Wednesday, February 28, 2024

Remote work pay cut: Should remote workers be paid less?

Same job.

Same company, but a different workspace. The question of remote employees facing a pay cut is now a reality as companies and government bodies begin realizing the difficulties of working remotely.

Recently Australian public servant jobs were awarded completely flexible conditions, meaning they can permanently work remotely or come into the office if they like. But an uproar occurred when a Victorian Premier said remote workers should face a pay cut.

Many workers were willing to take a pay cut to maintain their remote working status during 2021. Still, attitudes have changed as businesses ask employees to return to the office. Employees are expecting better pay conditions if asked to return, or they provide employers an ultimatum.

Should remote workers be paid less than their office counterparts? Let’s have a look.

The downsides of remote work and why pay cuts can be justified

Remote employees are satisfied with their conditions but commonly overlook the problems it creates for businesses.

Inflation

The current and biggest struggle is renting office space. We are amidst inflation and the cost of leasing an office, electricity, water, maintenance and other utilities is constantly rising. So why would an employer pay for empty desks?

During Covid, the transition to remote work was an obvious and necessary play to avoid your business being shut down. And it’s been booming ever since, with a 223% increase in remote hiring from 2019 till mid-2022, but now tech giants such as Amazon and Google are also facing office space issues.

Amazon paused the construction of its second headquarters in Virginia as a cost-cutting measure, and Google mentioned potential pay cuts for remote workers not long ago. Businesses are forking hundreds of thousands of dollars in office space only for their teams to work from a bedroom and remain fully remote.

It’s simply not sustainable for most businesses, and this dilemma is exacerbated for smaller companies.

Questionable productivity

Hybrid work has the accreditation of increased productivity, but remote work doesn’t.

A study by the Federal Reserve Bank of New York observed the productivity levels of call center workers, and their findings showed reduced productivity. Not only were fewer calls being attended, but the quality also suffered because workers were unable to communicate with co-workers for assistance quickly.

It also found that firms were reluctant to offer remote and on-site workers the same wage because it could risk attracting less productive workers. And studies that counter this claim only use employee self-evaluation as a measure of productivity, which isn’t an ample indication for business leaders that pay wages.

Remote workers are less productive on average.

There is a lack of structure when questioning productivity. Does work output measure remote employee productivity? The time taken to complete a task? The quality of work? The profit brought to a business? Or is it a combination of these factors which determines productivity?

Some studies have found workers are 18% less productive when working remotely, and fully remote employees are becoming less happy, feeling isolated or struggling to progress in their careers. Remote workers have limited interactions with their managers, which is key for understanding what’s needed to improve and advance their careers.

And further research shows that increasing depression amongst remote employees is a clear sign that productivity suffers, along with the mental state of your team.

If you’re less productive, should that equate to a pay cut?

The effects on the economy

Some governmental bodies are advocating and expect employees to return to the office because of economic implications.

Many small businesses in metropolitan areas rely on the thousands of office workers that buy local goods and lunch, but what happens when they disappear? Businesses are facing moderate wage growth pressures to match inflation but cannot do so because of fewer commuters.

It also changes the hiring dynamics for smaller businesses. They face the pressure of offering remote work or risk employees quitting and not applying for their positions.

And if that’s the case, why not outsource? Many countries can offer the same service at a significantly lower cost, and if you’re never seeing your team in person, what’s the difference? It opens the door to hiring less local workers and fewer job opportunities as a result of people wanting to maintain remote working status.

If managers can outsource their work for a much lower cost, then an argument for a pay cut may have its place. Paid time should consider the input that’s placed and the output received.

The upsides of working remotely

But it’s not all negative.

We know work-life balance had improved initially and so did freedom, but remote work often has a bad reputation since the benefits only consider the needs of workers. Let’s look at the upsides and justifications for not implementing a pay cut.

Hotels benefit

If people can work from anywhere, why not travel and get your job done is what many people have thought. The occupancy rate of people staying in hotels increased and consequently, hotels offered tailored packages for remote workers.

Remote workers are extending their business trips and staying longer to enjoy their destination since they can easily log on from a room with stunning views.

Overall, the hospitality industry has benefitted from traveling remote workers.

Adapting businesses are saving costs

We discussed how office space has been a hole that businesses are pouring money into, but those that adapt to flexible workspaces are saving more money than ever.

Firms are now embracing coworking spaces, serviced offices and virtual offices instead of opting for a traditional workspace. The flexible lease terms mean they have access to a workspace without locking into long and expensive contracts, plus it enables hybrid work if their team comes in occasionally.

Local is winning

Smaller local businesses can’t compete with the giants in metropolitan cities offering the same product/service, but they’ve gained a larger consumer base now that remote workers stay home.

When remote workers buy lunch outdoors or need to get something from a store, their local shops are the go-to! The convenience of walking five minutes or doing a quick drive brings more customers to local businesses than they would without remote workers.

Local businesses are experiencing growth and from an economic standpoint, it’s a good argument not to take a pay cut.

E-commerce potential

Online businesses, shipping and logistics experienced stupendous growth amidst Covid.

The jump is no longer as significant but remote workers still contribute to the spike. They typically do more online shopping, especially for work-related products and this resulted in more employment opportunities for logistics.

It’s not a large gain for the economy but it’s not a downfall either.

Areas of concern

All of these factors need to be considered in the debate for a remote work pay cut, but there are further areas of concern that need more research.

Absenteeism is a good example.

Remote work studies universally highlight lower absenteeism rates when compared to working in the office, but accuracy is of question. A sick remote-working employee is more likely to log on and occasionally move their cursor, and do an hour of work before completely relaxing the rest of the day.

Sick days become a liability for remote workers, especially for quiet quitters who are doing the bare minimum. But at the same time, employees must be trusted to ensure a positive work environment.

Businesses should also consider the nature of the role that’s being offered as totally remote. Many positions require spontaneous collaboration and instant feedback, which remote can’t offer.

There are many factors to consider before offering a fully remote role, and the debate of flexible work is likely to continue for the coming years, with a spectrum of issues being raised.

But for now, a pay cut is likely to cause too large of an uproar.

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Kyle Howarth

Kyle Howarth

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