First it was Facebook, then Google. Remote workers in these businesses could see their salaries reduced, with both companies operating a location-based pay model.
The move by the two tech giants has raised questions over what other businesses may do around remote working and salary reductions. In the UK, a cabinet minister has anonymously stated that civil servants who do not work on site should face a salary reduction, arguing it is unfair on staff who still commute.
Employees disagree. A Reed LinkedIn poll earlier this month of over 2,300 professionals found that only 18% would be willing to reduce their salary in order to work remotely. Responses to the poll laid bare a range of views and a variety of factors which companies contemplating pay cuts for remote workers need to consider.
However, there was one clear theme to responses: someone doing the same role shouldn’t be paid differently due to where they work.
Are companies losing out from employees working remotely?
While there are numerous reasons employers may want to incentivise employees to be on site, allowing them to work remotely has saved companies money. A survey of employers by Vision Direct found that almost half believed employees working remotely would save them money, while a study by Hitachi Capital estimated that UK SMEs were saving an average of £840 a month with staff working remotely.
These savings don’t appear to have come at the cost of productivity. A CIPD survey in April 2021 found that 71% of employers reported no change or an increase in productivity from teams who were working remotely. Employees are also using the time saved from not commuting to work longer hours, as Angela Jones, Transactional Finance Manager at Missguided, commented: “I work more hours now than I ever have done! People are more productive at home, surely businesses are benefitting from that without deducting pay.”
Given that employees are also facing increased costs from operating remotely (such as higher utility bills), it is understandable that respondents were resistant to taking a cut in salary when their performance is as good - or better - than when they were fully on site.
This point was succinctly summarised in a comment on our LinkedIn survey from IT specialist Anthony Hutchison, who said: “I do wonder whether the cost of doing business remotely is greater than the cost of doing business in a central office? If not, it seems hard to justify a pay cut for an employee if they are performing their role with the same productivity, when in fact multiple studies and surveys have suggested that productivity remained stable or increased during the lockdown.”
Can organisations legally cut salaries for remote workers?
Regardless of considerations around fairness, cutting pay for remote workers is a precarious move for employers. While employment law is clear around removal of location-based add-ons for employees no longer working in the stated location, it is far more restrictive around pay cuts for working remotely.
With most contracts not taking an employee’s location into consideration, unless a contract specifically gives an employer the right to reduce pay for working remotely, any pay reduction will require consultation with the employee and possibly trade unions.
Any attempt from an employer to unilaterally reduce an employee’s salary would go through a legal process. If an employee chose to leave their role over the move, they would have grounds to claim for unfair or constructive dismissal at an employment tribunal. Paying two employees different salaries for doing the same job is also in breach of equalities legislation.
However, there may be scope for a mutually beneficial agreement in some cases. Nearly a fifth of those who took part in the Reed poll said they would consider salary cuts for remote working. Heath Roylance, Digital Technology Product Manager at Whitbread, was one of those who outlined why they would consider a reduction:
“For me - and everyone is different - the answer is yes. In my current role it would save me about £450 per month and two hours in travel, so definitely something I’d negotiate if it was an option.”
Cutting pay will create talent retention problems for employers
While a potential a way to cut costs, reducing salaries for remote workers has the potential to create more problems than solutions for employers.
The likelihood is that a move like this would force many employees to consider their position and seek alternative employment. As Chris Adcock, Managing Director, Reed Technology explains, this could create a challenging situation for businesses:
“The current jobs market is heavily weighted in candidates’ favour, with far more vacancies across most sectors than there are professionals to fill them.
“Additionally, with remote working the number one benefit requested by candidates at present, by reducing salaries for remote workers, you’re also undermining your talent attraction strategies, with prospective employees instead choosing to work for organisations who will offer them remote working on normal pay.”
To continue to retain and attract top talent, using the savings generated by staff working remotely will be more appealing to professionals. If you are looking to encourage employees to work on site, investing in benefits which make the workplace a more attractive place to visit, offering increased flexibility to hours or creating an environment which makes team members want to return works better than implementing a salary reduction for those working remotely.
For more information on the salaries and benefits you should be offering your team members to help recruit and retain talent, download our free salary guides.