How Geographic Mobility Affects Salaries in the Age of Remote Work

So many of our dearly held expectations in the recruiting industry have been upended during the COVID-19 pandemic:

Remote work and flexible schedules were already a big trend but the pandemic accelerated adoption
Workers are increasingly opting to move from high “cost of living” (COL) cities into smaller cities and even rural areas that are equipped with good broadband capabilities
Inflation is meanwhile exerting upward pressure on salary expectations

So what is an employer to do in this sort of a job environment?

How COL Affects Salary Negotiations

We frequently advise companies on the differences between hiring candidates in different geographical markets such as New York, Los Angeles and Miami. For example, by some estimates, the overall COL in New York is 50% more expensive than Miami.

If you are electing to make a position fully remote, use that as leverage in salary negotiations. Fully remote positions will allow you to consider candidates in lower cost of living areas, which may in turn positively impact your bottom line. It can also enhance the diversity and skill set of your staff to be able to bring together candidates from all over the country or all over the world.

If, on the other hand, you want to keep your employees in certain geographical boundaries, be prepared to offer incentives, beyond a competitive salary, to keep your employees engaged.

New “Pay Transparency” Laws

Several states are enacting so called “pay transparency” laws which are meant to require employers to post a minimum and maximum pay range when they advertise a position. The purpose of these laws are meant to address gender-based disparities in hiring, but in the age of remote work, they can serve as a hindrance to hiring employees who live in certain states. For example Colorado enacted the “Equal Pay for Equal Work Act” which insists that employers list salary ranges. For that reason, some large startups have posted fully remote positions that specifically exclude candidates from Colorado.

New York City has recently joined the ranks of pay transparency cities with a law that become effective on May 15, 2022 that requires employers to disclose minimum and maximum salary ranges.

Be mindful of local laws

As an employer, you are entitled to know where your remote workers live. These workers will be subject to some of the laws in their local jurisdiction, regardless of where your headquarters are located. If you elect to hire a position that is exempt from overtime, you need to know whether or not your employee lives in California, where a local law sets the threshold for overtime-exempt pay at a certain salary level.