Subscribe
The insider's edge on job search & hiring™

Zuckerberg plan cuts pay for up to 50% of Facebook employees

Facebook workers get remote work option-but it could come with a pay cut

Source: arsTECHNICA
By Timothy B. Lee

Facebook

“We’re going to be the most forward-leaning company on remote work at our scale,” Facebook founder and CEO Mark Zuckerberg announced in a Thursday livestream to employees. “I think that it’s quite possible that over the next five to 10 years, about 50 percent of our people could be working remotely.”

Some Facebook employees will be eligible to request remote work status and relocate to another metropolitan area. They might do this to be closer to family or to move to a city with a lower cost of living. But this option comes with a catch.

“Our policy here has been for years — is already — that [compensation] varies by location,” Zuckerberg said. “We pay a market rate, and that varies by location. We’re going to continue that principle here.” In other words, a Bay Area engineer who chooses to relocate to Omaha or Birmingham would take a pay cut.

Zuckerberg said, “we’re going to need everyone to tell us where you’re working from now.” He added that “we’ll basically adjust salary to your location at that point.”

Zuckerberg says that Facebook is “mostly going to rely on the honor code for this” — but not entirely. Facebook will check IP addresses to help detect people who lie about where they’re living.

“There will unfortunately have to be severe ramifications for people who are not honest about this,” Zuckerberg said. One reason for that, he said, is that Facebook needs to know where its employees live for tax purposes.

Nick’s take

Leave it to Silicon Valley’s greediest CEO to boost profits by leveraging COVID-19 to induce up to half his employees to move out of the Bay Area so he can cut their salaries. Hey — that’s how I read it. If about 50% of Zuck’s workers go remote, FB will effectively cut up to 50% of its payroll, using what he calls “the honor code.” Do ya think Zuck sends lower Facebook stock dividends to investors in Greybull, Wyoming because their cost of living is lower than his?

Is an engineer that lives in Silicon Valley worth less when they move to Biloxi? How about if they get hired while living in Altoona? Should FB employees with fat mortgages and Lamborghinis get paid more because their cost of living is higher? Did you know that “offshoring jobs” to save money includes moving them to Texarkana? How would you negotiate your compensation deal if you got an offer from Facebook?

 

 

: :

Share
35 Comments
  1. I work remotely, but I get paid the going rate my company has for the JOB, not based on my standard of living for where I reside.

    This is as it should be.

    If my employer docked my pay because I live in a state with no income tax (or lower housing cost, or lower cost of living), I’d be pissed enough to find a different employer…..

    • @J: Imagine you have a job in Sunnyvale, CA making $100,000. You are, in fact, entitled to $100K because that’s what your company pays you for your work. Your company tells you to work remotely for the foreseeable future. You move to a city a thousand miles away where the cost of living is 20% lower. Would you accept a 20% pay cut to do the same work?

      This is where employers will hit the wall. They pay you for the work you do; they don’t pay your landlord for your digs. I think this corona event is going to upend how people get paid. Workers who go remote with their company’s blessing will make the market based on the value of their work, not on how much their groceries and mortgage cost.

      Consider: When you order a book from Amazon, does Amazon charge you a price based on where you live? Or does Amazon believe you are entitled to the same price everyone else pays? I’m sure Jeff Bezos would charge you 30% more than the guy in the next state if he thought he could get away with it. But he’s not stupid, even if as an American be knows he has the right to charge what he wants. The book’s value doesn’t change because your state’s income taxes are lower than mine!

      When Zuck cuts your pay after you move to Biloxi, he saves money in Palo Alto. Does he thus lower the price of advertising he sells? Or does he pocket the profit and call himself a shrewd businessman?

      So I’m with you. Your company cuts your pay when you leave the corporate office to work in another city. What if you move to another city in a year? Who’s going to keep this database of “worker value based on locale?” Glassdoor?? I’m LMAO. Zuck and his ilk will see their employees poached by competitors who have an edge and pay fairly. This shift to remote work (for some, not all jobs, of course) isn’t just profitable for employers. It’s profitable for savvy workers who won’t happily be treated like idiots. Or like you, they’ll quit and find more equitable employment.

      • Nick,

        Sunnyvale is not a good example. Although it’s technically in “Silicon Valley,” it’s not close enough to the danger zone for the cost of living numbers to sink in.

