Companies calculate a Cost of Living Adjustment (COLA) whenever one of their staff relocates and moves to a state that either has an incredibly high cost of living (California) or a low one (Iowa). However, as more companies become remote and people get to decide where to live, is COLA still relevant, and more importantly, is it still fair for the employee? Companies are saving thousands in commercial real estate and retention perks by having their employees go remote, so why are they so picky about COLA? Anna, Larry, and Trip discuss.
What is COLA?
Trip left the Bay Area as an economic refugee. He didn’t want to choose between paying rent vs. having another child.
Anna lives in Costa Rica, a vacation spot. It must be incredibly expensive to live there? Not so fast.
Major tech companies are announcing that you can work remotely… permanently. What’s happening here?
Companies are saving so much money on real estate alone right now.
Larry doesn’t think it’s right that just because you move from an expensive area to a less expensive area, you should get paid less for the same amount of work.
Companies are willing to spend big $$$ on all these crazy perks, like massages and free food because they want to retain you.
Zapier offered employees $10,000 to leave California. They knew the quality of life was going down. They wanted their employees to be happy, they wanted them to stay with them, so they asked them to leave the state.
An amazing retention strategy could very well be giving your employees the freedom of choice to live wherever they want.
These perks that Silicon Valley companies offer, they do not work! The average tenure for an employee is 13–24 months.
The cost to replace an employee is about half of their annual salary.
Trip makes a counter-argument about relocation. What happens if you get 53 more days back in your life (by not sitting in traffic) and you can use those days however you want? We’ll just pay you a little less compensation-wise.
Anna used to sit in traffic for five hours a day. Now that she’s remote, she cooks her own meals, she is learning a new language, there’s so much time now to work on and do cool things!
If all of your companies are remote, do you stop subsidizing people to live in specific places? And, see compensation normalizing on a global level?
Income inequity is a big problem in the United States and a remote workforce could level the playing field.
Larry sees people leaving big cities and going back to rural communities. He thinks it’s a rebalancing of what happened during the Industrial Revolution. We should be reinvesting in smaller communities.
Larry believes by going to where the talent is, instead of having the talent coming to you, we will see a bigger boom in cultural and cognitive diversity.
Anna shares her experience working with diverse and remote teams throughout her career.
It’s been interesting to see some of the companies struggling right now. The ones thriving are the ones solving real problems for people and their staff. The ones that are having challenges are detached from what people really need and are offering them cool scooters to zip around in.
Whenever Larry had to consider a new hire, they always asked if they had enough ‘relo’ budget to bring someone out-of-state in.
Trip’s father and grandfather’s generation, they worked to get a gold watch. That was their career moment.
If you value diversity, you have to invest and take risks, and grow people.
Ideally, you want to hire the most qualified person for the job and also have the added benefit they’re different from you. Anna has seen it where employers hire someone based on race or gender because they’re just trying to fill a quota or box and their lack of skills or quality brings the whole team down.
College degrees used to open doors. That’s changing now. Companies have to up their game.
Trip has hired several people who didn’t have a college education because they had skillsets that were unique and highly sought after. He also compares it to the ivy league graduates who have walked through his door.
Where is COLA and all of this going to be five years from now? Trip, Anna, and Larry weigh in.
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