Should where you work affect your salary?
This is a pretty age-old question, and for a lot of businesses in the past, the answer was fairly simple: Wages were based on the local market. Have an office in New York City? Benchmark for the location and pay people accordingly. Have another office in Los Angeles? Do the same thing there. And so on and so on.
However, the question has gotten a lot more complicated recently with more and more people working remotely. And now — as organizations are grappling with whether to require all, some or none of their employees to return to a physical office in the near future — the question has taken on increased significance. For many businesses, remote workforces are no longer a small segment of their staffs — in a lot of cases, these workers may now make up entire staffs.
As Plus VP of Consulting Services Chris Pardo touched on last fall, “The previous methodology of setting salaries based upon office locations no longer works in a WFA (work from anywhere) environment.” For organizations that will require 100% of their employees to return to a physical office, this may be a moot point. But it’s likely that many businesses won’t require every worker to return and will instead favor a “hybrid” approach that blends remote and in-person work. As Chris noted in a more recent post, 82% of company leaders plan to allow employees to work remotely at least some of the time.
The article below lays out some interesting food for thought when it comes to the issue of compensation in this environment. One idea presented for companies that value in-person work and want to encourage employees to return to physical offices is to pay this “on site” group more. The potential downside, however, is that this could alienate remote workers and create division within an organization.
A rise in remote work is likely to lead to a rise in relocation as well, so mobility and HR teams will want to make sure they have a clear strategy and communication plan when it comes to compensation. For the large number of companies that seem headed for a hybrid work model, it won’t be as simple as “pay New York employees New York-based wages.” Employees could instead be scattered across a number of locations, and employers will need to make sure they’re fair to all workers and also wary of permanent establishment (PE) risk and other compliancy issues.
For example, a company could present its workers with two different compensation packages — one for in-office work and the other for remote work. Still, experts warn that hybrid work models that pay different groups of workers differently could create tension. "Anytime you have one group of employees doing one thing and another group doing another thing, you have a chance for an 'us versus them' dynamic to take hold," said Jeffrey Polzer, a human resource management professor at Harvard Business School. "If a specific set of workers returns primarily in-person and another set is primarily working from home, that could create a divide between those two groups that could have dysfunctional consequences."