Cutting Costs? Don’t Do This

The COVID-19 pandemic and resulting global shift to work-from-home has influenced many people—including me—to examine HOW they work … and live.

I was already working from home—COVID just amplified WHERE home could or might be.

For small business owners, moving you AND the company may be one and the same. Larger companies might have less flexibility on where the business is located and discovered that where their workforce lives and works was less important.

Either way, one thing was certain—for anyone other than essential workers, the daily commute to a job site, particularly an office, was on pause.

Not needing to show up at a physical office gave us an opportunity to explore our options—leave a city, move closer to family, migrate to a milder climate … suddenly what might have seemed disruptive was just another choice.

And when considering relocating, depending on where you’re moving from and to, one factor may be a lower cost of living. 

After all, particularly when work may be slowed down or stopped, why NOT consider reducing your living expenses?

Which may seem like an opportunity for businesses to reassess salaries for employees working remotely long-term …

Disclaimer: I’m not a compensation expert, but I am one on company culture—and when considering less pay for the same work, the two are deeply entwined.

So—should you pay your people less because they moved away from Silicon Valley or Manhattan?

When it comes to their paychecks, should the defining factor be their physical place, or the value they deliver?

First, let’s look at whether reducing salary cuts costs at all.

DOES PAYING LESS FOR REMOTE WORK SAVE MONEY?

Not in the way you might expect.

Mercer found that tech pay outside Silicon Valley is already a lot higher than you’d think.

While some of these stats may be specific to big tech salaries, there are implications beyond payroll, too. 

If you’re shifting to a fully distributed or remote team, HR will need to reimagine how they go about recruiting, onboarding, training, planning company events … basically everything that used to be centralized. 

And then there’s the cost of turnover. 

It’s usually less expensive to keep an already-trained—and proven—employee than it is to lure, hire, and initiate a new one. 

If you’ll lose good employees over pay cuts, what’s the long-term cost to your business? And what does that choice say about you as a company when recruiting? 

It may be hard to be competitive when you’re viewed through the lens of an organization that views people as expendable to save a few bucks.

PEOPLE ARE YOUR BIGGEST ASSET

It doesn’t matter whether your workforce is in the office or working remotely—your people are likely your company’s biggest asset.

Depending on your industry, you probably spend more on your employees than on anything else. They keep the place running and make the work you do possible.

More than that, they’re people with families and lives of their own.

When times are tough OR an opportunity to shave costs presents itself, some businesses forget that. 

It’s the lazy person’s way of economizing.

Instead of rooting out inefficiencies and redundancies where the savings can be significant and don’t damage your company’s culture, some companies have started reducing compensation if an employee moves to a more budget-friendly location. 

Far fewer companies—if any—are RAISING salaries if employees move to a more expensive place.

Funny how that only works one way.

As a business owner myself, I appreciate wanting to reduce overhead.

And this is a moral and ethical question as much as a financial one.

If everyone’s taking a pay cut to keep the lights on, that’s one thing … and hopefully a temporary thing.

Many employees would opt for that rather than being laid off or the business going under.

But if you’re targeting your worker’s pay without reducing YOUR salary to spruce up your bottom line based on where they choose to live (or are essentially forced to live either because of economics or family requirements)—carefully consider your choices.

Yes, it’s business—and it’s personal, too. 

If the quality and quantity of their work is the same regardless of their postal code … would you risk destroying the trust and fabric of your company for a short term gain?

Will the same rules apply to leadership? What if you need to relocate to care for a sick parent … will you reduce your income accordingly?

Will these policies discriminate and fragment your workforce, instead of building a robust and committed team?

Choices around compensation are some of the most polarizing and critical decisions you can make. Take the time to consider your values and be mindful.

COST-CUTTING ALTERNATIVES

I run a small business myself, so I know exactly how important it is to cut costs when sh*t hits the fan. Like, say, if a global pandemic completely overturns the economy.

If your bottom line needs some TLC, here are a few cost-cutting measures that don’t involve changing numbers on paychecks. 

And, as a bonus, you won’t lose any sleep at night.

  • Reduce real estate costs: With office space at a premium in big cities, reducing spend or eliminating a physical office represents enormous cost savings. Taking your team fully remote—or dramatically reducing your in-office staff size—can save multiple millions of dollars a year.
  • Increase retention: Happy employees stick around. If remote workers are in a space that promotes improved quality of life, they’re more likely to stay with you, saving you tens of thousands of dollars in recruiting, hiring, and training a replacement. AND hoping that by the time they get up to speed, they are a good fit.
  • Eliminate subscription software: On average, small companies spent $5k per employee on SaaS products in 2020. While it’s possible you need all the software you use—it’s more likely that you don’t. Where are you overspending on subscription software that could easily be replaced with free or less expensive alternatives? Where have you opted in for a free trial and then months later are still being charged for a product you were only trying out?
  • Reduce business travel: COVID may have changed the way we do business forever—time will tell. At least for the short term, virtual meetings have become a more viable alternative to in-person visits. And while a virtual meeting will never have the same feel as face-to-face contact—reducing business travel by even 25% saves thousands a year per employee.
  • Recruit top talent from anywhere: If you’re opening your company to remote workers, you can pursue the best and brightest no matter where they live. In a location where it’s been historically tricky to attract top talent, you’ll be much more competitive. 

THE BOTTOM LINE

Today’s business climate is increasingly friendly to remote work … which is making some business owners turn their attention to compensation as a potential way to shave costs and increase profits.

I urge you to resist paying employees less for moving to a less expensive location. The number on a paycheck should be based on the value an employee brings to your organization, not where they do their work.

Especially if leadership isn’t willing to take any pay cuts for their own moves.

There are several ways to cut costs that will demonstrate your shrewd attention to detail while remaining true to your values. Examine all the ways you can reduce spending that don’t target your team’s compensation and you will foster greater loyalty and strengthen your company’s culture. And the value THAT brings to your business is priceless.


Doing more with the tools and the team you have is another way to save money without reducing anyone’s pay. Check out my 90-minute masterclass on time management, Calling BS on Busy, to maximize your company’s productivity.