Managing Cost Per Living Pay For Remote Workers

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Managing Cost Per Living Pay For Remote Workers

Remote working has been steadily rising over recent years. Due to the pandemic, more people than ever are now working from home. This has shown, to all those who previously had differing opinions, that remote working is viable and can have benefits for companies.

It is a trend that will continue to rise, but from that comes a conundrum – should remote workers be paid different salaries based on their location and cost of living?

Geographical Location

When working remotely, your geographical location greatly impacts your cost of living. If you’re living in a metropolitan area such as New York or London, you’ll have a higher cost of living than if you were in a remote rural area.

Companies such as Facebook recognize this and remunerate their remote employees based on their location. Mark Zuckerberg recently said that around half of Facebook’s workforce is expected to work remotely in the next five to 10 years.

He continued “Our policy here has been for years — is already — that [compensation] varies by location…We pay a market rate, and that varies by location. We’re going to continue that principle here.”

Employees will be able to move from the expensive Bay area to anywhere they choose, but it could well come with a pay cut depending on where they move to.  

This approach does have its benefits. For one, it widens the talent pool available to companies. They aren’t limited to those who live in the local area, or those who are prepared to move for the job. This allows access to the best candidate for the role, and is not limited to the best candidate in a certain location.

In turn, the spectrum of people you will have applying for your roles broadens, bringing more diversity and new perspectives to the table which could otherwise have been overlooked. Secondly, it allows companies to be cost-competitive, offering a package that reflects the going rate in the prospective employee’s area. Balancing their costs as they are able to pay more for those in metropolitan areas and less for those in other areas. 

However, others argue that it is unfair to pay people different amounts for the same job solely based on the remote worker’s location. If they are adding the same amount of value to the company, and completing the same tasks at a high standard, then why should they be penalised due to their location?

This tactic can also have a knock-on effect on the morale of workers. If some workers feel like they are being paid significantly less than others, this may have a negative effect on their work output and attitude. When the salary has been set and the job has been accepted, ensure that you’ve carried out thorough DBS background checks on future employees before they start their role, to make the joining process as smooth as possible.   

General Market Trends

Other companies turn to the general market to decide what to pay a remote worker. With this approach, companies examine the standard going rate for a specific role across the market. Here, salary is based on factors such as seniority, responsibility, experience, and skill set.

It removes the fluid nature of the pay scale and makes it more fixed, focusing on the specific job role rather than the employee’s location. Doing this imbues the role with value no matter where the employee is working from, and should instill a sense of pride in the worker. Having a positive effect on their work output as they feel a valued member of the team, despite being remote.

If they feel satisfied with their salary they are likely to put more effort into their role. As with most roles, there is likely to be a banding system depending on the role, this allows space for some flexibility based on the specific employee.

Legal Considerations

When deciding how to set salaries for remote workers, it is key that you think of any potential legal issues the decisions may cause. For example, if your policy ends up discriminating against a particular group or gender, say targeting working mums under an assumption that they are “more likely” to choose to work remotely in order to spend more time with their children and work around child care, this could result in unwanted legal action.

If your policy ends up impacting a specific group significantly more than others, even if unintended, you could find yourself in a difficult situation. Pay equity is still a vital consideration. 

Conclusion

It has become increasingly clear with the flexibility that remote working affords workers, and the cost benefits it has for employers, that it is a working model which is here to stay. Whatever route you decide to take with remote workers’ salaries, it is important to be transparent about how you have reached that decision and why.

Communicate your decisions with prospective employees so that they feel respected and valued. This will help to keep morale and trust high. When creating salaries for remote workers, remember to be as fair as possible, and as competitive as can be.

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