Zillow abandons archaic location-based compensation system
Dan Spaulding, the director of human resources at Zillow, the leading online real estate site, has made a bold, progressive and forward-looking statement in favor of losing the outdated location-based salary system. Spaulding said: “When you work for Zillow, your earning potential is determined by your performance and will not be limited by where you live. ”
Traditionally, companies have paid their employees in part based on where they lived and worked. Before the pandemic, when only a fraction of the workforce was remote, the majority of workers found jobs within a reasonable commuting distance. If you took public transportation from suburban Long Island to New York City, you would likely earn significantly more pay than someone doing the same job in the Midwest.
The virus epidemic has radically changed the way we think and do our business. We have collectively participated in a remote working experience of almost two years. Surprisingly senior executives, working from home worked well. Stock prices have climbed to all-time highs indicating that companies have thrived during this tumultuous time with people in an out-of-office environment. Remote working spawned derivatives, such as digital nomads who roamed the United States and the world for interesting places to work. Many people who worked remotely decided to move. Since they no longer had to go to an office, they figured they might as well live in a place they love. Some have moved to places that offer low taxes, affordable housing, good public schools for their children, a good climate, and an attractive lifestyle that suits them.
The frustration faced by those who moved was that they found that their compensation could be reduced if they resided in a city cheaper than where their office was located. Spaulding and Zillow, seeing this dilemma, took action. The company felt it was appropriate that its staff be paid at fair value, and not on the basis of where they live. It sounds logical, but it’s a game-changing moment.
In a post on LinkedIn, Spaulding said: “As we evaluated our compensation philosophy to align with our new flexible working policy over the past year, we knew it had to reflect our values and take into account competitive realities. With this evolved approach, our nationally competitive compensation programs are primarily tied to an employee’s role, responsibilities and performance, with less emphasis on geography.
The online real estate market platform has acknowledged that the mood of workers has changed. They want to work remotely. A hybrid job of a few days in the office is acceptable, but not 9 a.m. to 5 p.m., five days a week. Fearing the Covid-19, the Delta variant, and potential future viruses, Americans have moved from overcrowded and densely populated cities to more suburban or rural locations.
As a human resources professional, Spaulding has recognized that offering both remote compensation and appropriate compensation would be a great way to attract, hire and retain top talent. This decision is a brilliant recruiting strategy. He said of the company: “Almost half of our new hires — Zillow is on a hiring frenzy this year told us they chose Zillow because of the freedom and flexibility we offer.
Spaulding added, “Together our policies are designed to allow long-term flexibility, attract and retain top talent from across the country, and create a work environment where our employees have the opportunity to do the best work of their careers.” and highlighted the new agenda saying the company:
- Allow most employees to work from anywhere in the United States and Canada, and to relocate voluntarily without their pay being reduced
- Prioritize performance and reach over location when setting wages and don’t limit wage growth for an employee based on where they live
- Offer performance-differentiated equity rewards to continue Zillow’s long-standing philosophy of providing share ownership opportunities, through our Equity Choice program
- Continuously assess market benchmarks, reviewing national, local and sectoral measures, to remain competitive in retaining and attracting top talent, including more women and BIPOC candidates, who data shows are among those most interested in flexible working
“Flexible field work and compensation is a competitive advantage for Zillow in the short term, but we believe it will be an industry standard in the long term,” Spaulding wrote. Location-based wages and compensation are now being questioned and re-evaluated, in light of the success of the massive trend towards working from home or remotely anywhere. If this trend continues, it will be a boon for workers.
The prospect of not needing to live near a job or apply for a position anywhere in the United States could be a game-changer for a career. Someone stuck in an area that does not offer suitable jobs should be content with what is available. When companies are open to recruiting talent away from major business centers, it opens up new opportunities for large numbers of Americans.
To be fair, we have to take into account that Zillow has a vested interest in people who sell their homes, move out of apartments, move to a new location, and buy or rent a new home.
Reddit, a free community network based on people’s interests, previously shared a non-location-based compensation plan, similar to what Zillow does. In a company-wide memo, Reddit said, “Going forward, we want to meet the needs of our employees so they can do their best, especially in times of uncertainty. And as we fulfill our mission of creating a belonging for everyone in the world, we want Reddit to position itself as a workforce as diverse as its ecosystem of communities and users. To this end, the company will empower its employees by offering them the “flexibility to explore their workplace: in the office, remotely or a combination of the two”.
Reddit recognizes that a percentage of people can choose to move. If they wish, the company “support the movement and not adjust their compensation downwards. The company said in the memo: “We have redesigned our approach to compensation in the United States” To show its support for its employees, the company “is eliminating geographic areas of compensation in the United States” Unlike this As other companies do, this policy suggests that “compensation will be tied to pay scales in high-cost areas, such as San Francisco and New York, regardless of where employees live.”
Not everyone subscribes to this compensation model. In May 2020, Facebook CEO Mark Zuckerberg said, “We’re going to be the most forward-thinking remote working company on our scale. He then added worryingly that employees will have to notify their bosses if they move to another location. According to Zuckerberg, those who move to lower-cost cities “may have their pay adjusted according to their new locations.” He added, “We will adjust the salary for your location at this point. There will be serious ramifications for people who are not being honest about this. “
It appears that Google employees who wish to continue working remotely may see their pay reduced, depending on where they live. The search engine giant has rolled out a new calculator to show how much workers will be paid if they work in different locations. The bottom line is that employees who move from big cities to the suburbs will be subject to a pay cut. For example, Googlers residing in New York and working remotely will not see any pay reduction. However, Reuters found that an employee living in Stamford, Connecticut, a town where many people travel to the Big Apple, would be paid 15% less if they worked from home. Google employees who decide to move away from their desks are likely to face significant pay cuts. Reuters pointed out that a worker who moved from San Francisco to Lake Tahoe, an expensive area of California, would see their wages drastically cut by 25%.
Stripe, the fast growing FinTech payments company, has announced a different direction when it comes to compensation. In an effort to save on expensive real estate costs, Stripe said it would pay its employees $ 20,000 to leave New York and San Francisco. As an incentive, employees would be paid $ 20,000 to move from high-cost cities to low-cost locations. Sounds good, doesn’t it? Here’s the catch: Workers who accept the offer will have to take a 10% cut in their pay.
There is a downside. If more companies roll out similar programs, job seekers will face increased competition. Applicants had to be concerned about other people in their immediate vicinity applying for the same jobs. Now they will have to compete with the volume of applicants applying from all over the United States.