        I have family and friends in the San Jose area and the cost of living is more manageable there. While I was working in San Francisco, I invited my cousin to join me for dinner. Was surprised to hear that he had not been back to San Francisco for about 50 years because it was too expensive and he had no reason to back since he wasn’t living or working there anymore.

        My cousin’s wife also worked in Palo Alto, still a reasonable distance from San Jose, and again a big difference from San Francisco bay area.

        And there is a rough indicator of relative cost of living that could be used for quick lookups. GSA publishes the per diem travel expense rates for federal employees every year. Look up Palo Alto, as an example. Sunnyvale, Palo Alto, and San Jose are all within Santa Clara county. Check the typical lodging rate for the year. Then check SF (San Francisco county). Big difference. Now check, as another example, Athens, Ohio. Think the relative cost of conventional housing will be much different than this? That list is not complete, since it doesn’t contain all counties and municipal areas. But it does have the more expensive areas where cost of living reasonably drives up travel expenses.

        • @Steve: Point taken about Sunnyvale vs. San Francisco. But the last time I was in the Bay Area (about a year ago) I couldn’t find a hotel room in Palo Alto — and the prices were astronomical. I had to stay in SF, where I found a nice room at a surprisingly reasonable price just a couple of blocks off Union Square. Go figure.

          I’m surprised your friend never goes to SF. It’s still my favorite city to hang out in, next to Paris.

          • Nick, you probably know now you made a mistake. But not the one you think. Palo Alto is mostly corporate, more companies than real people. Many affordable places to stay in San Jose about 20 mins southeast of Palo Alto. Lots of real people and interesting places there.

            That’s about 20 mins vs. 1+ hours to get to SF, and 1+ hours to either get back to Palo Alto, or to SFO. Economy wise, I got you. But fun-wise, I agree, but I still got you! Union Square borders a gritty neighborhood, which is why it’s so cheap. Better reasonably priced places to stay elsewhere in SF.

            And it wasn’t my friend, it was my cousin. He moved there from the Haight. Now he’s a grown-up and older than me.

            And now my favorite record store in the US is also in the Haight. And my cousin doesn’t buy records anymore.

            • @Steve: My problem is that I lived in East Palo Alto (grad school) and Palo Alto (headhunting) for many years. I’ve got a soft spot for it and I like to wander around, so I try to stay somewhere in/around town. But I’ve found that whenever I drive in, I want to leave more than I want to stay. How many high-end stores and eateries can anybody stand? University Ave has become a downsized Rodeo Drive.

              EPA used to be anchored by two areas: Whisky Gulch (on the west side of 101) and Nairobi Village (east side). Poor people lived in the latter. Winos hung out in the former. And students and blue-collar folks lived on and off Cooley Ave and Newell Road in the small residential area on the west side of 101.

              A Friday evening might include dinner at Celia’s Mexican (about $10), a walk to Stacey’s Books, a beer at The Varsity, ice cream at Old Uncle Gaylord’s (or Swensen’s if you wanted frozen eggs and milk), and a seat in one of several little plazas.

              Thanks for reminding me that SJ is a place to hang out. Will go that way next time! Once upon a time, SJ Airport was the insider’s secret alternative to the busy SFO — you could park and walk to your terminal!

              One more problem: My favorite bookstore in the world is in the Richmond (SF): Green Apple Books. So’s my favorite Vietnamese eatery: Mai’s. Maybe I can’t go to SJ after all… Thanks for the travel advice!

  2. While I have no admiration of Zuckerberg and his ilk (their empires are falling), as well as the Silicone Valley, apples to apples, I wouldn’t expect to make the same wages I’d made in California if I relocated to somewhere like Wichita or Sioux Falls. That’s an unrealistic expectation, or for that matter, even kind of an entitlement mindset, IMO. Whatever the labor market allows in those regions, taxes, and cost of living all play into it as well. While it has little to do with wages, there’s also the quality of life factor to consider. Bang for the buck, some will accept a lower standard of living to gain a more civil and sane culture, less crime, better schools, more family friendly, better health care, slower pace of life, etc.

  3. Zuckerberg and Bezos are just asking for it with their arrogance and greed. They do not feel any need to cloak their statements in any kind of corporate-speak which most leaders of public companies must. Funny how they utter their statements on justifying paying their workers less from one of their many luxe homes with drug-lord levels of security.

