Okta has stopped cutting pay for workers who move out of the Bay Area. Its head of dynamic work says the new policy is part of a broader approach to employee wellness.
- Software company Okta will no longer cut pay for people who move from San Francisco, but their raises may be smaller.
- The move is part of a broader focus on employee well-being, which is a key component of the People pillar of sustainability.
Okta leadership thinks building the best and biggest cloud-software business comes down to hiring the right people — and making their well-being a priority.
And as the most skilled and talented people have the option to work pretty much anywhere — in early September, there were more than 1.2 million job openings in the US in computer occupations such as software developer and information security analyst — Okta is hoping that a unique approach to compensation will help it stand out.
Last year, Okta, a $28 billion company that makes security software for other companies, announced that employees would be paid based on their value to the organization, regardless of where they live. Before that, Okta, which employs 4,584 people globally and is headquartered in San Francisco, had cut pay for employees who were moving out of the Bay Area, a practice that tends to breed resentment among employees in the tech industry.
"It continues to be an attraction for us," said Samantha Fisher, Okta's head of dynamic work, who focuses on adjusting policies around hiring, office design, and employee collaboration. "Particularly as organizations in the tech sector haven't been as explicit as we have about pay equity." Indeed, top tech employers like Google have said they'll cut pay for their remote employees. Then again, Spotify and Reddit have said they'll pay all US employees San Francisco salaries.
But the coronavirus pandemic spawned a new class of remote workers, who discovered during lockdowns that they could have a better quality of life outside a metropolis like San Francisco or New York. Maybe they could finally afford a house with a backyard or simply avoid being jostled on their daily commute to the office.
Okta is betting that helping these employees realize their professional and personal dreams will help it attract the best talent on the market. Dynamic work is also a way for Okta to support communities outside San Francisco. "Allowing employees to work from anywhere has enabled Okta to hire diverse talent from outside of the markets in which we have offices, which are primarily in markets with higher costs of living," Fisher said.
How Okta calculates compensation
Now Okta looks at compensation in terms of two tiers. The top tier is the San Francisco Bay Area, where salaries — and the cost of living — tend to be higher than in many other areas. Every other US geographic region falls under the second tier.
Employees who live in the Bay Area now and move elsewhere will not take a pay cut, Fisher said, but over time they might see slightly smaller pay increases than their Bay Area-based colleagues. According to Fisher, that's because Okta takes into account an employee's value to the organization — which encompasses things like their subject-matter expertise, their experience, and the caliber of clients they bring in — as well as which tier they live in when calculating compensation. Employees who are hired in markets outside of the Bay Area will receive slightly lower starting salaries than their counterparts in the Bay Area.
Okta is investing in employees as a talent strategy
Fisher said Okta hasn't directly measured or quantified the impact of the new pay policy on its business. But she said taking care of the people who work for a company directly enables the business to thrive.
Okta's 2021 State of Inclusion report also spotlights pay parity as a core element of its diversity and inclusion strategy. "Okta provides a consistent and positive experience for all employees, regardless of location, and this also includes pay parity," the report reads. "We want to attract the best talent from wherever we recruit them." By the end of fiscal year 2022, Okta said, the company aims for 60% of new hires to be remote, meaning they do not live near an Okta office. Eventually, Okta expects 85% of its staff to be remote.
Enabling employees to work from home without penalty fits with Okta's sustainability goals as well. Last year, the company published the results of a study that found greenhouse gas emissions are 21% lower per employee in a dynamic work environment than they were before.
The way Fisher sees it, supporting employees in their efforts to build their ideal lifestyle is a critical talent strategy — employees want to feel as if their employer is invested in them. "If you really want your organization and your business to be successful," she said, "you need to have the best people." She added that those people need to feel as if their employer cares about not just their work experience but also "the things that are important to them outside of their work life."
Fisher, for her part, lives and works in the Chicago area. "I could choose to relocate to San Francisco," she said, "but I chose the standard of living that I chose based on what's going on in my life, which is the whole intent of dynamic work."