Google staff squirm as remote workers face pay cuts

https://www.wired.com/story/google-remote-work-pay-cuts-big-tech/

by blopeur • 5 years ago

77 98 5 years ago

jleyank3• 5 years ago

In my career, cutting salary without just cause was viewed as a request to change employment. Or, a signal that the company was in dire straits and extreme cash management was required. I think we can assume google does not fall into the latter category. And cutting salary when it will improve retention and hiring “reach” and enable the company to better manage real estate costs strongly suggests it’s a stealth layoff, aiming to remove any peg developing a bit of square-ness. Round pegs fit the holes best, eh?

And remember, having the worker exit on their choice costs the company nothing.

meowtimemania• 5 years ago

80% of my Bay Area salary is significantly higher than the local payment for my area. I’m just hoping these inflated salaries last. I’m nervous to buy a home because even if I make $$$ now, if I ever get fired and need to find a local job I won’t be able to meet my previous salary.

ithkuil3• 5 years ago

That worry would technically still apply if you could move while keeping 100% of the salary as a remote worker, right?

paxys• 5 years ago

This isn't a Bay Area problem but rather applies everywhere in the world. The risk adverse solution is to save for a home rather than take on a large mortgage.

s1artibartfast3• 5 years ago

This is exactly why the company has the leverage to revisit your compensation,full stop.

likpok• 5 years ago

All these companies had roughly these policies before Covid: move to the cheaper office, get paid slightly less.

It doesn’t impact tech people because the tech offices were always the bay, Seattle and nyc which often ended up in the same band.

tmysl• 5 years ago

Why does google (or any company for that matter) think this is a good idea? Especially with jobs in the tech industry being so abundant and people chomping at the bit to hire SWEs/SREs.

convolvatron• 5 years ago

Maybe they are finally getting a little financial pressure?

HenryKissinger• 5 years ago

By adjusting pay to local cost of living Google is effectively saying that they will provide their employees with the same standard of living regardless of their location. In lower cost of living areas this means an accordingly lower salary, because a Bay Area salary would otherwise afford an employee a better standard of living.

As for losing talent, Google is sufficiently established that the majority of freshly minted computer science and software engineering graduates are still desperate to work for Google if they can get in. And Google doesn't need to hire all the top talent to grow or run with the same profit margins.

I suspect software engineering salaries for new hires will start declining in nominal terms within the next decade or so, as (1) automation lowers demand for engineers on the business side (2) the labor supply keeps growing (3) non engineers in tech companies demand adjustments to their own pay to match engineers or start leaving for other companies that do, leaving less money to pay engineers (4) MBAs keep moving into management and start cutting labor costs for their most expensive individual contributors to increase profits and satisfy shareholders.

When new graduates make as much as doctors, with only a fraction of the education, while every other profession, with the exception of junior investment bankers, including technical ones and non-software engineering professions, are lucky to crack $75k, I don't see how the current job market is sustainable.

jleyank3• 5 years ago

I would think that relying on folks straight from school or from 4-ish years of hacking is very risky when it comes to more complex products. Unless you retain some of those expensive, grumpy, possibly-now-remote designers...

EDIT: debugging skills are earned through experience, not taught.

908B64B1974• 5 years ago

By adjusting pay to local cost of living Google is effectively saying that they will provide their employees with the same standard of living regardless of their location. In lower cost of living areas this means an accordingly lower salary, because a Bay Area salary would otherwise afford an employee a better standard of living.

Except you are now stuck and can't transition back to a HCol area because all these years you were building less equity.