    • Dee, in what little defense I’d ever give Zuckerberg, he has created a lot of jobs. Killing the goose that laid the golden egg doesn’t work.

    • @DeeC: Zuck is socially inept and clueless. He will forever reveal his ivory-tower arrogance. He’s transparent. Whenever I see his face, all I think about is what a crappy user interface Facebook has and how he has duped the world into using it. What really surprises me is that no one has created something far better to compete with him. He’s a genius at catering to the lowest common denominator.

  4. Although a valid point for discussion could be whether or not software engineers are worth the inflated worth they perceive for themselves, on a second read of this article it actually makes sense. Silicon Valley is a frightfully expensive place to live. Lots of news media material on this subject. But the Bay Area is at the heart of it. Very high cost of living. Employers have to pay more so their employees could afford to live there.

    So if your assumption is that a relocating remote worker will rarely travel, and will be living in a place with a much cheaper cost of living, Zuckerberg’s position make sense.

    • Well, the amount they pay a lot of workers who live in Silicon Valley isn’t enough to really live well there anyway.

      Why not pay the same amount for the same work and let the employee live somewhere really nice that they CAN afford.

    • @Steve: Zuck’s position makes sense only if his primary objective is to keep as much of his profits as possible. I’m a capitalist. I believe in making all the money you can. But only a phony capitalist fails to plow much of the profit back into investment in the business, especially in the form of better pay for workers, because that’s what drives consumer spending and real wealth.

      Don’t mistake greed for business and financial acumen. The pay FB doles out to employees working in its Bay Area facilities today tells us what Zuck can afford to pay no matter where they live. No one explains it better than billionaire Nick Hanauer in this TED talk:

      https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming?language=en

      Zuck is not a capitalist.

      • Nick, I hope you really weren’t preaching to the choir. He obviously DOES intend to keep as much of his profits as possible. Just only for himself. Certainly not putting anything else back into the company.

        But Joe Six Pack doesn’t care or comprehend any of this. He’s content to continue to give FB whatever they ask or demand. Invade my privacy? Sure go right ahead. Sell my personal account and activity details to the Russians so they can manipulate a US election? No problem! You’re demanding that I provide a copy of my driver’s license, birth certificate, and passport to prove my identity even though you have no right or reason? Sure!

        I said it made financial sense, but it doesn’t make contractual or ethical sense. Hire me for 300k+/year to move from the east coast to the Bay area, and then find that the homeless (bouncing back and forth between Oakland and SF) and the Pandemic situation is intolerable, so I have to move to Athens, Ohio, so I can have a good quality of life, and Miller’s Chicken for lunch every day, then suggest you’ll cut my salary to $100k/year, and you can probably guess what physically impossible act I’ll tell you to perform on yourself.

        But the typical younger basement-apartment-dweller-in-parents’-home software engineer who complains publically that they are barely breaking even at $300k/year (really), who might be seriously impacted by Zuckerberg’s mandate, might just fall for his dumbing-down approach. But will any FB employees ever come close to reaching retirement age in this century? Just saying.

        It should be fairly obvious to all intelligent people who have not yet been brainwashed (any of them left?), that Zuckerberg, and his half-drunk college buddies, have not evolved much since they discovered how to push certain weak-willed individuals’ buttons without spending any money on their own. Zuckerberg, now as a modern plutocrat, only had one good idea. The rest were garbage.

        • @Steve: Facebook wasn’t his idea. So all we’re left with is greed and garbage. (Unless we consider ripping off his “clients” a good idea.)

          • I attended a Boston-area graduate school of business 1995-1997. The student directory had a headshot of each person. Do you know what we called it? “The face book.”

        • “plutocrat”
          There is the word I was looking for …

      • I would never work for Fakebook. It is a toxic platform for many reasons. They engage in Employer Delegated Deception in their hiring practices. This is the other side of the coin in resume padding, which is a big deal in the professional academic Human Resources literature. Yet, the double-faced academics and the crony plutocrats they genuflect to go silent when faced with the manipulation and deceptions practiced by the predatory actors like Fakebook (there are many others). I have extensive experience in the software engineering field, having worked decades for Microsoft, created our own global technology corporation (current in Japan), and seen both sides of the Employer/Employee game in the tech industry.

