Ask HR: If I Work Remotely, Why Does Where I Live Impact My Pay?

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SHRM President and Chief Executive Officer Johnny C. Taylor, Jr., SHRM-SCP, is answering HR questions as part of a series for USA Today.

Do you have an HR or work-related question you'd like him to answer? Submit it here.

I work as a therapist for a mental health service agency. We recently switched from 50 percent remote to 100 percent remote work. With the ability to work from anywhere, I am planning on moving from New York City to Jacksonville, Fla. Now that we are working remotely, our location is calculated into our pay ranges. Is this common practice or a new phenomenon? Why does location impact my pay? —Nikki

Johnny C. Taylor, Jr.: Factoring in location when determining an employee's base salary is becoming common practice.

Frankly, employers have done this for decades. The current growth of remote work is simply making more people aware of it. Whether your employer considers the regional labor market or local cost of living, where you live has always been calculated into your pay rate. Pay rates are generally designed to be sufficient for attracting workers in a local market. However, in today's global economy, companies constantly adjust their pay structures to account for the cost of living and wages for similar jobs where the employee lives.

The proliferation of remote and hybrid work has created opportunities for employers and employees to reshape their careers and lifestyles. You're among a growing number of people with the ability to work 100 percent remotely.

Remote workers now have the possibility to work from anywhere in the world. At the same time, employers have the opportunity to recruit talent from anywhere. In a global labor market, you are no longer competing with workers only in New York City or only in Jacksonville; you are competing with workers virtually everywhere.

The cost of living in Jacksonville is about half that of New York City's. When you take this disparity into account, the significance of location becomes clear. Hopefully, this helps you understand your employer's perspective a bit better. Best of luck on your move.

I just started a new job, and it offers health savings account and flexible spending account benefits. I am single with no dependents and am relatively healthy. Should I consider either one of these options? What are the major differences between them? —Violet

Johnny C. Taylor, Jr.: Congratulations on your new job. There certainly are important differences between health savings account (HSA) and flexible spending account (FSA) benefits. Even if you don't expect to incur significant medical expenses, there may still be advantages of each you'll want to consider.

HSAs and FSAs are both designed to cover potential future medical expenses. Given that they are funded from pretax dollars, they both reduce your tax liability, which essentially saves you money when these vehicles are used properly. The primary differences between the two are in how long each benefit is available for use, who qualifies for the benefit and how much is available to use.

How long is the benefit available for use? You own and control your HSA and can roll over your contributions year after year. Should you leave your current job, you can also take your HSA with you. FSAs are less flexible because they are employer-owned. FSA funds not used in the current year generally cannot be carried over into the following year. So, you can potentially lose the money you contributed to the account. However, if an employer's plan allows for it, an employee may have the option to carry over a limited portion of the FSA funds.

Who qualifies for the benefit? HSAs can be used only with high-deductible health care plans (HDHPs). While HDHPs are more affordable overall, the deductibles you pay when using the plan are considerably higher than those for traditional health care plans. HDHPs can be a great choice for young, healthy employees with no dependents. FSAs are compatible with either traditional health care plans or HDHPs.

How much is available? Maximum contribution amounts also vary between FSAs and HSAs. The IRS can adjust those amounts year to year. For 2022:

• FSAs have a $2,850 limit for individuals.
• HSAs have a $3,650 limit for self-only coverage and a $7,300 limit for family coverage.

In addition, an HSA can double as a retirement savings vehicle. Both employer and employee contributions may continue to grow in savings with the option to invest that money in the stock market to generate additional income.

At the end of the day, every employer selects benefits offerings to meet its specific circumstances. Your HR professional is your best resource as you sort through the unique details of your employer's benefits options. I hope these considerations shed some light on your options and help you make the choice best suited for your lifestyle.