Will the Popularity of Remote Work Change How We Market Price Jobs?

The COVID-19 pandemic resulted in a groundswell of jobs getting adapted for a work-from-home model, leading to wide adoption of remote work. While many are wondering if remote work is here to stay, conventional wisdom predicts that, in many cases, these jobs will continue to be performed remotely. In a survey by the Pew Research Center, more than half of employees said that, given the option, they would want to keep working from home even after the coronavirus crisis subsides.

The advantages to remote work for employees are many, including reduced commute time, savings on auto and transportation expenses, more focused work time with fewer distractions, and increased flexibility for childcare, lifestyle, and family commitments. For many folks, returning to the “normal” five-day work in the office routine would be a highly unappealing outcome.

Tech companies like Microsoft, Salesforce, and Twitter announced fairly early on that their employees would have the option to remain remote. That’s not surprising, as the jobs most compatible with remote work are generally found in the information, technology, and financial services industries. Companies like Nationwide, Aetna, BP and Verizon have also offered various remote arrangements to employees.

There are, of course, advantages from the employer perspective that need to be weighed, including the potential for enhanced productivity and a wider pool of qualified candidates to tap into. But the shift to remote work also requires employers to determine a very important question: how might remote work arrangements impact pay?

Remote works’ potential impact on compensation practices

If a company chooses to adopt a remote workforce, they need to determine how, or if, compensation should be adjusted. A compensation best practice is to price jobs using geographic, and sometimes industry, scopes that most closely fit the recruiting pool utilized for the job being priced. Traditional compensation market pricing considers geographic location as one of the factors when developing pay levels. Large metros like New York and San Francisco typically have higher pay levels than rural or smaller city locations.  With remote work, should these location differences be minimized or in some cases ignored?

The answer is: it depends.

Remote jobs offer employers the ability to expand existing recruiting pools, which is a real benefit. However, they’ll also need to develop pay strategies to fit. Typically, jobs have been priced based on the recruitment area. With remote work opportunities, however, the recruitment area could be considered the entire country. One likely outcome is that pay levels for all-remote jobs will follow national market pricing rather than being based on the location of the employee.

Highly specialized, “hot” jobs add another layer of consideration to the process. These difficult to fill jobs could be mostly exempt from geographic cost differences, with pricing primarily driven by the availability of talent. If the talent pool for a certain job is limited, pricing will be more reflective of the scarcity of skilled candidates rather than the location of the candidate. In other words, if you need to hire certain talent, a pool of candidates that are broadly scattered will result in more hiring options, will be more favorable to remote arrangements, and less influenced by geographical considerations.

Local market conditions will continue to impact in-person jobs

Not all jobs are adaptable to remote work. According to a recent McKinsey global study of workforce changes and trends, 60% of the workers in the U.S. cannot perform their jobs remotely. These in-person jobs are generally found in healthcare, retail, services, hospitality, and trades.

Pay for some front-line jobs has been enhanced with bonuses and/or premiums to encourage workers to stay onboard, though some of these incentives have been short-term only. Recruitment for jobs that will remain fully in-person, including roles like factory and warehouse workers, hospitality workers, auto mechanics, plumbers, drivers, and healthcare workers, will continue to mainly be recruited from local talent pools and will be most impacted by local market conditions.

Employees are also expressing keen interest in a hybrid work model, where there is some mix of in-person and remote work hours. According to a PwC report, more than half (55 percent) of 1,200 workers surveyed between Nov. 24 and Dec. 5 said they prefer working remotely three days a week. Most likely, pay for jobs that allow for working remotely part of the time will not be adjusted.

Companies managing a combination of on-site and remote workforces that are made up of say 50% remote and 50% on site for the same role, will need to figure out how to pay equitably to avoid the creation of class system. One approach could use site location as the anchor pay level and apply a reasonable discount or premium for workers in various locations. Ultimately, the jury is still out on how this will be handled, and different companies will address it in different ways, with plenty of learnings for us all to consider along the way.

The new normal of determining pay 

While some organizations will have all of their employees continue to work on-site, others will manage a hybrid of on-site and remote workers, and some will manage a fully remote workforce.  Whatever the arrangement, determining the right pay for jobs, and ensuring fair pay equity, will now have additional complexities.

Here’s the best initial approach employers can take in this new normal:

• Determining pay for remote workers should be based on the job performed, skills required, and availability of candidates, with less weight placed on the location, since workers will be in many locations.
• For those jobs that cannot be remote, pay will continue to be impacted by location pricing differences, since most recruitment will be from local talent pools.
• Keep your ear to the ground for new ideas as working arrangements and pay methodologies continue to evolve. Listen with an open mind to employees, managers, and industry peers about how changes can be implemented with no negative impact to operations.
• Develop a compensation plan that is transparent and easily communicated.