Is it OK to reduce salaries for remote workers?

By Robert Half on 16th August 2021

With two-thirds of employees now viewing themselves as ‘homesteaders’ who work primarily from home, planning a return to the office (or not, as the case may be) is a veritable minefield for business leaders. So far, we are seeing vastly different approaches.

While some companies are offering employees the flexibility to choose what suits them best, whether that is a five-day week in the office, working remotely full-time or a hybrid approach, others are keen for a more structured return. Whatever you choose, it is important to make sure you communicate your decisions transparently and with consideration of the impact they could have on morale and retention.

Once you’ve decided on your approach, the question then becomes how do you address remuneration? Most companies have concluded that if you’re able to carry out the same role to the same standard while working remotely there should be no impact on salary, but we’re also seeing the opposite. Some businesses are prepared to reduce the salaries for those who decide to work from home, especially if they are doing so from a location with a lower cost of living. Is this ok? And what impact will it have on their workforces?

Carrot and stick

Some of the more cynical among us might suggest that businesses considering reducing incomes are using it as a deterrent for remote working. A way of coaxing reticent staff back to the office. Others would view it as a cost-cutting measure to scrape back pandemic losses. While these may not factor into your considerations, you should think carefully about the message you are sending out to your employees and the wider world.

Business decisions are being widely reported in the media and spreading like wildfire on social channels (The Guardian, City AM). Companies with more flexible offerings are being lauded for the trust they are placing in their staff and their understanding of employees. Meanwhile those with stricter policies are being portrayed as out-of-touch, conservative and in some cases bad employers.

The pandemic has shown that employees respond better to the carrot over the stick. If you truly want your staff to return to the office, shouldn’t you make it a place they want to be?

A blight on retention

Seemingly punitive measures, like reducing salaries, are a sure way to push your employees out the door, to a company who will offer them the flexibility they crave for their current salary or more. In the current candidate-driven market, your employees won’t have to look far to find a role that offers them the salary and benefits they want.

While many businesses are looking for opportunities for cost-reduction, cutting salaries in this market is risky at best. Now is the time to focus on holding onto your people. They are most businesses’ biggest asset as we move into a period of recovery and growth, but it is crucial they remain engaged and productive.

By reducing a salary, you could be killing someone’s dream of becoming a digital nomad or making their living situation uncomfortable, leaving them unmotivated. If they accept the reduced salary in exchange for flexibility they may become resentful. Either way, you are unlikely to retain that employee when there are so many more appetising options out there.

Given that we are seeing a supply and demand issue across all sectors, with businesses warring for talent with in-demand skills, retention should be the top priority for employers. While it can be tempting to cut costs in the short-term, senior leaders should take a long-term approach, thinking about the talent they will need to excel in the coming months and years.

So, is it OK to reduce salaries?

Every company will follow its own path, but it is important to do so while considering all the potential impacts. If you do reduce salaries for remote workers, you should be prepared to accept that it may be costly to replace them. Look after your people and they will look after you.

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