Working from home may soon come with a pay cut

Working from home during the pandemic has become a surprise success.

Many workers enjoyed a better quality of life, as well as savings on commuting, office wardrobe, and other expenses. Companies increased productivity and reduced costs.

Now that remote work is likely to survive in some form for the foreseeable future, a battle is beginning over who should pocket those savings, with some employers arguing that working from home is a benefit that should be offset by lower salaries.

As the pandemic subsides, more and more companies are calling their employees back into the office. Even so, according to the Working From Home Research Project, led by economists at Stanford and the University of Chicago, about 30% of all paid workdays are still done from home, up from just 5% before the COVID-19 outbreak.

Paying remote workers less is a practice already gaining ground abroad. In the UK, law firm Stephenson Harwood recently announced that employees could work full-time from home on condition that they take a 20 per cent pay cut.

Currently, such agreements appear to be rare in the US, likely due to the tight labor market. But that could change in the event of a recession, when employers see how remote working can reduce labor costs and increase bottom lines.

The Working From Home project found that 4 in 10 employers planned to use remote work to ease overall wage growth pressures – although not necessarily through cuts in the salaries of existing employees. For example, companies can fill new positions in cheaper markets with remote workers.

According to a survey by software and data company Payscale last summer, just over 60% of employers said they weren’t considering slashing salaries for prospective employees who will work partially or fully from home.

But a whopping 14% of employers said they plan to cut wages for teleworkers in low-wage areas, and 17% said they were undecided.

In dollar terms, economists estimate the value for remote workers is up to 7.3% of their income.

“Some employers would like [working from home] seen as a benefit or perk, and they expect employees to feel the same,” said Laura Sherbin, general manager at Seramount, a workplace research and consulting firm.

But the benefits of teleworking are by no means one-sided. In many cases, employers have also made savings.

In addition to productivity gains, there is evidence that teleworkers actually spend more time at work than office workers. Some businesses have also made savings by slashing rent and other expenses associated with maintaining a full office.

Salaries in the US have long reflected the cost of living and the competitiveness of the area where a job is located.

Even before the pandemic, some companies adjusted salaries for employees requesting to move to lower-cost markets. This practice has become increasingly common over the past two years, led by tech companies like Google, Facebook, and Twitter.

Although remote workers often didn’t like the pay cut, it didn’t generate much of a backlash, in part because people moving to cheaper cities understood they could potentially still have the same spending power.

But the practice raises vexing questions about workplace equity: Should employees at the same company doing the same job be paid differently because one chooses to live in Fresno and the other in Manhattan Beach? Should workers moving to more expensive markets get a raise?

Sherbin recalled that an executive at a large Washington company agreed to a large pay cut in order to move to Georgia for personal reasons and telecommute from there. But more than a year later, when he moved back to the Washington area, his employer refused to increase his salary again.

“What the company said to him was, ‘Oh yeah, you could have stayed in Georgia. We’re not asking you to come back to the office,'” Sherbin said.

Compensation experts say demanding remote workers take fewer wage risks, undermining the biggest benefits of a remote work option — increasing productivity by being able to attract skilled workers and minimizing costly turnover.

“It feels like a shell game to me. I don’t like that,” said David Buckmaster, Senior Compensation Director at Wildlife Studios. “It could be demoralizing.”

Unions are beginning to take notice. In Seattle, hundreds of public employees who have been working from home since the 2020 coronavirus outbreak balked at the mayor’s return-to-the-office policy, forcing the city to negotiate telecommuting policy with union officials.

Although the current negotiations in Seattle do not include wage structures for remote workers, it is something that labor officials elsewhere are concerned about, later seeing as a potentially contentious issue.

“Is that an advantage? That’s one of the things we’re fighting over,” said an official with the Communications Workers of America, noting that some call center union leaders don’t have the ability to work from home. AT&T, which recently extended its telecommuting agreement with the CWA, said its policies and wages have remained the same regardless of where it works.

Many workers say they are willing to compromise.

Tracey Parsons, 46, a translator for the United Nations who lives north of New York City in suburban New Rochelle, works three days from home and two at the UN offices in Manhattan.

“I would definitely take a pay cut, not that I think that’s fair,” she said.

Parsons estimates that the hybrid work schedule adds up to hundreds of additional dollars per month — if she includes the money saved on train rides, lunches, and anything else that involves commuting to the office.

But its value is potentially much greater, she said. She and her stay-at-home husband would like to move further north where housing is cheaper and the couple could build a better future for their 8-year-old son who has a disability.

“The positive implications and benefits of this situation are tremendous,” Parsons said. However, she wasn’t sure she could work from home for three days on a permanent basis. The UN only needed one day in the office last fall and only two days this year.

Raphael Kelly, operations manager at FedEx, believes that employers shouldn’t place a monetary value on telecommuting like they do on health benefits. At the same time, she said she understood if companies wanted to consider working from home as part of an employee’s compensation package.

“I think it’s an advantage and an advantage,” said Kelly, 47, who has worked full-time from her home in Haymarket, Virginia, since 2012. “And the benefit is that you’re available for your family, you can put on your dinner during the breaks, which is also good for the work-life balance.”

Kelly leads a team of 25 people who worked entirely remotely after the pandemic began. But since early summer they have been returning to the company building in hybrid form. “You’re not happy,” she said.

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