Israeli High-tech Won't Subscribe to Silicon Valley’s Differential-pay Policy

‘The use of the virus to cut wages because of work from home is cynical and wrong,’ says one Israeli company about the new U.S. trend

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Credit: Dado Ruvic/REUTERS

Facebook was the pioneer. It wasn’t the first tech company to allow employees to work from home, even permanently, but it was the first big company to announce a few months ago that remote workers’ pay would be tied to where they were working. Someone living in an area where, for instance, housing costs are lower than in San Francisco would see that reflected in his or her pay. Other tech companies have followed suit.

When the coronavirus forced millions of Americans to work from home, many chose to move closer to family or places where living costs were lower. But, as it turns out, that flexibility comes with a price.

Bloomberg reported that the California company ServiceNow was also considering changing its pay policies for employees who choose to leave the Bay Area starting next year.

CEO Bill McDermott said in an interview said that otherwise “you get into a situation where employees become the decision-maker in working literally from anywhere, and you would have a hard time organizing and holding together a culture if that was not the case.”

VMware, which provides cloud computing and virtualization software and services, said last week that employees given the option of remote work would see their pay cut if they choose not to live in Silicon Valley.

That means an employee working in the company’s Palo Alto, California, headquarters who chooses to move to Denver, Colorado, will have their pay cut 18%, sources told Bloomberg News. Moving to Los Angeles or San Diego will only bring an 8% drop.

Rich Lang of VMware said the adjustments were based on the local “cost of labor” and that employees might be entitled to a pay increase if they move to a higher-cost area.

The emerging work-from-home pay policies in Silicon Valley don’t seem, at least yet, to be spreading to Israel’s Startup Nation. A survey by TheMarker found that both local companies and the Israeli units of big multinationals with R&D and sales offices in Israel have no intention for now of making any changes, even as remote work seems to be evolving into a permanent part of corporate life.

Even at VMware, which has 200 employees in Israel who have been working remotely since March and are expected to continue to do so until next year, a company spokesman said their pay would not be affected by the new policy.

At Western Digital, which employs 1,200 people in Kfar Saba, the Tefen Industrial Zone in the north and the Negev town of Omer, Ronit Ronen-Karpol, head of human resources in Israel for the company, said the U.S. model wasn’t applicable to the Israeli market.

“At our three development centers, we pay the same salaries and offer the same conditions. Because the distances are so small, it’s not relevant,” she said. “In the United States, the distances between states are enormous and taxes are significantly different between states, so you can build a different compensation model according to the distance.”

With Israel due to go into a second lockdown this Friday, many workers in tech and other sectors will be working from home again for the next three weeks. But even after the lockdown ends, remote work is shaping up to be a bigger and bigger part of the workplace.

A survey by the Israeli Advanced Technology Industries trade group over the summer found that among 50 multinational companies operating in Israel, half were considering letting their staff work remotely after the lockdowns are over for at least two days a week.

Ofer Nahmani, CEO of Trax Israel, which employs about 200 people locally, said his company also had no plans to change its compensation policies.

“Unlike Israel, in the U.S. there are big differences – the average pay in California is higher than in Denver. Israel is too small to open up this big difference [in pay],” he said. “Most high-tech companies are based in the center of the country, which prevents them from imposing pay differentials.”

A spokesman for Payoneer, a U.S. fintech company that employs more than 900 people in Israel, not only said it had no such plans for either existing staff or the 150 new hires it is taking on. “As long are employees are working well, the use of the virus to cut wages because of work from home is cynical and wrong,” the company added.

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