Cloud and virtualization software provider VMware ($VMW) continues to closely manage expenses. The latest example: VMware employees who relocate from the company's Palo Alto, California, headquarters to regions with lower costs of living may wind up taking pay cuts, according to Bloomberg. Still, quick math suggests employees who flee Silicon Valley may still be ahead in the financial game.
Here's where the math starts: A VMware jump from Silicon Valley to Denver involves an 18 percent salary reduction, while a move to Los Angeles or San Diego triggers an 8 percent pay cut, the report says. The pay scales are based on cost of labor in various regional zones and benchmark salary variations among firms competing for VMware's labor pool, VMware SVP Rich Lang noted in the report.
Employees who leave Silicon Valley and take pay cuts may still wind up ahead of the game. The reason: Wages in San Francisco and San Jose need to be 41% and 40% higher than the national average in order to keep up with cost of living, respectively, Fast Company reports. With those stats in mind, an 8 percent to 18 percent pay cut to exit the Valley doesn't sound so bad.
Don't Blame Coronavirus (Alone)
Pay cuts tied to employee relocations aren't unique. Numerous companies are rethinking their compensation plans as thousands of employees rethink where they want to live and work. Indeed, the coronavirus pandemic coupled with extremely high cost-of-living expenses has triggered a mass exodus from Silicon Valley.
Still, the exodus started even before the coronavirus pandemic arrived. For instance, Business Insider notes:
- San Francisco lost more residents than any other city in the U.S. in Q4 of 2017, according to a Redfin survey;
- 46% of residents said they planned to leave the region, according to a 2018 survey from the Bay Area Council advocacy group; and
- 41% of 18- to 34-year-olds planned to leave the region in the next year, according to a 2019 Brunswick Group survey of 300 tech workers in the Valley.
VMware: Growing But Watching the Bottom Line
Meanwhile, VMware remains in growth mode, but the company has closely managed expenses amid the coronavirus pandemic. Indeed:
- VMware in May 2020 confirmed plans to freeze employee salaries, cut executive pay and suspended 401K retirement plan matching. Dell made similar moves that same month.
- VMware in August 2020 cut some headcount.
Looking ahead, channel partners should be tracking these dates:
For the second quarter of fiscal 2021, VMware's revenue was $2.88 billion -- up 9 percent from the second quarter of fiscal 2020, the company said on August 27, 2020.