Compensation Becomes a Trickier Question in the Age of Remote Work
One year ago, many organizations were desperately searching for skilled talent to help scale their companies. At the time, the US was facing one of its tightest labor markets in history. Unemployment rates were so low that it was challenging to find top talent. Recruiters had to race to win a “yes” from the right candidates, and quick reactions were key to securing placements.
What a Difference a Year Makes!
Today, things are very different, and we’re all glued to the news headlines and reports from the Bureau of Labor Statistics regarding massive unemployment throughout the country.
So, it should be easy for employers to find skilled labor today, right? Not exactly.
Changes to working norms that would have taken a generation or longer to come to fruition on their own were forced into place in a matter of months, thanks to the COVID-19 pandemic. Employers and talent acquisition professionals have had to adapt to a changing environment seemingly overnight. COVID-19 changed the way we source, interview, and employ talent, and US workers are now using very different criteria to determine where, when, and how they want to be employed.
These massive shifts present a unique opportunity for employers and talent acquisition professionals. We now have the chance to proactively reshape the workplace in a way that affords more flexibility and choice. Over a six-month period, our views about what constitutes a workplace fundamentally shifted. With this shift come dramatic changes to how we work, in or outside of the office. In turn, we must consider the impact these transformations will have on compensation and employee engagement.
Top Talent Highly Values Remote Work
Prior to the pandemic, many employers resisted work-from-home policies for a variety of reasons, from the need to focus on a thriving culture to preserving team cohesion and productivity. Then, the pandemic forced an estimated 42 percent of all US workers into a remote work environment, according to a report by the Stanford Institute for Economic Research.
The lessons we all learned from the prolonged COVID-19 fire drill were valuable. Today, many employers’ concerns about productivity or accountability in remote work have been largely dispelled. While the impact of remote work on team cohesion and engagement is still being measured, white-collar employees have grown accustomed to their flexible work-from-home schedules and would like to continue some version of remote work on an ongoing basis.
In parallel, employers have seen that allowing remote work can decrease longer-term overhead costs and increase employee retention. Plus, the ability to work from home on either a partial or full-time basis is a valuable perk that draws in highly skilled employees. These benefits may be why 60 percent of managers say they will allow their employees to work remotely more often after the pandemic than they did before, according to Gallup.
Yet when looking to the future of remote work in a post-pandemic world, employers must be sure to weigh the benefits against the possible affect on company culture.
Does Remote Work Improve Engagement?
A benefit of sharing a physical space with coworkers is that the arrangement lends itself naturally to a sense of community. It is fundamentally easier and faster to build trust, rapport, and cohesion when team members occupy the same workspace daily. For companies utilizing a combination of remote and in-office employees, remote workers may not feel as visible, and their engagement may suffer as a result. Even when the entire workforce is remote, employers run the risk of employees not feeling connected to one another or to the company.
Disengaged employees will negatively impact company culture, and company leaders must address that fact as they draft remote-work policies. Any comprehensive policy must create ways for remote employees to stay connected, interact with one another, and feel engaged.
As Work Becomes More Flexible, Should Compensation Shift, Too?
Companies that choose to leverage remote workforces give themselves the ability to tap a broader pool of talent, as their hires are no longer limited by geography. Since the monetary value of skills and experience varies across the US — as does the cost of living — companies may find that their current pay grades and salary structures no longer correspond to their talent pools’ expectations.
Companies may have to develop new pay structures to better account for the realities of recruiting remote workers. For example, if a candidate lives in a city with a low cost of living and the company’s offices are located in an area with a higher cost of living, should the candidate be paid a salary corresponding to their location or the company’s? Level of difficulty in filling the position and the flexibility afforded to the candidate may also impact compensation decisions.
Many tech giants are now grappling with this issue, and you should ensure your company has answers for these questions before expanding your recruitment strategy to remote workers. When it comes to determining appropriate salaries, be sure to factor in your company size and the number of employees located outside of the company’s headquarters, your growth plans, and your willingness to potentially trade engagement for and bottom-line savings.
While remote work won’t benefit every workplace or employee, many white-collar workers — particularly those with in-demand skills — now expect remote or flexible work options as part of the new employment normal. Leaders and hiring managers will need to think about how permanent remote work policies may change their workplace cultures and salary structures.
We’re in a new era of employment, one that holds significant opportunities for creative employee engagement and compensation practices. Leaders should begin planning for these things now. In 2021, talent acquisition will only become more challenging as the pressure to compete increases.