A 1M house in the Bay Area sells for 1M. A 300K house in Anywhere sells for... you guesses it, 300K.

squiffsquiff• 5 years ago

I'd put a slightly different spin on it- sure, junior positions will be automated and commoditfied, but I don't see senior salaries going down. There's a key difference between software engineers and doctors:

No matter how good a doctor is, they can only treat so many patients and/or train so many juniors. A software engineer can scale almost infinitely in some respects. In this they are more like the investment bankers you mention, indeed in some circumstances interchangeable

amusedcyclist• 5 years ago

It seems like people are constantly pessimistic about future salary for Software engineers. I'll present the opposite case, with the advent of software eating the world, good software engineers are infinitely more valuable than a good doctor or a good lawyer or whatever. This is only going to continue to get more extreme with software controlling more and more. Someone could stand up a web service or reduce server costs and save / make a company literally millions of $ (100's of millions at big tech). This was not possible 20 years ago when the job was much harder. Now conversely because its gotten much easier to write code, bad software engineers are basically worthless. So I predict what we'll see is an even more 2 tiered software developer salary market, where the best developers command crazy money while the bad devs get paid middling wages.

allcentury• 5 years ago

It took me a long time to realize that these weren't CoL adjustments.

Companies want to be competitive in your local market so they can retain you and so they can "hire the best".

Where this gets murky is now everyone is remote so is there really a local market?

durovo2• 5 years ago

Most people who cry about CoL adjustments don't realize that the developers working in India are doing the same job for 1/5th the salary. In a remote-first world, there is going to be some averaging of pay as the pool of the talent accessible to companies increases.

landemva• 5 years ago

'the developers working in India are doing the same job for 1/5th the salary.'

My experience is five of them could not replace me. They didnt have the skills. Maybe this has changed in the past year or so.

Matthias2472• 5 years ago

Not only India. It’s even Western Europe - which is generally not a low cost area. US salaries for senior/principal levels are 3-5x of what the rate is there.

908B64B1974• 5 years ago

the developers working in India are doing the same job for 1/5th the salary

The same job?

Sure.

Getting the same results? That's why every offshoring project I've seen was a complete success...

chubot2• 5 years ago

Exactly, not sure why the article doesn't address this.

From the employer perspective, the strategy toward compensation has NEVER been "equal pay for equal work". I understand why that is intuitively fair to people, but it's not rooted in reality.

The strategy is "I want to pay as much as other employers in the area". That is, if you get a job in the same area and your pay drops 40-50%, then that's a BUG from Google's perspective. They were paying you too much.

They want to pay you an amount so your pay will drop 0% or 10% when you get another job. Or conversely, if someone local is going to Google, they should get 0-10% more, not a 40-50% increase.

-----

As you mention, a corollary of this is that if most programmers start working remotely AND most companies offer remote jobs, then Google will be forced to adapt. Basically if all companies start doing what Reddit does, then Google will have to do that too to stay competitive.

It's a market-based system. There are many instances where markets determining prices produces outcomes we view as unfair.

Though I guess you can argue that it shouldn't be purely market-based and it should take into account "company loyalty". As the article mentions, employees can also "quit in place", which changes the calculus a bit.

chubot2• 5 years ago

Actually I just searched for "cost of living" and Bob See (a recruiter I worked with!) answered:

https://www.quora.com/Do-companies-like-Microsoft-Google-Ama...

Companies like the ones you've listed typically base salaries on "Cost of Labor" (for a given role in a given market), not "Cost of Living" (i.e. the price of a bucket of goods in a market) .

So that is exactly the misunderstanding here. People think the goal is "equal pay for equal work", or they think it's "cost of living". But neither of those is true -- it's a "cost of labor" adjustment.

lancesells• 5 years ago

I would guess in most cases whatever value the employees provided Google has not changed. Not only that, Google's costs are lower not having to provide a space for their workers.

Trillion dollar companies with their record quarterly profits cutting their employees pay is nonsense.

hellisothers• 5 years ago

Is it though? How is lowering an existing employee’s pay who moved away different than laying them off and hiring what you perceive as the exact same skill level of employee in this remote location at a lower pay?

Ignoring the whole “well my company already knows I’m a great fit and hiring somebody new is a risk” argument as that is an issue with hiring & firing generally.

yao420• 5 years ago

Exactly these companies are ultra rich and can afford to pay for talent. Google has $160 billion in cash.

Im NYC, Google just spent $2.1 billion on a Hudson yards building, in addition to the $2.4 billion for the Chelsea market and $600 million for the milk building across the street two years ago.

