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Should Teleworkers be Paid Differently Than In-House Employees?

By February 5, 2021March 22nd, 2021No Comments

In February 2020, 3.4% of the American population worked remotely. Two months later, that percent skyrocketed to include 42% of Americans.

New research finds teleworking will become a permanent fixture for many employers — which is good news for the 75% of employees who said they would like to continue to work from home in some capacity after the pandemic.

The switch to remote work means many employees are fleeing big cities and taking their jobs, and metropolitan salaries, with them. Employers meanwhile are considering new pay and reward models to account for remote work arrangements that could extend far past the pandemic.

Should pay-rates be adjusted based on location?

Adjusting the salaries of remote workers to account for differences in cost-of-living has always been controversial.

“This has been a point of debate starting with San Francisco in Silicon Valley,” says Michael F. Maciekowich, National Director of Astron Solutions, LLC. “When they [employers] had all their people in the office, they were paying very high San Francisco rates, but now they’ve got people who have moved to Nevada, so the question becomes, do you continue to still pay them the San Francisco level?”

A study by global advisory, broking, and solutions company Willis Towers Watson found that 60% of those currently without formal policies are planning or considering adopting a formal policy by next year. Nearly two-thirds (64%) of those with policies are planning or considering revising them this year or next to adapt to the changing nature of where work gets done.

18% of employers are setting pay levels by first determining the market value of an employee’s skills and then applying a geographic differential based on where the employee is located.

In a survey from Flexjobs, a recruiter from Pennsylvania-based data-analysis firm Haynes & Company said determining salary based on the worker’s location allows the company to stay cost-competitive and access a diverse pool of candidates.

“If you were to ask me if we pay the same amount of money for a role for someone who is working from home in New York as we do for someone who is working from home in Oklahoma City, the answer is going to be no,” the representative said. “We can balance having people in very expensive metro areas with having people who prefer to not be in those metro areas.”

Still, the majority of employers surveyed say they will continue to pay remote employees the same as in-office employees regardless of where they work.

“Generally speaking, changing pay based on location is not as common as people might think,” Maciekowich says.

Be wary of sending the wrong message

According to Maciekowich, many of his clients are determining pay-rates for newly remote employees on an individual basis based on how “critical” their position is.

“The decision is really becoming very decentralized,” Maciekowich says, “it’s not a hard and fast rule, but what we’re seeing from our clients around the country is they’re making the decision in terms of the importance of the position.”

It’s no secret that lowering an employee’s salary, particularly during a pandemic, could result in a lack of trust and ultimately push them to seek work elsewhere. That’s why Maciekowich warns employers to tread lightly when considering lowering salaries for certain workers.

“Recruiting firms have been extremely active on the internet, meaning that they know that there are now employees who are sitting in front of a computer at home,” Maciekowich says. “One of the things you cannot afford to do, especially now, is lose some of your critical people in critical positions.”

About the Author

Lia Tabackman is a freelance journalist, copywriter, and social media strategist based in Richmond, Virginia. Her writing has appeared in the Washington Post, CBS 6 News, the Los Angeles Times, and Arlington Magazine, among others.

(Photo credit: Goumbik from Pixabay)

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