The Rise of Remote Work: What does it mean for the future of your pay structure?
It’s no secret: Remote work is here to stay.
In fact, 74% of companies plan to shift to more home-based working on a permanent basis since Covid hit. And for employees, the one hundred and one reasons to leap at the opportunity to work from home have become even more important post-2020. Eighty percent of U.S. workers now expect their employers to allow them to work remotely multiple days a week and 82% expect flexibility in their hours. What’s more is nearly two-thirds (65 %) of employees are willing to take a pay cut to work remotely.
This is huge, especially when the goal is to maintain high retention and attract top talent. But what does this mean for location-based salaries when the national workforce is becoming more and more borderless?
In our article “Calibrating software engineering compensation for a remote workforce,” we listed three ways to consider paying your employees now that remote work and workplace flexibility are on the rise:
1. Pay the local rate for talent.
2. Set a company-wide salary band, irrespective of location.
3. Set a company-wide salary band, and adjust per employee based on the cost-of living in their respective cities
There is no one-size-fits all structure. You must weigh the pros and cons of each payment structure and ensure that it aligns with your company’s work philosophy and business model. But most importantly, that compensation program must remain competitive, consistent, and fair. That’s where PPP comes in. Let’s deep dive into each option.
1. Pay the local rate for talent
In the face of the Great Resignation, PPP’s customers use our benchmarking data to not only ensure equal compensation across departments and personnel within their company, but also to pay employees appropriately based on their location. They are seeking to align employee pay with the comparative cost of attracting and retaining talent in that geographic market.
Our real-time HRIS / payroll integrations ensure our data stays up-to-date and reflective of what companies are paying for a specific role in specific cities, even in the face of a rapidly developing market.
It’s obvious that organizations are now choosing to leverage remote jobs to expand into new geographic markets where they can source talent. But, it also begs the question – if an employer decides to move with the tide in a remote friendly work culture and one of their employees began a role in a specific location, should their salary change if they decide to pack up and work in a different city with the same position?
Vistaprint, a well-known marketing and design firm for small businesses, decided to continue considering location when setting pay. Although they opted to transition to a remote-first workforce based on survey results from their employees, they developed a globally-centered approach with geographic differentials that would be fair and equitable. In other words, they would continue to use the local rate as a driving factor in their compensation structures.
2. Set a company-wide salary band, irrespective of location.
On the other hand, online real estate site Zillow is shifting away from tying pay to local labor rates, according to a recent LinkedIn post by Dan Spaulding, the firm's chief people officer.
"As we evaluated our compensation philosophy to align with our new flexible work policy over the past year, we knew it needed to reflect our values and account for competitive realities," he wrote. He went on to say, "When you work for Zillow, your long-term earning potential is determined by how you perform, and will not be limited by where you live," with nationally competitive compensation packages primarily tied to an employee's role, responsibilities and performance metrics.
If this is the route best suited for your company, PPP’s powerful planning features allow you to analyze compensation for fairness and merit, then run organization wide merit cycles in one centralized portal.
3. Set a company-wide salary band, and adjust per employee based on the cost-of living in their respective cities
One way to do this is set employee pay to the U.S. national level and adjust it upward if necessary. While the national rate may be suitable for employers in areas with moderate labor costs, location pay could be adjusted up to account for higher living expenses for employees located in significantly more expensive areas like San Francisco and New York City. Conversely, if employees are living in areas with significantly lower costs of living, a location adjustment would not be applied.
It is important for employers to put deliberate thought and strategy into the approach that works best to support their business, but it is equally important for companies to develop a clear remote-pay policy that is consistently communicated and applied fairly across the organization.
It is a new dawn for the remote workforce. HR and talent acquisition teams can no longer rely on location-agnostic historical records and spreadsheets. PPP is fostering a new era of API-driven compensation platforms. We offer seamless integration with your systems of record to ensure that you can stay up-to-date and competitive in the ever-changing market to keep your top talent engaged.
Join the movement now.