As a growing number of companies grant their employees the option to work remotely, one current gray area is remote work pay.

Here’s the situation: the vast majority of workers—80%, according to a September 2021 study on Employee Expectations in Hiring—shared their expectation of being able to work virtually at their company.

But a separate new survey report from PayScale on the 2021 State of Remote Work revealed that nearly the same percentage of employers (81%) have no discernable pay strategy for remote workers. A Salary.com 2021 survey on Remote Work & Compensation came up with a similar number of employers (72%) that “have no formal practice in place for determining remote pay.”

The latter survey also reported that remote workers “will not tolerate being paid less for remote work,” which reveals the fact that the subject of remote work pay has seen intensified debate over the past year and a half since the start of the COVID-19 pandemic.

The main bone of contention relates to whether or not remote workers who relocate (since they no longer need to be based near the company’s offices full-time) should be paid the same amount as they were when working in-house.

The Relocation Pay Debate

The Society for Human Resource Management (SHRM) recently published an article titled, “Should Remote Workers Who Relocate Be Paid Less?” In the piece, global HR consultant Bunmi Biu explained that some companies, including Facebook and Twitter, use location-based pay to determine compensation, lowering salaries when workers move to areas with a lower cost of living than they had while working at a particular company office.

“Asking employees who relocate to areas where labor costs are relatively low to accept pay adjustments based on the ‘going rate’ for the job in the new location is a practice that advances equity,” Biu wrote. “It ensures that employees working in the same position across an organization receive similar compensation based on local costs.” She added that when workers move to relatively higher-cost locations—especially if the employer requested the move—then their compensation should be adjusted upwards accordingly.

At least one study—WorldatWork’s Geographic Pay Policies Study—shows that around two-thirds (67%) of U.S. employees surveyed expected their location to affect their pay. The study also found that had more locations were more likely to create geographic pay policies.

Discover a better way to recruit remote talent

Founded in 2007, FlexJobs is the most experienced remote & hybrid hiring platform.

• Unlimited job posts
• Low, flat membership fee
• Access top-level remote advice

• Unlimited resume searches
• Reach the right candidates
• And so much more!

Get Started!

Some key findings of this study that are of interest to employers considering the remote work pay issue are:

• Nearly all of the more than 500 organizations surveyed said they were “somewhat or moderately flexible” when it comes to full-time remote workers relocating voluntarily.
• The organizations that don’t allow relocations for remote workers outside of preexisting legal or geographic entities cited cost as one reason, along with legal, regulatory, and tax implications.
• Half of employees surveyed indicated that a pay adjustment would be “very or extremely influential” when deciding whether or not to relocate voluntarily.

Creating a Comprehensive Remote Pay Framework

Biu suggested that location-based pay strategies for remote employees can help ensure consistent, equitable internal policies and can even promote attraction and retention of talent.

But she emphasized that in order for this to work, companies must commit to “a focused design and comprehensive framework” that includes not only a strategic pay philosophy to help guide whether pay is at market, above market, or below market but also “designing and implementing a consistent, integrated approach around pay adjustment decisions.” The employer must keep consistency and equity top of mind when considering pay adjustments for remote team members. Biu also advised:

• Identifying remote work positions strategically as part of a long-term remote work strategy
• Considering market rates and supply/demand when determining pay reductions
• Being transparent about location-based pay practices

Not all agree with the idea that people who relocate for remote work should be paid differently than they were before. In the SHRM debate piece, attorney Rick Grimaldi, who specializes in labor and employment law, argued the other side: “Employees should be paid what their work is worth, no matter their location. It’s a matter of reducing risk and remaining competitive.”

Grimaldi’s conclusion was that in the current business environment, it makes “good business sense” to keep employees happy. Plus, he noted that paying remote workers a varying wage can potentially lead to legal complications and pitfalls.

Be Clear and Consistent

Whether you decide for or against location-based pay for remote workers, it’s important to think through the issues and concerns on both sides. Developing a clear strategy on remote work pay can help clarify the corporate policy and ensure that there are no surprises for workers who want to relocate.

Distinguish Your Remote Workplace Culture