How to Prepare for Record Level Employee Relocation
In 2019, surveys showed that 62 percent of workers said they would relocate for a new job or to live in a different city. That was before COVID-19 disrupted our lives. Now employees are relocating in record numbers.
This leaves human resource professionals with tough decisions regarding pay rates. Most employee relocations involve moving from high cost of living cities and states, to areas where the cost of living is lower, and they feel they will have a better quality of life. This leads to an, often uncomfortable, discussion about pay. Employees and employers have different perspectives, both with valid points.
From an employee perspective:
- The company was willing to pay high rates for my skills – what has changed?
- It won’t cost the company any more to pay me the same rate.
- I was forced to work remotely during the pandemic and I’m still doing the same job. Why can’t I continue in New City?
- Why does the company care where I live?
From an employer perspective:
- We wouldn’t choose to have you work remotely on a permanent basis.
- You will not be available for in-person meetings if needed. Travel expenses would increase.
- If we were to hire someone in New City, we wouldn’t pay Old City rates.
- Now we have to be compliant with and monitor employment laws and regulations in a different state.
How do companies tackle this issue and come up with a plan that is win-win for both parties? Whether or not a company has a presence in the destination city/state can affect the discussion. Time zone differences must be considered. Whether or not the employee is doing a job that requires a special skill or talent, or is hard to fill, plays into the decision process. Is the employee a top performer with a bright future at the company? These are just a few of the many considerations a company must think through.
As with most things, there is not a one-size-fits-all approach.
Three options for setting the pay rate include:
1.) Continue paying the same rate. Set the expectation that future increases will be consistent with current practices.
2.) Adjust rate down to New City wage rates. Set the expectation that future increases will be consistent with current practices.
3.) Continue paying Old City rate (premium). Set expectations that wages will be frozen until they are in line with New City rates.
Regardless of which option is chosen, employers need to know the current rate for each job in each new location so they can make an informed decision. So how do companies know what to pay in new markets? Do they create new salary structures for each market? Create a national structure and apply geographic differentials? What about minimum wage requirements and local employment laws and regulations? How do you come up with a policy that is fair, unbiased, and enables both employee and employer to be successful?
Most human resources departments are not equipped to know compensation practices in markets in which they do not operate. Compensation consultants with access to national market data and geographic differentials can work with companies to determine the best path forward. They can help develop a tailored approach for each company based on the company’s needs and resources. Because at the end of the day, we are all in this together. A company cannot be successful without strong talent that is appreciated, and employees cannot be successful without a profitable company in which to work.
Here are three important compensation considerations:
If your head is spinning, it’s time to contact your compensation consultant to help with next steps! If the answer is YES to any of the questions above, don’t be afraid to ask an expert. It can save you money in the long run and keep your employees happy and productive- A great way to start the new year! Experts@FahrenheitAdvisors.com.
About the Author
Merryman Putnam partners with clients to provide compensation expertise including total compensation measurement studies where her expertise ranges from creating a compensation philosophy to market review, analysis, and recommendations. She has worked with public, private, and nonprofit entities in a variety of industries.