        No American worker should be treated the way these tech companies treat people in their hiring practices. It is corrupt to the core. The lies and manipulation and deception are happening on so many levels and so deep you would be shocked (or maybe not).

        https://soundcloud.com/user-295952651/yogesh-yogi-marge-for-xoriant-lying-and-saying-its-my-job
        https://youtu.be/G4TN3caBMxg

        Enjoy a 360 degree trip through Luon Cave in Halong Vietnam:
        https://youtu.be/OJMIIYPCdk0

  5. That’s how has always been working in Europe my US friends, where people taking global positions earn much, much different salaries based on the country they are hired in.
    Every corporation has a local headqaurter in each country and pays salaries based on the local country average.
    I’m not surprised this is coming to US as well, unfortunately.

    • @Giovanni: Point taken. But you are confusing matters.

      Zuckerberg has no plans to open local headquarters everywhere his remote employees will work. He’s going to move them out of office facilities in Palo Alto that cost him a lot of money, to let them work in homes and apartments where they pay the rent and the mortgage and utilities, while he plans to pay them lower salaries and lowers all his costs of operating Facebook.

      I think he’ll be surprised at what is coming.

  6. Not much difference between having remote workers in Podunk Holler and paying them less because they live in Podunk Holler rather than SF, and having remote workers in Mumbai and paying them less because they live in Mumbai…a practice that was well-entrenched before anyone got his shorts in a knot over some virus.

    It’s all part of the same landscape – employers going cheap on compensation because they get away with it six ways to Sunday. Different excuse, but same result.

    • @Askeladd: It’s called greed and it’s been disguised as capitalism before revealing itself to be the fount of failure again and again.

  7. So if someone establishes themselves for 181* days in a locality so they can claim it as a legal residence, FB will surely pay them based on that locality right? And the whole IP address won’t matter because it’s based on legal residence, right? FB won’t attempt to cut pay to account for those spending 5 months in a much cheaper location, right?

    And surely if someone moves from locale A to B where B has twice the cost of living, FB will just automatically double that person’s compensation, right?

    Forgive me for feeling that FB will only use this policy to cut pay as much as possible and not to align salaries to locales. Look for them to fight every attempt to get increased compensation when said attempt fully complies with their policy.

    * Or whatever number of days is required by state/local law to be considered a permanent resident.

    • @Chris: That’s a good way to change the perspective on this. Another:

      Software developers are pretty smart. I’m spending $3,200 for a rental in San Francisco while working for Facebook, and Zuck is paying me $175,000. He lets me move to Podunk, USA where my rent is the average $1,000. How much do you want to bet that a developer smart enough to work for Zuck isn’t smart enough to game the system and keep getting their $175k without Zuck knowing where they really live?

      But your perspective is more compelling because it instantly reveals Zuck’s failure to think through issues that matter only to his employees.

      • The thing is, this could easily have been presented in a completely positive manner that would still have reduced the cost of office space: “If you can work remotely from an area with lower cost of living, it will seem like getting a big raise!”

        • JR, As you probably expected, there’s also a downside to that scenario.

          As an example, about 20 years ago, when “mobility” became a mindless buzz word, Cisco was pushing Voice over IP (VoIP) telephones on their enterprise networking customers. Products were poorly supported, and most of Cisco’s enterprise customers had not yet learned about or implemented IP traffic management, which is required for the technology to work properly. VoIP telephony, and the Cisco customers’ IT managers’ credibility and careers took a hit. All this while Cisco was convincing customers to buy “these voice things” so you can buy more of my switches and routers to plug them in and make them work. That didn’t last long.

          Cisco engineers and other Cisco employees then noticed a dramatic difference. Their own offices, that were now equipped with IP mobility feature, were now almost always empty…and there were fewer of them employed there. Cisco successfully made a good portion of their own workforce disposable.

  8. Nick,

    I agree that once you contractually agree to a salary, it is unfair and unwise to adjust that salary if your locale changes. What comes next – you are not driving/commuting as much, so I’m deducting the commuting expense consideration; you don’t have to buy lunch, so I’m reducing pay accordingly – the rationale could go on endlessly.

    What is real is that the initial salaries offered in the Bay Area etc. MUST be significantly higher or else no one will take them. In pharma, an entry level safety physician can command 250,000 at most companies – but in SF it’s 300K or better because everyone know the rents are 4500/month and up. And that ratchets along the ladder for every level of position.