They have the money, they just might not want to lose their real estate investments value.

bravetraveler2• 5 years ago

Funny to see this mentioned. A friend of mine started remote in the city where we lived, then moved to the sticks.

They tried to pull his chain on this, then realized he essentially was the market there.

Awkward exchange overall; felt very much like 'we want to dial the pressure of the thumb'.

Eventually they did a 180 on it and no adjustment happened. If it were me, it'd erode my trust. I'm thankful my employer only cares to know my location for tax/withholding purposes.

It's like you said... is there really a local market (with everyone remote?). Even then, this person was there just long enough to qualify for raises and already had several.

A bit like a slap in the face to have these rewards (presumably for your efforts) to be clawed back... because the employer essentially realized you didn't need as much anymore.

edit: To be clear, not Google - elsewhere.

Jyaif• 5 years ago

"What is it about my work that is somehow less valuable in a different location?"

That person is either incredibly naive or dishonest. If she's naive, she should start by asking herself why is she paid multiple times what someone doing the same job in Hyderabad is.

foepys• 5 years ago

All this outsourcing talk is so 2005. If it worked so easily, FAANG would've outsourced everything to India 10 years ago and tripled their profit.

In reality a common cultural background (i.e. how to approach some kind of work) is a lot more important than a lot of managers want you to believe. Outsourcing also requires extensive planning and management, which increases the number of managers required and thus increases the costs of outsourcing.

E.g. VW tried outsourcing over the last 10 years and is now recruiting developers en masse in Germany because it failed to make it work.

unmole• 5 years ago

All this outsourcing talk is so 2005.

Except for the fact that it's not outsourcing to the lowest bidder like companies tried back then.

Pretty much every major American tech company has a development center in India. The developers working here are employees of the parent company. They have the same or functionally similar culture as the HQ.

And the cost advantage has significantly shrunk because of the booming local startup scene.

ithkuil3• 5 years ago

Then hire managers from Hyderabad

EDIT: by which I mean that the issue is more deep than just how to manage people. Managing an existing talent pool seems to part of the picture.

pjmlp2• 5 years ago

Given how much companies like CapGemini, TCS and Infosys grew in Germany during the last 15 years, I bet VW still has plenty of business units going at it.

UncleMeat• 5 years ago

It isn't outsourcing. If I moved to London, my pay would be adjusted down by like 45%.

mrbadideas• 5 years ago

As someone who had run 200 person offshore development teams, the biggest issues are time differences visas & norming\forming teams.

Time difference: this can be mitigated for North America by using teams in South America, but scale is typically limited, The time difference in India is brutal for everyone, you end up having small windows of time to communicate synchronously either early or late, people are typically tired when this communication happens, either just waking up and trying to get their kids to school/ family going or trying to go to sleep so they can wake up early for another call… which leads to sleep deprivation!

One way around this is key individuals who have strong people + technical skills spend significant amounts to of time at the start of projects in North America(assuming it is a NA centric project) this allows them to fully immerse and absorb the nuances of the people, product, requirements and politics of the program, this is expensive and can be challenging from a visa perspective, any project I’ve worked on that has succeeded started with this.

tomohawk• 5 years ago

If the company was willing to pay me $X for the work I'm doing, then they should continue to pay me at least $X if I change locations. The work has already been valued.

Does the company exist to support the HR department, or does the HR department exist to support the company and employees? At google, we know the answer.

rightbyte2• 5 years ago

I wonder what operators at like the Hover Dam makes an hour. Surely they get payed by the value producing those 2GW?

You essentially get payed to afford housing in the area where you work, not by value.

8note3• 5 years ago

No you don't, or Vancouver would have very well paid software jobs.

You're paid about the same as other jobs you could get. The drop in salary is a loss of leverage you have over the company

TheRealDunkirk• 5 years ago

Google made $19B profit on $65B revenue last year. Whatever this is, it is NOT about being able to continue paying their workers what they already make.

GhostVII3• 5 years ago

People making hundreds of thousands of dollars complain because they don't get to keep their insane salaries when moving to less competitive areas.

