Pay Transformation and Remote Work

There is no doubt in anyone’s mind that the Coronavirus Pandemic has caused major shifts in work-life patterns. According to Upwork, 42% of the American workforce is working remotely. But, by 2025, 22% of the workforce will still be working remotely — a 37% increase from the number of remote workers prior to the pandemic.

Remote work does work for companies. A Gartner Survey found that 80% of company leaders plan to allow employees to work from home part of the time post-pandemic and 47% will allow employees to work from home full-time. In a PWC Survey of CEOs, 78% agree that remote collaboration is here for the long-term.

Remote Work: By the Numbers

The following information is from an article on Remote Work Statistics: Navigating the New Normal:

• In a recent Flex Jobs survey, 65% of respondents report wanting to be full-time remote employees post-pandemic, and 31% want a
  

hybrid remote work environment – that’s 96% who desire some form of remote work. What’s more, 27% of workers say that the ability to work from home is so important to them that they are willing to take a 10% to 20% pay cut to work remotely. And, 81% say they would be more loyal to their employer if they had flexible work options.

• Remote workers are more productive: According to Flex Jobs’ survey, 95% of respondents say that their productivity has been higher or the same working from home, and 51% report being more productive when working remotely. Top reasons for increased productivity include:
  

– Fewer interruptions;

– More focused time;

– Quieter work environment;

– More comfortable workspace; and,

– Not being involved in office politics.

Despite pandemic challenges, working parents also report increased productivity with 49% of working mothers and 50% of working fathers saying they are more productive working from home.

In a Boston Consulting Group study, 75% of employees working remotely report being able to maintain or improve productivity on their individual tasks, and 51% say the same about collaborative tasks.

• Remote work is impacting real estate as it gives employees more options of where they want to live.
  

There are a number of companies that already had flexible Work-From-Home (WFH) policies. Twitter and Facebook already expanded their WFH policies. Twitter announced that its employees were free to work from anywhere and offered allowances for home-office supplies.

To address pay, companies who adopted geographic pay differentials have now moved to localization structures based on the cost of labor versus the cost of living in recognition that employees moved out of high cost of living areas. The pandemic sparked the question of whether pay differentials should stay in place if the remote location in which the employee works doesn’t justify a higher cost of living differential.

Twitter moved to what they call a competitive pay localization structure or a single salary structure for the entire country. However, for high skill tech jobs that are in-demand nationally, not having a location differentiation may pose a recurring issue if you want to attract that talent to your company. The issue becomes that if an employee can work in a lower cost area but the company is going to reduce their pay as a result, they may say “I’ll just go and work for a company that won’t do that.” Companies need to look at their pay structures to determine what’s equitable and location is just one factor to consider.

As we move to a more remote-work model, the traditional office space becomes irrelevant so COLA no longer applies. Companies need to rethink their geographic structures accordingly. COVID has changed the internal compensation structure. Companies also have to consider employees no longer have the free lunch or snacks employees were offered at work, the on-site gym, but they also no longer have the commute, the wardrobe costs (even if it was business casual), child-care or pet-care costs, etc. So, companies need to assess pay given the value proposition of the new remote work model.

Conclusion

Most companies will undoubtedly face the issue of re-assessing their approach to pay for remote workers as the number of remote workers increases. Companies will determine their selected approach on many factors. BCR can help you assess the best options for your company as you navigate this significant change.

Sources:

• “6 Ways COVID-19 Will Change the Workplace Forever” by William Anroda, Forbes, May 7, 2020

• “5 Lasting Changes to Expect in the Workplace Post-COVID” by Ashley Stahl, Forbes, February 1, 2021

• “Coronavirus Could Transform the World of Work. Are Businesses Ready?” by Tom Miller in Workspan Daily, April 1, 2021

• “Cost of Labor vs. Living” by Mark Athitakis, Workspan, 1st Quarter 2020

Written by: Barb Manny, BCR Advisor

BCR is a local, minority-owned firm with more than 25 years experience in serving non-profit, public, and privately held entities in the key areas of Benefits and Compensation Consulting, Performance Management, Human Resource Organization Development, and Human Resource Information Systems and Processes.