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Compensation in a Remote Work Environment

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Over the last 10 months, we have watched many companies across the US begin to shift from a traditional work landscape to a “work from home” environment. The cause? An on-going global pandemic. What appears to be one of the greatest human capital management endeavors in a generation, recent events have prompted remote work opportunities faster than any other point in time. We at L&A believe this trend is continuing to pick up steam as many companies are looking to move more employees to a permanent remote capacity over the next several years.

To date, L&A has found remote work to be generally positive in nature, as numerous benefits to both company and staff are coming to light. Reduction in personal commuting expenses, increased job productivity and satisfaction, and increased attraction of top talent to name a few. This is especially true for companies operating under a traditional office-based model where many have had to maintain operations under the initial stay-at-home guidelines for non-essential employees.

With any strategic initiative, however, discussion is needed. L&A is currently engaging in conversations specific to remote-based pay, where it seems there are competing perspectives. In this article, L&A unpacks several hot-topic approaches being considered to aid in determining remote employee compensation.

Last year, several Big Tech companies openly shared intentions to cut pay for remote employees who choose to move to a different zip code. This may seem logical from a cost-savings business perspective; however, employees will likely not favor reduced pay for the same work expectations. Despite the displeasure that comes with the proposed reduction, L&A notes that shifting to a geographic approach is not necessarily out of line with current norms. Case in point, traditional benchmarking methodology calls for the utilization of geographic-specific survey data for middle management and professional level staff alike. This contrasts with the typical national average approach utilized for c-suite executives who are often recruited from across state lines.

Some may not agree with reducing full-time remote pay purely due to an employee’s choice to move to a different area. However, aligning remote pay with current geographic-based market rates on a go-forward hiring basis is not out of touch with Generally Accepted Compensation Principles®. L&A would support this approach for smaller companies with specific remote jobs that are i) highly competitive in nature and ii) have a much smaller talent pool to choose from.

Another alternative being considered is moving to a national average. Given the larger talent pool now in play, companies with many remote jobs may favor the use of a more inclusive average. After all, this approach is sound considering employees are working the same job with the only difference being location. Another perk to this approach includes avoiding backlash that is sure to ensue from employees who argue the point of equal pay for equal work. Not compensating on a more level playing field may in fact lead to retention and attraction issues as well.

It is worth noting that this methodology works better for companies with many of the same remote jobs where the talent pool is quite large. L&A would support the use of a national average for larger companies looking for a more corporate-centric alternative. This alleviates the administrative burden that the geographical approach prescribes.

In summary, L&A believes remote opportunities will continue to increase at a rapid rate in 2021 despite the understandable hesitation from some. After all, it can be quite a shock to traditional office-based cultures. Current trends are suggesting remote work is here to stay and we can be certain that the debate surrounding remote work compensation will continue.

For more information regarding remote employee compensation, please reach out to the L&A Team by submitting the form below.