Why the issue of salaries and homeworking won’t go away!

August 27, 2021

Chris Lipscomb (BA, MSc, FCIPD) COO Blue Pencil

So far, for some, there seem to be comparatively few downsides to the Covid pandemic in terms of employment conditions. Those in the public sector have largely dodged furlough, whilst many in the private sector have been supported through the hard times and will hopefully now be able to place their employment on a more sustainable footing as the economy roars back to life.

Not only that, many of us can now work from home, either on a temporary or permanent basis, and avoid the costly commutes we once had to endure. No need either to pop to sandwich shops or supermarkets for lunch. Now we can just reach over to our fridges and grab a bite whenever we feel like it. The icing on the cake is that we are still being paid the same as before but have less outgoings. Fab!  More money to spend on home extensions, cars and luxury items, sales of which have all collectively soared. Yes, there have been those who have lost their jobs but with job vacancies at an all-time high, anyone who wants to, should soon be accommodated back into the workforce.

Hold on, hold on! If something sounds too good to be true, then it is. The media has recently picked up on the announcement by Google that they are looking at differentiating the pay for those who switch from office to home working on a permanent basis. Whilst the media see this as a retrograde move, this is not as illogical as some may think. In the UK, salaries are formulated using both role specific as well as location data to reflect such things as cost of living etc (e.g. London weighting). The monetary upside of the pandemic for some has been the fact that they are no longer having to pay expensive train fares or put petrol in their cars as they have by and large been working from home. In some cases, people have even moved to cheaper but larger rural homes in the countryside to continue with their work on a city centric remuneration package.  Faced with shortages of talent in many areas, employers are being understandably cautious how they approach this mismatch but like Google, they will. Economies go through transient states, and it is not too hard to spot the Covid related economic pressures piling up in the background. These will invariably be passed on to all of us before too long including employers. Tackling pandemics does not come cheap and whilst it may be discourteous to talk in mercenary terms about the measures needed when you are still in the middle of the pandemic, rest assured times will be more taxing “in every way” before too long.

As I have already mentioned, salaries are invariably weighted to the cost of living of where the business operates from in order to attract talent to specific locations.  As businesses begin to face rising employment costs, they will need to look at the basis by which employees move from an office to being either partially or fully home based. Not only is it unreasonable to hold an employer to the same salary when your costs are being reduced, the argument for more permanent homeworking from an employer’s perspective with all the management/collaboration challenges that entails, is still yet to be fully proven.

Read This book about the power law of Attraction- A Lei da Atração e

Some argue that salaries should not be adjusted because homeworking is actually doing employers a favour by helping them to reduce office space thereby saving money, but this is not necessarily the case. Employers are very often tied into long-term commercial leases and cannot easily break their obligations without significant financial penalties. Moreover, if the office space is owned by the business, it may not be easy to use any spare capacity for different activities which means that they are less likely to benefit anyway from increased homeworking. In truth, businesses have already accepted the concept of split working between home and office where the occupational activity lends itself to that. This is typically facilitated with a caveat that a minimum of 2 or 3 days per week are spent in the office. The difference is when an employee wants to move from a flexible arrangement to a more permanent home working arrangement.

The pandemic has artificially created an army of temporary home workers and with high levels of Covid infection still evident, there is little immediate incentive for employees to rush back to the office. However, as medical science helps us downgrade Covid to something more akin to normal flu, the inescapable rationale for being co-located will resurface. To add a further dimension to this, research by the National Centre for Social Research (NatCen) indicates that working from home is causing increased levels of loneliness and mental distress not felt by those working outside the home (Guardian 4 July 2021). These potential issues are another reason why employers need to be careful how they manage permanent home working requests as they are often driven by the perceived financial advantages to the employee as much as than anything else.

If you are now sitting deep in the countryside and admiring the views from your conservatory while enjoying your London weighted salary, my advice would be to make the most of it while you can. As with technology, where Google takes the lead, others will inevitably follow. Businesses are also recognising that if some people can genuinely work anywhere effectively, then salaries should be related to where people are actually working rather than a designated office location. If you apply this logic, then homeworking could lead to a downward pressure on salaries for many.

There are of course a small number of individuals who are keen to take homeworking and geographical flexibility to its’ ultimate conclusion by living/working in other countries, often with lower standards of living.  This approach is not without its risk for the wider employment market. For example, why would you support a UK employee to transfer to a country like the Philippines on their current salary when you may be able to hire a local Filipino worker in the same field at 10% of the cost of a UK employee.

None of these issues are straight forward and I sense that rising vacancy levels and staff shortages are not necessarily conducive to employers playing hard ball right now. However, these issues have not gone away and will resurface as soon as the employment market softens.