DoingIsLearning• 5 years ago

Would you feel as strongly about this if it was a corporation, instead of a single individual?

If I as corporation buy from a third party OEM and they decide to move production from Texas to Malaysia or Vietnam, would you also feel strongly that I as customer am entitled to a discount?

Or would you consider that we have agreed to a contract where the supplier is delivering the same OEM product but now from a different location?

8note3• 5 years ago

I would, yeah. Chances are that the product has changed, same as the now-remote engineer's product

GhostVII3• 5 years ago

If a supplier changes locations I would definitely expect prices to change in future contracts. Of course the current contract shouldn't be changed if we had already agreed on a price for some number of units.

rsj_hn• 5 years ago

The OEM is selling a tradable, so you would expect companies to already search the world for the cheapest version and be buying that, as there is effectively a single global market.

Labor, historically, has not been so mobile. There is not a single market for labor, there are many different markets.

And in each market, the company pays the prevailing market wage. For that reason, when someone moves from market A to market B, their wages are adjusted up or down based on the cost of labor in those markets.

Jensson3• 5 years ago

People pay more for products made in USA than products made in China, even if it is the same product, yes.

silexia• 5 years ago

Just wait till Google realizes they can hire equally competent people overseas for a fraction of the wages and those people won't have any of the cancel culture tantrums American workers do.

xen0• 5 years ago

I can't wait for Google to open offices world wide.

Oh wait...

GhostVII3• 5 years ago

I suspect that the slightly lower confidence in the workforce would outweigh the cost savings, Google has lots of cash.

nojito• 5 years ago

This is a great way to finally lower the massive engineering bloat that plagues FAANG.

hello_moto• 5 years ago

A lot of the discussions here never mentioned one issue that might arise if the companies didn't adjust for CoLiving:

What would happened to the existing employees of the same company that already accepted lower salary for being in LCOL?

Google Mountain View pays differently than other Google branches (heck for a while, the pay in Google Seattle was slightly lower compare to HQ).

Now you have Google Señor Developer in LCOL accepted the fact that they get paid less than their compadre in Mtn View, but your Mtn View compadre decided to be your neighbour while refusing your level of pay. Wouldn't that create tension?

throwawaysea• 5 years ago

Such issues already exist. When the company adjusts pay scales they don’t go proactively bring everyone up to their “true” deserved pay. They might make some minor adjustment but are otherwise happy to let compensation linger above some defensible minimum and pocket the difference.

joshuamorton• 5 years ago

FWIW from the data I've seen (at Google) this isn't really the case. When the guideline for a location increases, salaries are set to the new guideline * whatever the prior performance/tenure/whatever multiplier on top of that guideline was. This is also the case when you transfer to a more expensive location. (A well-tenured senior engineer who transfers from Bangalore to Mountain View won't be set to the minimum salary for L5, but something higher)

plafl• 5 years ago

Was "Señor Developer" intentional or an auto correction of some spanish keyboard? Anyway I love it and I'm thinking of keeping it for myself.

djmips2• 5 years ago

Old obvious but funny pun. Please enjoy!

lazyant• 5 years ago

While I sympathize with the principle that two people providing the same value should be paid the same, in these discussions it seems to me almost everybody is forgetting we live in a capitalist world and the offer and demand law applies.

If a company can get the same or better quality of engineers in a lower cost of living area at a cost discount (example: Canada where salaries were about half than in SV and about 50% less than say Midwest US), why are they going to not take the discount? And this "arbitrage" is what it seems to be happening, with US companies hiring fully remote Canadians at 25% discount for them and still the Canadians making 25% more than they used to. (Obv this doesn't address existing employees who moved to LCOL)

demeyer13• 5 years ago

In an aggressive hiring market for engineers, this is a decision Google is making which will increase potential churn risk for some engineers. As a Xoogler myself, I know how much they invest into thinking about talent acquisition and retention and would venture to say they are aware of this. I suspect none of this is as "hot take" to them.

