Should businesses pay remote workers less in the future?
Half of the workforce is now remote, with many saving money on commuting and living costs – should that translate into diminished pay packets?
The employee exodus
Living and working in a city can be costly. Let’s take the capital, for example. Commuting from within London or from a satellite town costs circa £5,114 – 18% of the average annual London net post-tax salary – according to most recent Tyto research. Then there’s rent. The average rental property in London is circa £1600. Another sizeable chunk of the end-of-month pay.
Therefore it makes sense that since offices were told to close by the Government – with many companies deciding to change long-term work-from-home policies as a result – that many decided to leg it from expensive urban hubs. In 2019, just five per cent of the UK population worked from home full time, according to the ONS. Now, that number is closer to 50%. Some think it will never reach previous levels and many will never return to the expensive cities they once lived in.
Workers are contributing less to the infrastructure of the economy whilst still receiving its benefits
For many individuals, the decision was based on health – coronavirus levels are usually higher in cities – but for some it was the results of a cost benefit analysis. Compared to London, other locations, say Wales, are a lot cheaper to live in. The average commuting costs for those living within rural Wales is just £743, according to Money.com. So, with employees potentially benefitting from lower costs in the long term should employers dock salaries?
Facebook has plans to adjust pay on this system. Chief Executive Mark Zuckering told staff last summer that: “We’ll adjust salary to your location at that point . . .” And they’re not alone in thinking employees should take a hit for new structures of work. Deutsche Bank recently proposed making staff pay a five per cent ‘tax’ for each day they choose to work remotely once restrictions are lifted around the world and the ‘new normal’ ensues. Deutsche Bank argues that it would leave the average employee “no worse off” because of savings made by not commuting and not buying lunch on-the-go and fewer purchases of work clothing.
Justifying the concept, Deutsche Bank Strategist, Luke Templeman, told The Guardian: “A big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life. That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits. That is a big problem for the economy.”
Employees within the office obviously don’t pay for the electricity used when they are in the building… why should they expect this when working remotely?
However, the concept of expecting workers to potentially choose between remote working and earning less money, or working in an office and earning more money (but spending more), has outraged some from the HR and worker wellbeing communities such as Jane van Zyl, Chief Executive of UK work-life balance charity Working Families. She told HR Grapevine: “Simply put, employees should not have to pay for better wellbeing. Companies that implement effective flexible working practices benefit enormously from better talent attraction, retention, engagement and performance—all of which will have a positive impact on the bottom line. Expecting staff to pay for the privilege of flexibility would run the risk of undermining many of these good outcomes.”
However, if the choice between continuing to work remotely and taking a paycut or returning to the office were given, recent Forbes data suggests that a whopping 44% of workers would take this option, so long as the pay cut was under 10%. Yet Rachael Power, Head of People at LoveCrafts, notes that those deciding salary based on such things are missing the point. “Pre-pandemic/remote working, it wasn’t typical practice to set a new hire compensation package according to how far or expensive their commute was,” she says. “These decisions are based on the role requirements and skills they bring to the business and it’s up to the candidate to determine whether that’s a motivating and fair package and covers their costs.
“I don’t believe that has changed simply because they may now work remotely. The next decision is whether a role can be performed optimally if permanently fully remote and if so, the local market rate will clearly be a determining factor in future comp decisions,” she adds.
Simply put, employees should not have to pay for better wellbeing
The new costs of work
Power also believes that another factor is in play when discussing lower salaries for remote workers – the inevitable rising cost of working from home. “Of course, we all also incur more costs associated with home bills and home office set up,” she notes. And Power is right; energy provider Utilita conducted research in May of 2020 and discovered that the average employee is spending up to £70 more per month for elements such as heating, electricity and faster internet. Wired research concluded that overall, this will equate to over £2billion in increased energy spend this winter alone.
And it’s for these reasons that the CIPD’s Senior Adviser for Performance and Reward, Charles Cotton, believes pay cuts to be unenforceable. “Employees within the office obviously don’t pay for the electricity used when they are in the building, nor do they expect to have to purchase items such as screens or chairs, why should they expect this when working remotely?”
Ultimately, whilst certain companies such as Facebook have hinted at implementing a pay scale based on whether a worker remains remote or not, the vast majority have understood that adopting a more flexible working model and allowing remote working wherever feasible is a mutually beneficial agreement. Companies such as Powers’ LoveCrafts report that, due to the benefits to wellbeing of remote working, productivity within the company is up and workers are continuing to remain focussed despite the stress and unrest of the pandemic.
Powers therefore believes it is within everyone’s interest to put wellbeing first and foremost, believing that profit will follow as a result. “We’re focusing on helping people to look after their mental wellbeing, physical health, having space and opportunity to be creative, supporting their continued development, and drawing a distinction between work and home life. These are all the challenges we need to support remote workers with, and I don’t believe a salary reduction positively contributes to this cause,” she concludes.