Remote Working: Will We See Pay and Conditions Decoupled from Location?

Sep 2, 2020

Among the many things that will emerge from our collective experience of the COVID-19 pandemic, one of the positives is the way that it has triggered serious conversations about how and where we work.

Particularly in industries like the tech sector, remote working was already a fast-growing trend before the intervention of SARS-CoV-2. Now we can safely say it is part of mainstream workforce organisation and culture. Lockdowns may have been lifted, furlough schemes ended, yet millions of people have still not returned to the office full time.

According to the CIPD, remote working rates will double for good even as the pandemic recedes.

That represents a major shift for HR teams and recruiters to come to terms with. The implications are manifold and far reaching. But just one of the interesting conversations it has triggered over the past few months is this – just what exactly does a shift towards more remote working mean for location-based pay differentials?

Maintaining the status quo

The idea that you might get paid substantially different amounts for doing the same job in two different locations is not going to shock anyone these days. Differences in living costs between large metropolitan cities like London and the outlying provinces have made this inevitable. Plus, of course, there tends to be more competition for jobs in bigger urban areas, leading to employers pushing up remuneration packages in order to attract the best talent.

The tech sector has long seen some significant regional differences in pay. Tech workers in Northern Ireland, the North East of England and Wales, for example, can expect to receive salaries worth between 75% and 80% of what tech employees in London are paid.

Yet the trend towards remote working has thrown up some interesting questions around this. Certainly for job roles that can be carried out digitally in their entirety – web and app development, cybersecurity, data analysis, for example – remote working doesn’t just mean staff not travelling into the office a couple of days a week to help with social distancing protocols. It represents a fundamental decoupling of work from location, allowing firms to cast their net wider in their search for the best talent and recruit from anywhere.

And it is that which raises the debates about location-linked pay. A couple of months into the initial lockdown, Facebook made a high-profile announcement that it was going to run with the home working experience and make as many future job roles as possible available for remote working.

At the same time, it also made clear it wouldn’t offer the same packages to remote recruits as it paid to its tech teams in San Francisco’s Bay Area, notorious as being one of the most expensive places to live in the US. Instead, it would make pay offers based on the location of individual recruits.

The employees’ perspective

It is not hard to understand why Facebook would do this. Pay levels for tech jobs in the Bay Area and nearby Silicon Valley are as high compared to the rest of the US as salaries in London are compared to the rest of the UK. And the same underlying reasons apply – competition for jobs and high living costs. Any way to cut such high salaries on one level makes sound business sense.

Yet from another perspective, Facebook’s stance could also be interpreted as a rather cynical move to exploit the remote working trend in order to pay staff less. Certainly businesses might see the attraction of paying remote workers less in locations with lower average salaries, but potential recruits are unlikely to see it the same way.

According to a recent survey, half of workers at UK tech SMEs want rewards to reflect ability rather than location, compared to a third who think it should continue to be location-based. And it is clear to see why tech workers want pay decoupled from location – four in five would consider relocating if more remote work opportunities were available.

As always, employers would be advised to listen to what workers are saying on this topic. As the Facebook example shows, remote working does present an opportunity to reduce payroll costs, especially if your firm is headquartered in one of the big metropolitan tech hubs. But remote working already offers cost savings to companies, in terms of required office space, equipment costs and so on.

It would be a mistake for any firm to set themselves on a collision course with staff and potential recruits by insisting on location-based pay policies for remote workers. One of the things about an increase in remote working is that it makes the whole talent market much more fluid and dynamic. If talented individuals want to be paid for their abilities rather than their postcode, they are more likely than ever to find someone who will comply.