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The New Remote Workforce

Published March 8, 2021

The pandemic-related lockdowns of 2020 demonstrated to panicky business managers how newly developed information-age technologies could facilitate remote employee connectivity. They discovered that white-collar job productivity could be maintained surprisingly well, salvaging at least a portion of firm profitability during a sharp economic recession. And these same employers have discovered that any related revenue losses were small relative to the savings from leasing much less office space in high-rent, downtown districts.

Has the work from home (WFH) movement proven too successful? Corporate C-suite execs are now mulling whether to reduce the salaries of those remote employees who have traded their expensive condos in high-cost cities for more affordable homes in low-cost towns with many—but not all—of the same amenities. For example, the NerdWallet cost of living comparison website indicates that an employee earning $100K in Seattle needs less than $60K to maintain the same lifestyle in towns just over the Snoqualmie pass, like Ellensburg or Yakima.

Indeed, the Wall Street Journal found that Microsoft has notified remote employees that their pay and benefits package may change based on their chosen location of residence. Still, other companies are committed to paying their workers the same salary regardless of their resident city of choice. Spotify, a Swedish company, informed its U.S. employees they could work from anywhere and maintain their current level of pay.

Businesses may strive to maintain the happiness and productivity of their remote employees, but the complexities of working and living in two different political geographies can be daunting. For instance, operating a business registered solely in an income tax state obliges that firm to pay state taxes on all employee salaries.

But remote employees may bristle at the notion of paying income tax while living in a non-income tax state. The Wall Street Journal reports that some businesses are willing to bear that burden. Lyft workers, for instance, can be taxed at the rate of their current state of residence.

Beyond taxes and cost-of-living differentials, still other challenges exist when managing WFH employees. Businesses are considering how to provide childcare assistance for remote employees without irking workers without dependents. The Wall Street Journal notes that Bank of America Corp. has offered employees up to $100 a day toward child-care expenses. Palo Alto Networks Inc. offers a $1,000 stipend that can be applied to many quality-of-life options. Parents can use it for the welfare of their children or fitness enthusiasts can use it for recreational equipment.

Navigating our novel WFH culture will not be quite as smooth and simple as technology might suggest. Somehow, the related benefits and burdens will need to be shared across both employees and employers. The challenge will be to develop the optimal path towards mutual advantage. As John C. Maxwell has said, “Change is inevitable. Growth is optional.”

Eric Knowles, MBA

The Knowles Group has been providing professional economic services to the legal community since 1979. The firm has worked on behalf of thousands of attorneys in a dozen states and Canada. Testimony has been provided in both federal and state venues.