always commute time.  I asked someone "Would you take 100 KWD (~$350) cut if I removed all cars from the road for your commute?". He said he'll double that just to remove the taxis from there. This was ofcourse just theoretical to show how bad commute to work was. Throw in remote-work, and definitely a lot of people will be happy to do it. Several reasons 1- Save on commute time: This is usually 1.5-2 hours daily. This is time you can use to sleep better, do your hobbies, go out, or have more family time. 2- No stress from commute: Some studies showed long time in traffic jams can have serious effect on person's health. 3- Less laundry/planning/preparing to go to work. 4- You can live in far cheaper more beautiful place. 5- You can even travel the world while working remotely! The conflict is interesting as some companies now are using remote work to lure in talents, Switzerland is forcing companies to pay rent for remote workers, as they are using their own home as office, while I expect other companies will impose pay cut for remote workers on the long run."

  • Karthik Sridharan said "Great take and ummary, Bashar. Of course, the future is quite uncertain and also exciting. Will be interesting to see how your predictions play out."

  • Hanadi said "thank you very much Bashar for this - you are spot on - yes studies are showing that people are willing to take pay cuts to live a lifestyle they desire. I think this new normal will increasingly put pressure on employers to innovate their comp and ben strategies beyond a mere salary cut to be able to attract this increasingly growing talent base."

  • Ermira Krasniqi said "Great post, Bashar! Absolutely agree with the reasons you stated."

  • heremaia durie said "Hey there! I took a 10% paycut from my last job to work remotely and can say that I'm a lot happier doing so. A big thing for me is that when covid dies down, we have a 6 month policy where you can live anywhere and still get paid in the local currency of the home country, in my case NZD (new Zealand) I could live in a cheaper country Say Indonesia, have a low cost of living and still earn NZD. I think Pay cut needs to factor in relative wealth based on cost of living too! I see that companies such as twitter and spotify as well are guaranteeing silicon valley rates globally, fingers crossed for my company as well!"