Should Remote Employees Be Paid Less?

It’s already been a while since Mark Zuckerberg famously announced that half the workforce at Facebook will work remotely in the next 10 years. A lesser known and at the same time less popular aspect of that announcement, is that in return for that “privilege” employees will accept a lower salary.

There’s even more, according to Forbes, 44% of the people who participated in a study on Twitter stated that they would accept a 10% decrease of their salary in exchange for the opportunity to permanently work remotely. This leads both companies and employees to ask themselves, what is the impact that the work from anywhere policy is going to have on them in the future.

At the center of the argument, one aspect: geographic location. Usually, highly developed technology hubs justify the high salaries they pay by the high living standards that have to be met in the areas where they have their headquarters. If in the post-Covid world remote work will not lose its glamour, Google maps dependent salaries will become the buzz-word.

Factors that influence salary ranges

In principle, the financial compensation offered by a company to its employees is an act of fairness. Among the elements that are taken into account when establishing the level of the financial compensation one might find:

➔ Skills
➔ Education
➔ Demand
➔ Location

But when it comes to remote work, things get a little bit more complicated both from the employers’ and the employee’s point of view. Whether the geographic location becomes a decisive factor varies according the policy each company decides to apply. The skills, the accumulated experience as well as the ability to clearly communicate with a team should weigh a lot more than geographic location when establishing the salary for a certain position.

Is geographic location that important?

The main reason why geographic location has been included as a variable that decides an employee’s salary is the fact that entrepreneurs want to make sure their employees are able to satisfy their basic needs out of the salaries they receive. In other words, they want to make sure that the employees can survive on the wages they receive. Of course, life in Cluj is a lot more expensive than in Călărași or Piatra-Neamț.

Despite all this, placing that much emphasis only on the geographic location to the detriment of the necessary skills can mean giving up on the principle of meritocracy.

Let’s take the following example: is a graphic designer living in Ploiesti less capable than a graphic designer living in Bucharest? If they both work remotely and the only difference in their salaries is made by their respective geographic location then we can safely say that there is an inherent problem in using geographic location as a financial differentiator.

An employee’s “position on the map” does not have a lot to say about the value that that employee brings to the company. In our example, it’s possible that the employee living in Ploiesti might turn out to be more productive or the quality of their work might be superior even if they both have the same qualifications.

There are lots of studies that concluded that people working remotely are more productive. Therefore, should people working remotely be paid more or less than the ones working on site? There is no correct answer or a set precondition. If the remote work trend continues to grow there is a big chance that we might see major changes in the employee payment and reward system. But when it comes to establishing financial compensation, skills and experience should be the deciding factors, not the geographic location.

Remote work ≠ zero costs/expenses

As we’ve already seen in a previous article, one of the advantages of remote work is that it allows employees to cut costs. If, as an employee you opt for the WFH regime, your costs will clearly be lower because you will not have to fill the gas tank as often, you will prepare your own lunch and even if you will not always work in pajamas, you will definitely be able to save a lot of money on your office wardrobe.

Still, those working remotely do not live like hermits. They behave just like to the rest of the people: they go shopping almost daily, in the morning they ca be found at the closest café and they travel to meet clients or work colleagues, etc. Furthermore, depending on the industry in which they work, they might even have had to acquire specific equipment (new laptop, printer, etc.) that allows them to perform their daily tasks. Also, in most cases, the cost of the internet connection as well as the cost of the electric energy, which are essential to remote work, are paid by the employees.

Therefore, even if the person choosing to work from home might significantly reduce their costs, it doesn’t mean that those costs go to zero and therefore, in principle, a reduced salary is not justified.

On the other hand, from the point of view of the expenses, remote work doesn’t only benefit the employee. According to Global Workplace Analytics, US companies that implement a remote work policy can save each over 11,000 USD/employee/year.

It will be very interesting to see where this trend is going and the impact that working remotely will have on the way we live our lives. But for the moment, as a manager, the only fair option is to value your employee regardless of where they work from.

Would you accept to be paid less in exchange of the possibility of permanently working remotely? Please leave us your answer in the comments section.