Should Employee Pay Be Based on Location in Our WFH World?

If you really value your employees, you won’t disincentive them from choosing the remote, out-of-state work setup that works for them. (Hint: Maybe you should even pay them extra for it.)
Should Employee Pay Be Based on Location in Our WFH World?
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As remote work plans extend (and extend), more and more companies are grappling with the unexpected decisions that have to be made to sustain their business and support their employees. 

The latest topic to cross HR professionals’ desks? Location-based pay. That is, should companies pay employees lower salaries if they’re working remotely out of state?

Some say that geography shouldn’t matter.

But not everyone feels that way.

Our take? Between a labor shortage and The Great Reshuffling, HR needs to do everything they can to guide their employers to keep the great talent they have—not disincentivize them by cutting their pay. 

Here are three ways to future-proof your compensation and benefits offerings for remote workers, hybrid workers, or anyone in between. 

1. Compensate Based on Value, Not Location

First, let’s look at pay equity. That means paying people equal compensation for equal work. No other factors; it’s simply about the value they bring to the organization. 

Supplemental reading: What Amazon Prime Day Can Teach HR About How (Not) To Retain Employees

Companies with multiple locations have traditionally factored in cost of living to their pay scales. Is this equitable? Not really. This says to employees, you’re worth more because you live in a more expensive (affluent?) city. Or, you offer less value to this company (same job as the big city employee, by the way) because it costs less to live where you do. 

See what we mean by inequitable? 

But when you take location out of the equation, and just look at the value an employee adds—whether they’re in the office, at home, based in HQ, or across the country—that value remains consistent. And so should their pay. 

“I'm not a fan of cutting pay for employees to work from home. COLA doesn't change and with the market and hiring right now, I would like to minimize turnover. It is a benefit but most are more productive or can be so I don't think cutting pay is the move. My opinion only!”

—Megan O'Dom VanDelinder, HR Professional

2. Take a Closer Look at Your Benefits Package

Nowadays, working from home (WFH) is not a benefit; it’s a necessity. So be sure to update your list of benefits on job postings and any other relevant places. 

Next, reconsider the benefits you offer to your employees—and think about how those who do WFH or on a hybrid schedule can fully benefit from them. 

For example, instead of the benefit of an on-site gym, think about offering a fitness- or wellness-related stipend so employees can work out (or seek out restorative time) where they want to. Or, instead of an in-office child care service, offer a reimbursement program to help offset the cost of a local babysitter. 

“What's interesting to me is that EE'S were not given any additional funds for commuting, parking, meals or wardrobe pre-pandemic. They got a job, were expected to show up for that job and do the work. If the work is still getting done, they should still get full pay IMO. The bonus for the ER is saving on rent.”

—Ruthann Weeks, HR Professional

Better yet, you can ask your remote employees about the benefits and perks that are most important to them—and then give them those benefits and perks (instead of the ones you think they want or need). 

3. Make WFH (and Equal Pay) Part of Your Retention Strategy

Winning the war for talent means differentiating yourself from your competitors. And in our WFH—nay, WFA—world, that means offering competitive pay, attractive benefits that meet your employees’ needs, and flexible working arrangements. 

Show your employees you value them, wherever they are working, by continuing to pay them fair and equitable wages—and not only will you retain the talent you have, you’ll attract the new talent you want, too. 

“I don't get the rationale for [cutting pay]. The work is getting done. The workload is the same. If anything, it is MORE economically advantageous to have people working at home.

Easily 55% of all jobs can be done remotely. Any employer that insists on having everyone work in an office setting is primarily concerned about control, so I guess it's no surprise that they would penalize remote workers with salary reductions.”

—Brian Cesario, PhD, Associate Professor of Industrial-Organizational Psychology

Get Time Back in Your Day

… And we don’t mean five minutes at the end of a Zoom meeting. 

At Eddy, we know staying on top of today’s ever-changing workplace can be a lot for a small HR team, especially if you’re a team of one. That’s why we created a software to help take the administrative tasks off your plate, and let you focus on taking care of your employees.

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