Is location relevant anymore?
One of the major responses to the pandemic has seen many employees across a number of sectors working from home or “working from anywhere” (WFA). Based on COVID-19 company announcements, from March 2020 through to May 2020 we noted 50 organisations that implemented a variety of working from home arrangements and as of June 2020, research by Roy Morgan estimated that over 4.3 million people (that’s 32% of working Australians) had been working from home.
However, in recent months despite reduced risks of infection, the expected volume of employees migrating back to the office has not necessarily occurred. So far in 2021, CBD foot traffic in major Australian cities has dropped drastically across the board from the same period last year.
Stats and graphic by Roy Morgan research
“The Return To The Office” and the feelings around it is a hot topic of discussion at the moment. After being liberated from long commutes and having more time to spend at home, workers are rebelling against the idea of going back to the pre-COVID rat race.
“Employees have shown they can make it work well and productively for businesses and I would be very surprised if people aren’t out there asking for these kinds of measures as a regular part of their jobs,” says Professor Ray Cooper, an employment relations expert at Sydney University’s Business School. (Excerpt from The Sydney Morning Herald.)
A number of legal and accounting firms continue to support employees working from home, and Westpac has indicated that based on increased productivity, staff may continue to be home-based if they wish. Australian software giant Atlassian announced in August 2020 that they would not require employees to return to the office, but would allow them to choose to work from home, the office or a combination of both. Fast forward to December 2020, and they’re still making good on that promise.
“We’ve always thought a lot about how do we have the best of both worlds?”says Scott Hazard, Head of Workplace Experience at Atlassian. “How do we let people balance their personal lives and the things that often aren’t centred around our offices or our global facilities, while at the same time recognising that the facilities in our offices do play a role in our culture, the way people connect and how we collaborate on work,”. (Quotation from Business Insider.)
Like Atlassian, it appears businesses around the globe are embracing the change wholeheartedly and preparing for its permanence. Graphisoft, an architectural and software design firm in Budapest, Hungary have advertised a work from home managerial role seeking to fill it with someone who can “conceptualise how the firm should hire and expand in the future, given new habits of remote working, and synthesise new thinking on how to get the best out of people.” (Quotation from Reuters.)
So how will companies manage remuneration in a world where employees may WFA?
Our experience tells us that apart from the typical ingredients including industry sector, size of job and experience, salaries have been set based on office location. Whether it be Perth, Sydney or Karratha, location of the company office has historically been a key determinant of pay rates to ensure the workforce is relative to other competitors locally. However, times have been changing in recent years where state-based differences in Australian remuneration have become minimal as key talent is sourced across the continent or even overseas where working remotely grows in prevalence. Now fuelled by recent events, more and more roles may WFA and the sourcing of ‘global’ talent will mean traditional salary approaches may require a more nuanced approach.
Here are some ways companies may consider setting pay for the new WFA workforce.
1. Set remuneration based on the head office location
Whilst simple to manage as a ‘one size fits all’ model, remote workers may either financially gain or lose depending on their local cost of living.
2. Benchmarking remuneration to the worker’s location
A more tailored approach, ensures the remote worker remuneration is locally relevant based on where they live. The challenge however, is obtaining relevant market remuneration data and maintaining for multiple remote workers across various locations.
3. Differentiating pay structures based on cost of living levels
Using the head office to determine a base rate, a number of pay structures above (e.g., 120%) and below (e.g., 80%) are assigned to locations depending on their cost of living.
4. Standardise remuneration to one location (e.g. head office) and adjust (up or down) for each remote employee based on cost of living
Similar to alternative 3, however, specific to each individual circumstances.
The WFA arrangement is undoubtedly a growing trend and will challenge the traditional tried and tested remuneration philosophy ‘locally relevant and globally consistent’. Companies will need to review their pay approaches for a WFA workforce sooner rather than later, particularly in these challenging times where talent retention is critical and remuneration costs will require prudent management.