    Bottom line, I doubt that established, home-owning Bay Area residents are going to wholesale exit to Dubuque IA – maybe the younger, rent-paying singles and couples as a rule.

    • @Hank: “I agree that once you contractually agree to a salary, it is unfair and unwise to adjust that salary if your locale changes.”

      But that’s who Zuck is talking about — existing employees. As for his rationale, how much I’m driving, whether I carry my lunch or walk to work :-), and my other living expenses are none of his business. We know that companies will adjust job offers and salaries based on local economics to make competitive offers (and perhaps to maintain competitive salaries), but that’s not what makes someone accept or keep a job. It’s what likely stops them from rejecting or quitting a job.

      As you note, homeowning employees with ties to the area are not so likely to leave. Those who do leave are likely to leave so they can exploit the cost of living differences. They’ll have more discretionary income. If Zuck eliminates that, he likely loses the employee altogether or keeps paying them the higher salary.

      I can’t wait for the stuff to hit the fan as FB starts recruiting in other areas, with this bright light shining on what the company pays.

  9. “Whether or not Software Engineers are worth the inflated worth they perceive themselves”.
    NO, they’re not worth what they perceive themselves (good point, Btw).

    “The amount they pay a lot of workers who live in Silicone Valley isn’t enough to live well anyway”.
    No one is forcing anyone to live and work in Silicone Valley. Live less large and live somewhere else then.

    “How much do you want to bet that a developer smart enough to work for Zuck isn’t smart enough to game the system, and getting their $175K without Zuck knowing where they really live?”.
    One really wants to go there? That’s called FRAUD, and that’s also theft and criminal. While Zuckerberg may well be a dreg, he’s indicated harsh consequences for those who’d commit this, and rightfully so. I’m sure FB will have ample oversight to monitor this. Not only can FB terminate and criminally prosecute for this, fraud and theft are considered gross misconduct, and if FB proved this, the employee would be automatically disqualified for UI benefits. Add to that a then criminal record, or the legal costs of expungements or diversions, and the computer jockeys might then be relegated to a future of “do you want fries with that order?”, or “welcome to Walmart”.

  10. I experienced this back in 2008 with a previous employer who was an International Business supporting various Machines. During my last year of employment with them, they relocated the helpdesk and software distribution team responsibilities from the US and Canada, to Romania, Argentina, and India. I was instructed not to tell the customer this was done because we were still providing the same service as we always had. I don’t remember the cost of employees from Romania, but the cost of employees from Argentina was 1/5th the cost of US and Canada, and the cost of employees in India was 1/10th of the cost of US and Canada. This was done without prior notification to the customer who noticed within a few days, based on the email address suffixes of the support personnel. My company never offered to reduce their rates and it cost them dearly during contract negotiation time that year when the company refused to renew.

    I was offered a new position in Dubuque, Iowa at a datacenter by my employer. They claimed that since the cost of living was lower than my current location, I would be taking a 20% paycut and there would be no moving or living expense offered to sell my home and move almost 180 miles. I told my manager I would rather take a voluntary separation package if one was offered. As luck would have it, I signed one shortly after and left the company.

    I was sad to leave the great community of co-workers, but with no competitive salary or benefits, there was no point in feeling Big and Blue so I moved on.

    • @Bill: I think you’ve highlighted the realities of a greedy employer/vendor screwing over customers and employees. In the end, the company loses.

  11. From what I see, there are only 2 ways to fight back. Employees with their feet and move on, and advertisers pulling ads. But will they work together? Unfortunately there will always be entry level software engineers willing to take less pay, or as many have been saying, he can always move to off shore engineers. Unionizing is not an option because employees will be spread out all over the country.

  12. The article says “Facebook will check IP addresses to help detect people who lie about where they’re living.”

    Great! I can login to numerous VPN servers and make my IP address look like I live in Seattle or London, or pretty much where ever I want.

    • And you could get a PO Box and a bank in that city too….

  13. I saw that Stitch Fix is doing the same thing. They fired a number of their staff in California, and are hiring for the same jobs, but in Dallas, Minneapolis, and other cheaper cities: https://www.cnbc.com/2020/06/01/stitch-fix-is-laying-off-1400-in-california-18percent-of-workforce.html

Leave a Reply