Should remote workers be paid less?

Should remote workers be paid less to take into account saved costs of commuting and the impact on commuter services or should they be incentivised to work from home more to improve their efficiency? Lucie Mitchell investigates.

 

The pandemic has forced most of us to work in very different ways, with unprecedented numbers of people now working remotely, and many planning to continue beyond the crisis too.

A report in 2020 by the Chartered Institute of Personnel and Development revealed that employers expect the number of people working from home will increase to around 37% of the workforce once the pandemic is over, which is roughly double the pre-pandemic average of just 18%.

With remote working set to become far more commonplace in the coming months, and with that the opportunity for remote workers to save on commuting costs or relocate to a more affordable area, could employers be justified in cutting their salary?

“Remote workers should not be paid less than their office-based counterparts,” states Jamie Mistlin, co-founder of Remoteably. “Workers’ salaries should be based on the worth of their skills to the business and be guided by market rates.”

Lizzie Benton, founder of Liberty Mind, echoes this view. “Remote workers may have reduced costs in commuting, but this doesn’t account for the changes they would need to make in their own home to accommodate them working remotely, such as office furniture, as well as increased heating and electricity usage and enhanced broadband costs.”

Mistlin also points out that remote flexibility should be seen as a way to improve the efficiency and effectiveness of an employee. “Why penalise staff for not having to commute for two hours a day? Without the physical and mental toll of a gruelling journey into the office, employees can reinvest their time and skills into productive work that adds value to the organisation.”

Tax breaks or tax rises?

Employees who incur increased costs through working from home can, in fact, claim tax relief. However, a report by the Equal Parenting Project revealed that just 4.5% of managers confirmed that they paid their employees the £6 per week that can be claimed back from HMRC, suggesting few employers and employees are accessing these tax breaks.

In Germany, the government is planning a tax rebate to cover work-from-home costs during the pandemic, such as increased utility bills, which will allow employees working from home to reduce their annual tax bill by €5 per working day, up to a maximum of €600 per year.

On the flip side, Deutsche Bank has suggested that employers pay an extra 5% tax on the salaries of remote workers due to many more people working from home and not contributing as much into the economy, as they are saving on things like commuting and eating out. The bank argues these gains outweigh any costs incurred from home working.

Yet Matt Stephens, CEO and founder of impact-driven fund manager Inpulse, argues that remote workers are still very much plugged into society. “They may still need appropriate work clothes, and they are likely to pop out to buy their coffee and lunch, as well as shop locally.”

Stephens can see why, to some CFOs, it could make logical monetary sense to conceivably pay remote workers less. “An argument could run along the lines that location independence is worthy of a reduction in salary, as they could choose to move to an area where the cost of living is much lower, and they gain back the most valuable commodity – time,” he says.

However, this is certainly not his view. “Reducing pay for those who choose to remain remote full time after the pandemic is not only harsh; it is also an act of self-sabotage to your employer brand and employee engagement.  You will likely make your employees feel resentment, cause disengagement and make people question what your company really values.”

Older workers

With employers looking to cut costs in the current climate, and with many employees now working remotely, it could be argued that older workers may be at particular risk of a pay cut, due to the fact they tend to have higher salaries than their younger counterparts.

However, Phil Flaxton, chief executive of Work Wise UK, warns employers that this is a very sticky road to go down. “If an employer is pressurising older worker to take a pay cut, they can go straight to Acas, and bring an employer to task. Many older employees have got more experience and knowledge and may have a lot more to contribute, so it’s not grounds for reducing their salary,” he says.

Stephens believes what is more likely to happen is that there will be a higher turnover of older workers as employers cut back on promotions, pay rises and perks. “Coupled with the likely rounds of redundancies, older workers will be most at risk of leaving as they can be the more costly overhead,” he states.

Alternatives

So what alternative solutions could employers look at that could be seen as more effective and fair than cutting remote workers’ pay?

“Instead of changing pay, businesses need to look at the support they offer teams and invest in the right tools and systems that can help people gain that work-life balance that is so easily blurred during remote working,” suggests Benton.

Stephens concludes: “If the pay reduction can’t be justified on the grounds of value, contribution, company values or improving engagement, it is not helpful. Keep it simple, if your employees love working from home and are productive, don’t ask them to choose between being remote and their salary. Support them in their remote working and look to reduce costs in other ways.”



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