In a previous blog, we wrote about how a hybrid work model provides an exciting opportunity to rethink rewards strategies to become more competitive and productive. But compensating a workforce that is partly remote, partly in office, presents special challenges as well, like if and how to account for differing costs of living in different geographic regions, and how to provide workers with the most meaningful benefits.
Here are what some industry thought leaders are saying about those challenges and how to address them most effectively.
How to handle geographic pay scales?
If we have been paying salaries based on geographic location, to compensate employees living in high-cost areas (or to save on salaries for employees in areas where you need less income to live), should we now adjust salaries to reflect employee home locations, rather than offices?
There are different schools of thought on that. Facebook, which expects nearly half its employees to work remotely in the future, will adjust its compensation based on the cost of living in the area in which an employee lives. Other tech companies have a different approach.
In an interview with CNN, Reddit's Chief People Officer Nellie Peshkov explained why Reddit abandoned geographic compensation zones in the U.S. and is paying everyone Silicon Valley salaries. “We do believe that having a strategy for flexible work by paying all our employees within the same range in the United States, will allow us to attract and retain great employees from diverse backgrounds and diverse communities throughout the country ... and it means being rewarded for their impact, not their location.”
Peshkov believes that eliminating the need for relocation removes an obstacle to attracting talent. “Previously, our biggest challenge was to ask people to uproot themselves and their families and separate from their communities and relocate to locations where we have offices. Now we won't ask people to make that sacrifice.”
According to a report by Willis Towers Watson, Flexible Work and Rewards Survey: 2021 Design and Budget Priorities, 61% of employers say they will pay fully remote workers the same as in-office employees regardless of a worker’s actual locations for all jobs; however, over a quarter of employers (26%) report that pay will be based on the location of remote workers for all jobs.
Catherine Hartmann, North American rewards practice leader at Willis Towers Watson, believes that the trend will be to set a national pay scale, but with additional premiums relative to select skills and cities. Catherine was quoted in 3 Compensation Strategies for Your Remote Workforce, saying “What I see happening more for the future is this movement towards a national approach to pay with a few areas, such as Manhattan and the Bay Area, receiving a premium.”
While this approach could mean higher spend on wages, it likely will be offset by savings on office space and other office-related expenses. And anyway, if you offer lower pay in a lower-cost area, you risk losing talent to the firms that don't.
Benefits and perks
Recruiting firm Crossover, which specializes in remote careers, predicts that remote work will continue to grow long term and that companies will offer more benefits and perks to their employees to support the needs of a remote workforce: childcare credits, telehealth benefits, mental healthcare resources, etc. This in turn will enable companies to expand their potential hiring pools to include candidates from around the globe.
According to the Willis Towers Watson research, just under a third (29%) of employers are providing additional benefits to promote workplace flexibility (e.g., backup daycare, subsidies for daycare, or virtual learning). And while about two-thirds of organizations recognize that health and financial wellbeing programs are necessary to support workers in a more flexible future workplace, about one-quarter also realize that those programs need to change.
The advice from Microsoft’s Human Resources Hybrid Quick Start Guide? “Target initiatives to address audience segments and unique employee needs in different ways, including offering benefits where they're needed most.” If you read into that, it requires the ability to segment your employee population in meaningful ways to deliver the right benefits to the right people, a task that depends on having the right technology.
Flexible, digital compensation management
Offering flexible rewards requires a flexible, digital compensation management platform. beqom offers a solution that works alongside your HRIT or HCM software to provide the rewards management you need to meet today’s challenges in competing for talent and motivating your workforce. Talk to a compensation expert at beqom about what digital transformation of total rewards can do for you.
To evaluate your current compensation management approach, use beqom’s free online Rewards Maturity Assessment tool to determine where your company's rewards maturity level falls, from Below Standard to Mature.