Pay cuts for remote workers? Not so fast.
In a matter of months, the conversation around how employers should compensate a remote workforce has shifted — again.
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After the COVID-19 pandemic closed offices and enabled many to work remotely, some workers hit the road. Relocations spiked in 2020, with approximately one-fifth of U.S. adults participating in a June 2020 Pew Research Center survey reporting that they either moved due to the pandemic or knew someone who did.
While remote workers did not make up all of the individuals who have moved in the past year, migration was significant enough for some larger companies to make broad changes in response. Leaders including Facebook CEO Mark Zuckerberg signaled that their firms could introduce "pay localization" policies, which adjust workers' pay according to the cost of living and cost of labor in their new locations.
For a time, the idea of geography-based pay appeared to be catching on. Per the results of a February survey of U.S. employers by World at Work, more than 60% of respondents said they utilized geography-based pay policies, and 44% said they were considering or had modified their policies in response to increases in full-time remote work.
Now, a shortage of available talent is leading employers, like human capital management software firm Isolved, to choose a different approach: salary portability.
The salary portability concept is fairly straightforward, according to Amy Mosher, Isolved's chief people officer. It is the method by which an organization determines an employee's salary when the employee moves to a location where a benchmark for compensation has not been set up.
Like other methods, salary portability considers the local pay rates of employees' new locales, Mosher said in an interview, but it also combines those figures with the employer's own compensation survey data and internal benchmarks for a given role to determine how employees should be paid in a given part of the country.
Mosher illustrated salary portability through the example of an Isolved employee who recently moved from Denver to a suburb of Dallas. The employee moved to a lower-cost area voluntarily, but the salary differential for her role in the new area was not "significant" — the company's definition being 15% to 20% lower than the employee's existing salary, Mosher said — meaning the employee was able to maintain her same level of pay.
If the differential would be significant, Isolved may make a change, Mosher added, and that includes cases in which the company asks an employee to move to a location with a significantly higher cost of living than their current one; "very often we will make the change and will increase their salary," she said.
A more comprehensive approach to remote worker salary benchmarks could be more appealing in a world where flexibility is less an emergency response to the ongoing pandemic and more an attraction and retention tool for employers, according to Catherine Hartmann, managing director and North America rewards practice leader at Willis Towers Watson. The uncertainty posed by the delta variant has only strengthened the case for remote work.
"This return to work is not going to look the way that it did prior to the pandemic for most organizations," Hartmann said. "They want to keep that idea of remote work and flexibility if they can. They think it's right for their cultural situation."
Extension of remote work has gone beyond being a safety protocol, she continued, as employers face the threat of attrition. HR industry observers have dubbed the current wave of organizational attrition, marked by increasing retirement rates and job changes among skilled workers, the "great resignation."
Whether taking a career pause or considering new career paths, the demands of talent are forcing employers' hands on flexibility, be it in the form of hybrid, remote or other forms of work arrangements. "I've seen a lot more creativity in thinking about how we keep people," Hartmann said. "That means retention bonuses, more flexible work arrangements … that in some cases can be tied to equity."
Employers also may explore programs such as sign-on bonuses and tuition reimbursement, the latter becoming a particularly common employee benefit. That is indicative of a strategy that emphasizes having many tools in the retention toolbox, to borrow Hartmann's analogy.
"All of these things are about this idea of, how does my program balance affordability with what is going to engage and keep the employees that I need to get our work done," she continued. "I feel like the pandemic, in some ways, was a jolt to the system."
The idea of equity is key for Isolved and its remote operations, because it may not be possible to keep the employment experience precisely equal for on-site and remote workers, Mosher said; "You can't bring pizza to remote workers on Fridays."
Beyond ensuring transparency in setting pay, employers that seek to expand remote work operations need to be able to offer virtual options so that employees can still engage in the employer's culture, she added. Isolved has continued to offer virtual comedy hours, "free lunch Fridays" and other events that allow remote workers to connect with co-workers.
"I really feel like it's not necessarily about salary portability," Mosher said; "it's about the culture of your business and how you want employees to feel about their experience."
Mobility's long-term implications
Mosher described the process of working to help the company's leadership grasp the importance of maintaining salary portability, explaining that leadership needs to understand the costs of letting an employee go versus finding a skilled replacement who is potentially from a geographic area that is also different from the current employee's location.
"If this person leaves, where is that location going to be? Anywhere? Then what's the difference?" Mosher said. "There's never an answer that fits everything, but for us, it's what does this person need for this role to be successful."
However, Mosher said she is thinking about the broader implications of voluntary relocation. Based in the Bay Area, she has seen many workers move from higher-cost locations close to the San Francisco Peninsula out to the region's eastern portion, where home prices are lower. The resulting salary creep in formerly low-cost areas may not only increase those home prices, but it also may make it more difficult for cash-strapped employers to benchmark employee salaries in a given area.
"I am excited to see what happens there and a bit nervous as well," Mosher said, adding that even employers that expand remote work "need to be economical and spend [their] money wisely."
This article, written by Ryan Golden, appeared first on HR Dive.
