Amy Stewart is a writer, speaker, marketer, and author of Payscale's crowdsourced data-driven research reports. You can contact her through payscale.com or via Twitter @amymstewart. Views are the author's own.
If you are in a leadership position and still on the fence about remote work, chances are high that you are underestimating the extent that workers value workplace flexibility and expect the option to work from home to continue after the pandemic.
According to recent research on the State of Remote Work released by Payscale, 89% of organizations described their office as "traditional" before the pandemic, with only 7% saying they had a hybrid or flexible office. After the pandemic, 50% of organizations say they will have a flexible or hybrid office.
That's quite the flip, but employers shouldn't be too quick to congratulate themselves on their ability to adapt to the expectations of the market.
Half of employers embracing flexible workplaces can be viewed as a glass half empty. Less than half of employers (47%) are anticipating that at least 25% of the workforce will be able to work from home at least some of the time in the future. Meanwhile, 43% of all workers expect remote work options to increase after the pandemic, and that number climbs to 71% for employees in highly competitive IT positions and 75% for employees in marketing positions.
In other words, there's a mismatch happening between the changes that businesses are making to accommodate the shift to remote work and what employees expect. Payscale's data also shows a strong correlation between job-seeking behavior and the inability to work remote, suggesting that employers who don't offer enough flexibility will need to brace for turnover in an already volatile talent market.
Businesses don't know how to compensate remote workers
Even more concerning is how few organizations have figured out how their compensation strategy might have to change to accommodate this dramatic shift in workplace dynamics. The vast majority of organizations that Payscale surveyed (81%) don't yet have a compensation strategy that encompasses remote work. That's huge.
It also points to a weakness in how businesses think about and prioritize compensation in general. According to Payscale's Compensation Best Practices Survey, which is fielded in November and released in February, only 45% of organizations even have a compensation strategy. Many businesses have delayed modernization to their compensation practices, preferring to lean on preestablished processes that haven't changed substantially in decades. Most employers set compensation for positions using salary data gathered from multiple sources, but especially HR-reported salary surveys. Gathering this data and updating salary structures takes a year, which is why pay increases tend to happen annually, especially at larger organizations.
Modern compensation technology that leverages multiple streams of salary data powered with artificial intelligence has changed what is possible when it comes to compensation, but remote work is really pushing the envelope — forcing organizations to evaluate and potentially overhaul the methodology they use for setting and managing pay.
Before the pandemic, a traditional salary structure was a common methodology. That approach begins with analyzing the cost of labor for talent in a particular location, such as the company headquarters, and setting targets in a pay range for specific jobs within that location. Post-pandemic, more organizations are looking at setting pay according to the employee's location, establishing pay zones for similar regions and metros, or using a location-agnostic model that can accommodate a more distributed workforce. With this latter methodology, the employer uses a national salary range and applies geo differentials. This allows organizations to determine appropriate salaries for employees working from any location, which would in turn allow current employees flexibility to choose where they want to work, possibly with a modest pay adjustment.
This can be a good move for many organizations and is especially picking up steam in technology companies and in global organizations that manage pay for numerous locations already. The right strategy will be custom to each organization and the talent they need to attract and retain. It is likely that approaches will shift as employers identify challenges and work out kinks with new processes, so we shouldn't expect one size to fit all.
Lowering pay is not the prevailing trend
A lot of attention has been put on what organizations like Google and Facebook are doing when it comes to pay. Giant technology companies can often be leaders in workplace trends, so when these organizations announce that they may lower pay for employees who choose to move away from urban tech meccas and work from home, it creates a ripple effect. However, when it comes to compensation, it's important to note that most companies aren't headquartered in San Francisco, where pay for tech positions is much higher than other locations.
More to the point, a shift in compensation methodology that utilizes geo differentials does not mean that employees are necessarily going to see reductions in pay. Payscale's research on the State of Remote Work found that 69% of organizations do not plan to lower pay for current employees, and that only drops to 61% for future employees. Even then, such an adjustment should only apply to employees who move to less expensive areas. Using this methodology, employees should see their pay increase if they move to a location with a higher cost of labor.
In other words, organizations that think employees should make less just because they work from home or far away from the office are missing the opportunity with remote work. Most organizations do not feel that work performed away from an office is less valuable. The reason to adjust compensation methodology is to increase flexibility for everyone and create a more dynamic workplace that empowers employees to take better care of themselves and their families. Will some employees incur pay cuts? Possibly, yes, but this should only happen in a matter that is fair, consistent, equitable, and with an abundance of communication and transparency.
It's time to take the lead on remote work
When it comes to remote work and remote work pay strategies, if you are waiting to see what other organizations are going to do — or for the pandemic to end to see if the workplace will revert to pre-pandemic norms — you are behind the wave that is happening right now.
The talent market has never been hotter, and candidates are actively asking about your remote work policy. You need to be thinking about how you are going to offer workplace flexibility, how you will accommodate employees wanting to move to a different location (or what your reasons will be for refusal), and explore whether or not a change in policy will require that you manage compensation differently.
The time for waiting has passed. Organizations that don't think carefully about what employees want and expect after almost two years of working from home will lose their best talent to the competition as the pandemic gets under control and the economy rebounds. We are no longer in an unprecedented situation. Data on the State of Remote Work is now available. It's time to make your move.