Silicon Valley Pay Cuts Ignite Tech-Industry Covid-19 Tensions


Tech workers fleeing the San Francisco Bay Area to work remotely amid the pandemic are facing a new reality: pay cuts.

Over the past several months, Covid-19 has shaken traditional notions of where employees can work. In Silicon Valley, which has a relatively high cost of living and an employee base with access to state-of-the-art remote-work tools, companies are devising plans for a future with decentralized staffs. In some cases, changes can include cutting salaries by 15% or more depending on where someone moves.

The nascent pay-cut movement stands to create tension between some of the most profitable companies in the world and skilled employees who enjoy high salaries.

Companies point out that changing pay based on the local cost of living is standard practice for many organizations, including the federal government—with decisions to raise or lower salaries related to housing costs and other factors. Letting someone take a San Francisco salary to Wyoming could be considered unfair to present and future remote hires in cheaper cities who might receive a lower wage.

But Silicon Valley companies have spent years going beyond standard corporate norms to endear themselves to their workers. In an era where companies rain free food, massages and yoga studios on their software engineers, the cold rationality of geography-based pay risks alienating employees used to being courted.

“If anyone should be standing up for high pay, equal pay and great talent, it should be these companies—I find it to be pretty hypocritical,” said Jason Fried, chief executive of Basecamp LLC, a Chicago-based maker of workplace software that has a remote workforce. Tech companies are so profitable they can easily afford to do what is right, he said. “You’re hiring a person and the skills they bring.”

In May,

Facebook Inc.

FB 0.26%

said it was shifting toward