With the onset of COVID and pandemic related activities, many organizations have shifted to a virtual workforce. As you hire new employees does it really matter if they live in the same city where your company resides? What about existing staff? Now that your employees can live anywhere, log in and continue to work for you, do you need to pay them the same “big city” rate?
I’m asking you to challenge this thought. All organizations need to watch their bottom line for cost effectiveness. You want to pay your employees fairly for the job they are performing. But it comes down to why would a company pay a much higher salary than is competitive for a certain job? For example, if your company is in New York city and one of your employees is working out of their home in Des Moines, IA do you need to pay them at the premium New York rate?
I am hearing that most organizations have not made the decision to reduce pay for existing employees if this situation arises. However, many organizations are giving consideration to paying an employee at the market rate of where they live. It just makes sense. Unless you require the employee to come into the office on a regular basis, why would you pay them at big city rates if they are working at home in small town, USA? Salary differentials for non-executive jobs can range from +5% to +25% depending on the going rate of pay and cost of living in that area.
As organizations are coming out of the pandemic, a thorough review of current job responsibilities is in order. Your employee staff has gone through a significant shift over the last 10 months. If your company experienced layoffs, those job duties normally would have been reassigned to others. Some companies have implemented salary reductions. Other employees may have changed responsibilities if they have assumed responsibilities of terminated staff. Additionally, if some of the staff is working in the office and some staff is working from home, can you assume that the person working from home is doing the same level of work remotely? I’m just saying, an assessment needs to be performed. Let’s assume two employees are assigned to the same job classification, but one is remote and one is working in the office in a major metropolitan area. The remote worker and the office worker may be doing exactly the same job and the market analysis should reflect that for overall national averages. However, there may be difference in the cost of living if the remote employee is living in a rural community and does not need to pay high rent, transportation, parking, etc.
It is imperative that your organization proactively review employee’s pay. Time is of the essence since the market is moving quickly and people may be enticed to make a job change. You would hate to lose the key employees you have just because you have not assessed their pay compared to market rates. With the help of a seasoned Human Resources professional, all components of compensation should be considered when doing a market analysis. Base pay is just the starting point. Base, incentives, bonus, commissions, benefits, perks all need to be considered when comparing an employee’s compensation compared to market rates of pay. An external professional can provide an objective point of view and ensure your organization is implementing fair yet cost effective strategies to employee pay.
This is also a good time to review your employee’s compensation compared to other employees. A diversity review of employee pay both compared to market and their peers will allow your management team to ensure fairness across the board. A diversity pay analysis has always been a priority. Now, more than ever, it is critical that managers and senior leaders inform their employees of this analysis and any disparate issues are being addressed. If the organization does not have pay issues, the audit documentation will confirm the exercise has been completed and provide proof of a satisfactory review.
Bottom line, it is imperative for you and your company to be proactive in the salary review process. If you care to discuss further, feel free to contact Nicole Schmidt, Reward Strategies LLC at firstname.lastname@example.org. Check out the website at www.hrrewardstrategies.net for additional information.