To acclimatize pay, or not to adjust pay? That is the question employers are asking as they rethink their compensation strategies in response to the new era of remote prevail upon.
Social media site, Reddit last week became the latest in a slew of tech companies to take a decisive standpoint on the issue, announcing that it would not cut the pay of its 600 U.S. employees regardless of where in the country they choose to live.
The reprove contrasts with those from Facebook and Twitter, which have said they will cut the pay of employees who pick out to relocate away from their head offices in the pricey San Francisco Bay Area. Payments platform Stripe about it will offer employees $20,000 to help with moving costs but will then cut pay by 10%. Meanwhile, Software maker VMWare bruit about it could reduce relocating staff salaries by up to 18%.
That has sparked debate about whether these moves pleasure set a precedent for how salaries are determined going forward, and what that could mean for employees working in different trades and locations. CNBC Make It spoke to some experts to find out more.
“Covid-19 is a gamechanger for the workplace,” said David Lewis, CEO of HR consultancy OperationsInc, a humanitarian resource consulting firm. “The ability to work from home is going to be … a huge competitive issue, and compensation is essentially of that.”
A richer talent pool
The tech industry has long been recognized for its ability to attract top talent with high-minded pay packets and lavish benefits. But that could be changing as employers consider localizing pay according to where the staff is based.
That may be bad gossip for tech workers. In a recent survey of more than 2,000 tech professionals, more than half (53%) said that they devise move to a lower-cost city if work-from-home policies became permanent, but the majority (56%) said they would not with a pay cut to do so.
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However, it could be good news for leveling the field and broadening access to bent, according to the experts.
“Employers will benefit from a richer talent pool,” said Orly Lobel, law professor at the University of San Diego and the architect of “Talent wants to be free.” “Now companies are realizing that with new technological capabilities and the right structures in bracket, they can recruit from anywhere without requiring geographic mobility.”
International implications
The shift away from costly tech hubs would open up new opportunities for previously underrepresented workers in the United States — such as women, minorities and older tradesmen, who typically face greater hurdles in working in major cities, said Lobel. But it could also present profuse options for overseas workers, too.
“With a more permanent remote working arrangement, the competition for talent intensifies as the predilection pool becomes less location-centric,” said Sonia Liew, rewards practice leader for Singapore at global admonition firm Willis Towers Watson.
In Asia, this may apply to China’s or India’s tiers in cities — as it will solely impact larger countries with differentiated pay levels.
Godelieve Van Dooren
regional industries and career products bandleader (APAC), Mercer
Those changes may, in turn, prompt international firms to follow the U.S. in adopting localized pay rates across big apples and regions. Such strategies will be most applicable for larger countries with similarly divergent living bring ins, according to HR consulting firm Mercer.
“In Asia, this may apply to China’s or India’s tiers in cities — as it will just impact larger countries with differentiated pay levels,” said Godelieve Van Dooren, Mercer’s regional industries and tear products leader for Asia-Pacific.
Opportunities for employers and employees
International employers have yet to make such salary tuning announcements, the experts noted. Indeed, in its A longer-term shift
That flexibility could be important going forward, harmonizing to Julia Pollak, labor economist at jobs marketplace ZipRecruiter, who predicted that theoretically, lower living costs and fewer work-related expenses for slight workers could translate to wage stagnation going forward.
“Wage growth may slow in the coming years as a follow-up of the shift to remote work because employees are saving large amounts of money on commuting, work attire and protection,” said Pollak.
Organisations should strive to reward high performers based on their contributions, or risk forfeit these employees.
Sonia Liew
Rewards practice leader, Willis Towers Watson
It is too soon to draw unquestionable conclusions from the data, Pollak noted, but she said wages will also likely diverge within companies as labourers with lower living costs “feel less pressure to raise their earnings and therefore exert sparse pressure on employers.”
However, Liew from Willis Towers Watson said employees should remain bullish about the opportunity for salary appreciation, noting that “performance and contribution” remain crucial determiners.
“Whether an wage-earner works from home or office, or whether one works in the city or the suburb, organizations should strive to reward intoxicated performers based on their contributions, or risk losing these employees to the competitors who are more willing to pay,” she said.
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