Some companies adjust pay depending on where employees live, raising the question of whether they’ll change employees’ salaries now that working remotely is becoming more common.
In a new survey about work-from-home policies, 4.3% of companies who responded said they would reduce employee’s cash compensation if they moved to a lower-cost geographic area, while 56.5% said they wouldn’t, according to the executive compensation consultancy Pearl Meyer. About a quarter of respondents said that it would depend on the individual situation and about 14% said they’re unsure.
The survey consisted of 349 companies across industries that include finance, insurance, real estate, energy and utilities, technology, and health care.
Bill Dixon, managing director at Pearl Meyer, said he thinks employers are cautious about lowering pay because of the possibility that there may be employee turnover after the pandemic subsides.
“Adopting a stance like that could be very disruptive,” Dixon said.
Pearl Meyer’s survey also found that 33% of respondents have workforces that will work remotely after the pandemic, and that 80% say their organization’s shift to remote work has been successful. In 2021 and 2022, the survey found that a third of companies are going to either significantly reduce their office footprint, or “moderately and strategically reduce” it.
“The expectation is that the operating costs have been lowered possibly because of real estate costs being less,” Dixon said. “But there are other ways that costs have been lowered—by improving productivity and in the efficiency of decision-making and the speed of decision-making.”
It’s still an open question if we’re going to see a shift in resources from real estate or operating costs to higher employee pay Dixon said.
“But I will say this: many companies either lowered their salary increases last year or froze salaries. So I would expect that to change,” Dixon said. “I think we’ll be back to old norms, and some companies will have to increase their merit increase pools to remain competitive.”
As operations in the US begin to return back to normal, Dixon said he thinks employees will do a combination of both remote and in-person work.
“A lot of people are going to use a hybrid-office approach, where you don’t have your own official office, but a workspace is available if you come into the office,” Dixon said. “That was a trend, though, underway that I think has been accelerated by the pandemic.”