People

Going remote? Expect 'downward pressure on cash compensation'

WFH culture will be a reset moment for compensation, says one senior tech recruiter, who predicts pay cuts of up to 15%.

Golden Gate Bridge

"The whole play … is to get people out of the high-cost zones," said Stephen Sterett, managing partner at executive search firm Austin McGregor.

Photo: Joshua Sortino/Unsplash

When Mark Zuckerberg told Facebook employees that a significant proportion of them could work remotely, it sounded like the start of a liberation for a tech industry tied to Silicon Valley. Then he said salaries would be adjusted for cost-of-living — and the reality of those changes started to become clear.

"The whole play … is to get people out of the high-cost zones," said Stephen Sterett, managing partner at executive search firm Austin McGregor. Sterett, who focuses on filling senior roles at tech startups, told Protocol that he thinks employees leaving the Bay Area should expect significant salary cuts, while tech workers in the rest of the country may soon find that far more opportunities are open to them.

A VP of marketing at a growth-stage tech company would make around $225,000 in the Bay Area, Sterett said. That same role could be filled in Austin, Chicago or Atlanta for 8% to 15% less, he thinks. And it's not just salaries that take a hit: People outside the Bay Area "aren't as savvy when it comes to equity," Sterett said, and so they ask for less. While a marketing VP might get 1% to 2% equity participation in the Bay Area, Sterett said, that would be more like 0.5% to 1% in other parts of the U.S.

Some tech companies have already started to hire remotely. "A plethora of [Bay Area] clients of mine … have already made plans to move," Sterett said. "And they're hiring a ton of remote workers."

Sterett now thinks "there is going to be some downward pressure on cash compensation, for sure, on the West Coast." Bay Area engineers may find they have little option but to accept that: If they go out into the market, "they're going to find that the compensation at other places is going to be adjusted downward as well." Soaring unemployment won't help matters, either, as it tends to push salaries down.

Some jobs could leave the country altogether. Sterett said there was already a trend for companies offshoring certain product development and engineering roles, and the pandemic will lead to that happening "at an accelerated rate."

Still, one thing that isn't set to change, according to Sterett, is the pay gap between Big Tech companies like Facebook and Google, and everyone else. "They overpay because they want to get the best talent," he says. "That's just what they do, they buy people."

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