The continued rise of digital nomads and the challenge of paying them

Who are "digital nomads?"

I would describe this group as well educated, highly skilled and digitally savvy. We have talked about these "location-independent entrepreneurs" previously. 

The history of digital nomads:

"Digital nomads" have existed prior to the creation of the term, which was used for (probably) the first time in 1997, in the book by the same name by Tsugio Makimoto and David Manners. As Simone Puorto points out in this article from hopsitality.net, Makimoto and Manners predicted that "most people will find that the geographic tie is dissolving. It will happen gradually, and people will be slow to realize that a revolution is occurring but, by the end of those ten years, most people in the developed world will find themselves free to live where they want and travel as much as they want." 

When considering the history of digital nomadism, you can go back even further (say to 1964) to look at the thoughts and writings of Arthur C. Clarke. This YouTube video is a 2-minute talk where Clarke contemplates where technology will take us as it relates to working and living. He explains that we will have the ability to be in instant contact with people and it will be possible for a person to conduct business from Tahiti or Bali just as well as could be done in London. Travel would only be needed for pleasure, not work. 

Predictions moving to reality:

Many consider Steve Roberts one of the (if not the) first "global nomads" as he zoomed around America back in 1983 on his computerized recumbent bicycle. Today it feels like we are closer than ever to his prognostications. While this pandemic is not over, it has pushed many to reconsider how and where work gets done. It has opened the door further for digital nomads to flourish. In October of 2015, (yes, just six years ago), this article predicted that there would be 1 billion digital nomads by 2035! Many are now pondering what is next as it relates to work models, talent management, employee mobility, immigration and tax compliancy. 

Recruiting digital nomads:

Visa laws in most countries are not set up to deal with this new class of modern nomads who are living and working remotely around the world. However, there are at least 20 countries (Dubai, Germany, Mexico and Australia, to name a few) that are recruiting digital nomads by adding work visa options (digital nomad visas, remote work visas and freelancer visas) to attract them. For a summary on where this is happening and the basic conditions of these visas, check out this article from Expert Vagabond. Per Fragomen, Sri Lanka has just introduced a new "Digital Nomad Visa" and a new tourist visa with extended validity that will enable the holder to perform work for their overseas employer remotely in Sri Lanka.

How to pay them:

Per the Harvard Business Review, despite the large and growing number of these employees, few organizations have formal policies and programs for them. But blasé approaches may not be sufficient. Understand that having digital nomads on the payroll can leave firms open to a wide variety of regulatory and legal risks. The article suggests limiting the amount of time nomads can spend in any one location and listing “no-fly zones” — places that are off-limits because of their compliance rules and regulations. Companies should draw up an agreement that defines the terms of the arrangement and specifies that the nomad is a telecommuter whose place of employment is and will remain in a location the company currently operates in.

As we know, the pandemic has led to huge increases in remote work that has challenged companies to better define their compensation practices. More and more companies are choosing to localize salaries based on where employees choose to live. Nomads, given they move around, make this kind of structure more challenging. In this World at Work article, Brad Hill, a principal at compensation consulting firm Clearwater Human Capital, suggests that pay should be based on the value the role adds. “So, if my organization requires an employee to reside in the Silicon Valley, then I should pay a geographic differential to reflect the higher pay there,” he said. “But, if an employee determines that he or she would like to work in the Silicon Valley, and it provides little or no benefit to the company, then his or her wage should be the same as workers at headquarters, or established at national pay levels."