At the same time, Google's stock is up massively over the last two years. Google has been relatively aggressive with RSU allocations. That appreciation in RSU value will act as an offset for a subset of those who would churn. This must also factor into their current policy decisions. The team's at Google try very hard to optimize for retaining their best people, but they are dealing with very large numbers of individuals during an unusual time. Further, they have traditionally been leading the charge for geographic proximity and density for product teams. Lots of change for them to manage through right now.

That said, as a CTO at a startup (which counts Google Ventures as an investor) I have hired many engineers from Google over the past 18mo. Approximately half our engineers are ex Google, Amazon, Microsoft. Beyond our product and ENG culture, our policy is fully distributed work (within the US - compliance reasons) and that is the one benefit ex FAANG engineers seem to value the most, currently (small N, selection biases acknowledged). Over all roles, I would estimate more than half the company consists of ex FAANG employees. Many were tired of being locked into a geography which did not make them happy.

So I view this as a change in the market dynamics which is allowing startups like mine to help make these engineers happier. We have engineers that have joined, and immediately moved to Hawaii, or purchased a rural farm in the Midwest - and we are 100% supportive of them having a work/life that makes them happiest. Also, we've removed policies of paying differently based on the traditional tier 1, 2, and 3 geographies.

This is a market advantage that favors engineers, and as such - I'm very supportive :)

madarco• 5 years ago

Could you elaborate on the compliance reasons for not hiring outside of US?

bravetraveler2• 5 years ago

Not the other user, but...

I'm not sure if FISMA/FedRAMP necessarily require it, but it certainly makes things 'easier' (as much as they can be).

Generally, the point is... federal stuff is the most likely candidate in my opinion.

Jensson3• 5 years ago

Could you elaborate on the compliance reasons for not hiring outside of US?

Every country has their own laws and regulations around employment that you have to comply with, so even if it would be fine from the US side it would still cause a lot of legal work from the other side. Small companies might get away with hiring them as contractors, but large companies would get targeted if they did that too much since not every country is as lenient with these things as USA is.

demeyer13• 5 years ago

Indeed, as the other individual commented - there are compliance obligations which are more difficult/costly/time_consuming (not impossible) to satisfy if we have non US citizens working on the product. We are going to hire outside the US, but at our current stage there is a cost we can't easily absorb - right now.

chris11• 5 years ago

Many were tired of being locked into a geography which did not make them happy.

Do you compete with Bay area FAANG salaries? It seems that part of the reason companies pay so much in Silicon Valley is because the cost of local labor is so high.

demeyer13• 5 years ago

We do. It works for us because we are aggressive on salary (for a startup at our stage) and very aggressive with benefits and flexibility.

aYsY4dDQ2NrcNzA• 5 years ago

Pre-pandemic real-world scenarios at my employer:

1. Employee switches to 100% at home situation, same team, same role. But they remain in the employer’s town, they don’t move away.

2. Same as scenario #1, but they move away to somewhere with a cheaper cost of living.

#1 suffers no pay reduction, but #2 does.

mensetmanusman• 5 years ago

Companies exist to inflate real estate prices, so they must pay based on local costs! /s

LAC-Tech• 5 years ago

A lot of people seem to be under the assumption that this is based on "cost of living'.

Where I live has a higher CoL than almost all of the US, and local salaries are a fraction.

It's about google paying competitively compared to local companies. Nothing to do with cost of living.

JoeAltmaier• 5 years ago

Get real. Arguments about CoL or geography or stock are all smokescreen. They pay for Engineers is whatever the market will bear. It's quite curious that Engineers accustomed to calculating efficiency and tradeoffs will get mired in imaginary discussions about 'correct' hiring.

If arguments about CoL or geography or nationalism quite being persuasive to potential hires, the hiring organization will simply switch to some other arguments. It's just business.

senectus1• 5 years ago

I dont understand how this makes any sense.

Seems mean and greedy to me.

I use MY resources, My power/internet/aircon/floor space to do a job for my employer. Why should I be paying for that?

theonlybutlet• 5 years ago

An opportunistic smash and grab, they've found some leverage they can use to their advantage. It'd be fair if the workforce were unionised.

Google staff squirm as remote workers face pay cuts

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