Remote work is a lifestyle that began with trends like “working-from-home Fridays”. It wasn’t until the pandemic that this way of working became mandatory, causing Americans to disperse from booming metropolitan hubs to rural communities. While candidates have mobility at their fingertips, companies are left trying to manage their workforce virtually.
Executives have used terms like “working remotely for the foreseeable future” until the physical office returns. When the day to work in the office does return, will the employees return too? This question has triggered a debate across industries on whether salaries should be adjusted for the employees who choose to work in a different location than their office.
Calculating an employee’s salary based on location has been a standard in the industry for years now. Income fluctuates based on several factors, not just the cost-of-living index. These factors include:
Now with companies reducing overhead costs and limiting budgets, hiring managers are not only considering the cost-of-living adjustment (COLA), but also their workforce’s geographic location. Location-based pay helps employees keep their purchasing power, despite rising costs for essentials such as food, clothing, and housing.
On the contrary, 30% of the workforce is estimated to work from home several days a week by the end of 2021. With so many employees working remotely from a location other than the office, why would location-based pay make sense?
“If you have the same person, they’re still providing the same value to the organization, they just happen to be living somewhere else, does that really change what you should pay them?”
—Mary Ann Sardone, Partner in Mercer’s talent consulting business
The synergy between an employer in a high-cost place and a worker in a low-cost place offers benefits on both sides. The benefits that a value-based salary provides include a simpler calculation for the employer and the opportunity to give employees more flexibility.
The Evolution of Industry
Let’s take a look at four industries impacted by the effects of the pandemic.
It’s no secret that tech companies have long fostered the culture of working remotely, but never have employees had the chance to work remotely full-time. Facebook, Twitter, and VMware have given their workers the choice to decide which location is best for them to work during the pandemic, and now—indefinitely.
When it comes to salary, tech leaders are leaning towards basing income on office location. For example, if their employees decide to move from the Bay area or New York to Austin or Massachusetts, employees must take a 15% decrease in their salary and equity awards. Depending on which location an employee chooses, that reduction could be even more.
The construction industry was under reconstruction after the stay-at-home orders put national building projects on hold. In 2020, this slowed the industry down and led to increased use of technology, more remote work, a smaller employee pool, and supply chain disruptions. Eighty-percent of employees took a pay cut and were furloughed until their local municipality deemed construction as an essential business.
Accounting & Finance
Before the pandemic struck, only 29% of employers had 60% of their staff working from home once a week. As a result of Covid, the number of firms increased from 29% to 69%, and executives expect this to become the norm. Employees in accounting, financial advising, and commercial banking have now transitioned to virtual settings for some aspects of their roles. Stock market traders, on the other hand, may require more office space to use powerful systems and lower latency.
Biotech & Healthcare
With the pressures of the biotech & healthcare industries at an all-time high, they adapted to the pandemic overnight. Market leaders allowed medical workers to work remotely, research teams reprioritized studies, and plant and network experts pushed for continued medical supplies. Biotech workers remained on-site throughout the pandemic, but with strict Covid protocols in place.
Moving forward, the industry is still taking the time to finesse the challenges of remote work, such as technological limitations, cultural issues, restrictive billing protocols, and liability. The biotech world anticipates more flexibility between the office and home office, while doctors have adopted in-home nurse visits, telemedicine for trial visits, and digital tools for remote monitoring.
The Future of the Workplace
Research shows that only 37% of American jobs can be done remotely, meaning that only some industries will have truly been impacted by the effects of Covid-19. Before the pandemic, certain industries wouldn’t have considered remote work seeing that employees could work in-person. Now that 2020 has brought the world to a standstill, this has faced employers with a revolutionizing question: are my employees more productive working from home or in an office? The answer to this question is the future of your company.
To learn about the salary trends and demand increase in cities across America, use our comprehensive Salary Guide to weigh your options.