A number of small towns, their eyes on companies’ newly liberal remote-work policies, are offering relocation incentives to higher-income employees. The trend is raising the stakes for CFOs whose C-suite colleagues are looking to them to help devise a compensation model for a permanently distributed workforce.

“If your company falls in the camp of having a more distributed workforce or whose people have moved to cheaper locations, you’re going to be looking at the cost-of-living adjustment for a lower-cost location,” Gartner Senior Research Director Nicole Kyle told CFO Dive.

Almost two-thirds of employees in a Gartner survey said they would take a pay cut in exchange for working remotely on a permanent basis, and almost half of those already working remotely said they would consider moving if it were made permanent. 

That fits well with the surge in localities trying to capture the attention of the large pool of well-compensated employees suddenly untethered from Silicon Valley, New York City and other talent hubs around the country. 

The Shoals, a northern Alabama community two hours from Birmingham, Nashville and Memphis, is offering $2,500 in relocation assistance to anyone whose salary is at least $52,000, another $5,000 if the person stays for six months and another $2,500 if they stay a year — $10,000 in all.

“We’re looking for talented remote workers to join the Shoals community,” the municipality said in its promotion material. 

Shared interests

In its promotion, the Shoals makes it clear who it’s looking for: “You’re employed as a full-time remote employee or self-employed as an independent contractor.” 

In addition to the cash, the town touts its low cost of living and sense of community as reasons to make the move.

Other towns far from traditional talent hubs making a push for remote workers include Tulsa, Okla., Topeka, Kan., Newton, Iowa, and Lincoln, Kan. Sparsely populated states, including Vermont and West Virginia, are competing, too. 

Sky Cassidy, head of MountainTop Data, which helps municipalities target relocation candidates, says employers, employees and the towns stand to benefit equally from the dynamic. 

“The employee, the company and the location all get something important out of it,” he said. 

Cost reductions

On a cost basis, a liberal remote policy can work to the employer’s benefit to the extent it enables the organization to shrink its office space. The Gartner poll found 72% of employers intend to reduce their space.  

“You get some cost savings through a smaller and more rationalized real estate footprint,” Kyle said. 

But for CFOs trying to help build a compensation model there are other issues to consider, starting with state and local tax nexus that could come into play. 

“At what point are employees creating new tax liabilities?” she asked. “Companies need to [know] where employees are moving, how long they’re there, and all of that.”  

And then there’s the impact of deep-pocketed companies [with] no intention of lowering pay for remote workers. In any competition for talent, they would start with an edge. 

“Companies that maybe have more cash to burn and can afford to pay their talent a bit more will say, ‘Look, we’ll pay you for the work you do regardless of your location,'” Kyle said. “If you’re in an industry where competition for talent is super high, or you’re hiring for skills where competition for talent is super high, you might rethink making those adjustments downward.”

The need to get the pay scale right will become especially important when the ability to work remotely becomes less of an option and more of a baseline expectation. At that point, it won’t be enough for an organization to say it offers a remote-work option. 

“There is going to come a time, and research points to this, when hybrid work and flexible work is the expectation,” said Kyle. “Once that happens, talent is going to start to look at things like benefits and compensation as a differentiator. We’re not at that point yet.”

There’s little chance remote work won’t become the norm; a growing body of research makes clear there’s no going back to what once was, Kyle said. 

“If you go back to expecting employees to be in five days a week, 9-5, and their role allows them to work digitally, you could lose up to 40% of your workforce,” she said.  

Going forward, getting the compensation balance will be hard if CFOs aren’t thoughtful about how they position their organization. If compensation is set too high, it could hobble organizations in the future. 

“There are longer term consequences of some of these short-term levers that organizations are pulling,” Lesli Jennings, senior director of talent management at Willis Towers Watson, said. “CFOs have to be very careful about the financial decisions we’re making now. If these are temporary [conditions] and we’re moving quickly, we need to be very careful about what the longer term implications will be.”