Should remote employees earn less? Most employers say no

September 14, 2021, 11:30 PM UTC

One in four employees is expected to continue to work from home even after the COVID-19 pandemic eases, yet most companies still don’t have plans to adjust pay for this remote workforce going forward. 

In a report released by PayScale on Tuesday, 69% of nearly 700 HR leaders and executives involved in compensation decisions who were surveyed reported that they are not considering lowering pay for current employees who mostly or permanently work from home. 

“Organizations are still figuring things out as the market landscape continues to shift. Many are waiting to see how other organizations will ‘return to work’ following the pandemic, but that has been continually delayed,” Scott Torrey, CEO of PayScale told Fortune.

Prior to the pandemic, about a third of employers reported their worker pay strategy was based, in large part, on where the company or its offices were located. Now about 30% report they are undecided on basing compensation on location. 

Of the organizations that have considered the issue of remote-worker compensation, the majority say they do not plan on lowering pay. Additionally, 62% of employers say they are not planning on lowering compensation for new hires who work remotely full-time or partially. 

Although not the majority, a substantial percentage of companies, about 14%, report they are considering lower pay for future hires who live in areas with a lower cost of living. But as the Delta variant continues to delay a return to the office, more companies could follow the lead of Google and Facebook and adopt location-based compensation strategies.

So if employers aren’t basing pay on location, what other factors are up for consideration? Some of the alternatives include compensation based on the national median salary for specific jobs or industries, said Torrey. And rather than starting with a single location, like the company headquarters, employers may may adopt a more regional strategy.

“When it comes to pay strategies, organizations need to focus on the compensable factors that they value. Location will likely factor into most pay strategies, but how organizations account for it may differ,” Torrey said.

Perhaps most important, however, is that companies adopt compensation strategies that are consistent and well communicated, he added. “Many organizations underestimate the complexity of getting pay right,” Torrey said. A strategic, consistent approach is essential to creating policies that are both competitive and fair.  

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