Should You Adjust Compensation Due To Employee Relocation?

March 5, 2021 Christina O'Handley


As remote work becomes the new normal for many organizations, employees are taking advantage of this opportunity to relocate while keeping their current jobs. While employee relocation can be an exciting opportunity, it is causing a debate in the HR industry as to whether employers should readjust pay based on the cost of labor in their new location.

There are many pros and cons to readjusting pay if employees choose to relocate that you will need to consider. Not sure where your organization should stand on the issue? Below are a few questions to ask yourself when making the decision.

Do you have enough market data to confidently pay employees a fair wage?

If you choose to adjust salaries during employee relocation, you’ll need to do your research on the market. Do your due diligence and provide data to back up your claims when speaking with your employees. Your staff will not take a pay cut well if you do not have the data and research to back your decision.

Are you in a heavily regulated industry?

Your industry will most likely dictate whether you can readjust salaries due to location. If you are in a heavily regulated industry, it may make sense to readjust pay. Having these types of measures in place will lead to more accurate pay and allow you to comply with all local laws.

How hard is it to attract talent to your industry?

Readjusting salaries will also depend on how competitive your industry is and where most of your talent is located. For example, if you are looking for software engineers with Silicon Valley experience, it may be hard to get a candidate to accept an offer with a salary dictated by their location.

Are you willing to let your top talent leave?

If you do choose to adjust pay for your employees living in cities with a lower cost of living, don’t be surprised if they decide to leave your organization. Readjusting pay will not only lead to high turnover, but it can also lower company morale. This can also increase turnover for employees that didn’t even choose to relocate. You’ll need to consider what type of remote work environment you want to create and if readjusting salaries is worth it for your business.

Why are you offering remote work opportunities?

Think about why you are offering remote opportunities in the first place. If you are trying to save money, pay adjustments may make sense for your business. However, if you are trying to provide a better work environment or retain your top talent, readjusting salaries during employee relocation may not make sense for your organization.

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