Should remote job salaries become location-based?

Should remote workers be paid less money? That is the question that has prompted fierce debate amongst businesses and on social media and it is hugely divisive.

The argument for salary being dependant on where you live and work from stems largely from the premise that many salaries – particularly for jobs that required expensive commutes to cities such as London – take into consideration the costs of travel to work or for living in an expensive location in order to be close to work. WaveTrackR data shows that average salaries in London are by far the highest of any region, reflecting the higher cost of living and expensive travel into and across the city.

However, with many now considering working from home at least part of the week, should pay take into account your home location, particularly if you move to an area with a lower cost of living? Or, as many others believe, should pay be based purely on employee value, i.e. the skills and successes they bring to their job?

The pandemic has changed the way we all work now and in the future. Huge companies of the likes of PwC, Unilever, HSBC, Amazon, Microsoft, Paypal and KPMG (to name just a few) have announced permanent plans for hybrid working options. Data released by the Office for National Statistics has shown that online job adverts containing terms related to ‘homeworking’ were being posted at 307% of their February 2020 average. Of those currently home working, 85% are planning on a hybrid working set-up, whereby they would spend part of their week remote working and part of it at their usual place of work. This shift towards flexible work locations has led many to move away from the city to areas where the cost of living is cheaper.

The proportion of buyers looking for property outside the major cities and in more rural areas has shot up over the past year and Rightmove reported in March that Cornwall has replaced London as the most-searched-for place to live on their property portal, with Devon in third place. Other rural areas also feature highly in searches, including the Isle of Skye and locations in Norfolk and East Sussex. A huge 52% of inquiries from those based in London are about moving out of the capital, compared with 39% pre-pandemic.

Rightmove’s May 2021 House Price Index has also highlighted the surge of buyers from the south looking to buy in the north, where their money will buy them more – the bigger house and larger garden that so many are now searching for. Freed from the chains of the daily commute, people are moving to areas that offer cheaper property and generally a lower cost of living. So, with a lower cost of living, commuting costs halved or scrapped altogether depending on the working from home frequency, should pay be lowered to reflect the change in outgoings? Facebook CEO Mark Zuckerberg certainly thinks so. A recent statement confirmed that from June 15th any Facebook employee can request to work from home but if any remote employee moves to a lower-cost area their salaries will be adjusted accordingly. 

There are several problems with this policy. First of all, what is this saying to current employees and recruitable talent? That where you work is more important than what you bring to the table, mattering more than your experience, your expertise, your contribution to the business? How will this affect employee retention and your ability to recruit top talent? What employers will be effectively doing is asking employees to make incredibly difficult decisions about what is more important – their quality of life or their salary. And for many, it is not a decision at all. What if you already live in a cheaper area because that is what you can afford? By decreasing your salary your employer will be penalising you for your economic background. Discrimination based on location.

Furthermore, on this basis, why stop at location? If you take location into consideration when determining salary based on cost of life, shouldn’t you also consider other factors impacting that cost, from the number of children you have, to pets, to elderly dependents, to whether you’re single or married, and so on? Clearly, location-based pay has the potential to be an incredibly fraught and political issue.

Pay based on the location from which you work could de-motivate current employees, disincentivise candidates and encourage talent to move towards companies that don’t effectively punish their employees for working for home. Although hiring slowed during the worst of the pandemic, the battle for talent hasn’t gone away. If you want to attract the very best talent, you are still going to have to be competitive when it comes to what you offer, particularly in industries such as IT which are experiencing skills shortages. WaveTrackR data has shown that jobs have been accelerating at a faster rate than applications in both April and May. The fact is that when competing with other businesses for top talent, reducing pay in any form is not going to help.

One of the bonuses of remote work for employers and recruiters is that they can tap into diverse talent from across the UK and even overseas as location becomes irrelevant. The talent pool widens exponentially and the possibilities are huge. However, the best remote/semi-remote talent will go where the biggest opportunities lie and, crucially, where they feel most valued. If your salary is based on what some consider to be an arbitrary factor of where you’re working from rather than your value as an employee, it’s sending a negative message. 

It is a particularly hard sell when many employers found during the pandemic that working from home actively increased productivity. There aren’t many scenarios whereby greater output and superior results would lead to reduced pay. Making salary decisions based on lifestyle choices feels unfair at best, discriminatory at worst.

And when talent can now pick from a far greater number of organisations – just as remote working possibilities widens the talent pool opens for recruiters, it enlarges the opportunities for candidates – what you offer needs to be even more competitive. And the reality is that many candidates will applaud a flexible working policy but balk at a salary that reflects where they live if they take up a remote role.

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