With job vacancies rising in the US and the UK, firms face challenges in retaining and recruiting talent, yet some employers are considering cutting the pay of workers who won’t return to the office.

Reduced pay for remote workers – the background

Despite US job vacancies hitting a record 10.1 million, Google is claimed to be considering cutting the pay of remote staff with those living furthest away from the office to lose most, which could encourage many to undertake lengthy commutes to offices to retain their full pay.

Arguably, the policy is penalising staff who may wish to remain remote for a variety of reasons including those with caregiving responsibilities, personal health issues, and more.

According to the Independent, these workers could face a pay cut of up to 25% meaning many will have to choose between money and job wellbeing.

The discussion in the UK

Similar discussions are being had in the UK’s civil service sector, where officials have held high-level talks about removing London weighting (which is worth about £4,000 to offset the higher living costs in the capital) from remote London-based employees to get them back to the office.

Data gathered from the UK talent consultancy firm Future Strategy Club found that over 2 million Londoners left the city over lockdown, where a salary reduction policy could lead to higher turnover where remote workers look for employers that better support their working preferences. Already in the US, Facebook and Twitter have already cut pay for remote employees who move to less expensive areas.

This comes after Future Strategy Club found that 58% of UK workers want flexibility in their current role, where 43% said they would consider leaving their job if not given a hybrid work option.

A new UK survey by HR software provider CIPHR has found that over two-thirds (68%) of British businesses are contemplating pay cuts for staff who opt to work from home, despite many (53%) saying they’ve actually saved money by having more remote workers.

Business leaders respond

Commenting on the findings, Claire Williams, Director of People and Services at CIPHR said: “Employers need to tread very carefully if they are going to look to remove location allowances or cut wages based on location, as a result of the shift to more home working. Not only because of the legal and ethical considerations and consequences but the long-term impact on employee loyalty and risk of increased turnover.

“If employers have very clear policies and contractual arrangements in relation to location allowances, then this will be easier to navigate. But that won’t necessarily make it more palatable for the employee who is receiving the news that their earnings are going to reduce through no fault of their own.

“Good communication is key, especially when explaining why certain decisions have been made to the detriment of the workforce. With survival in mind, it is to be expected that organisations will look to capitalise on the success of home working and release properties to make significant annual savings.

“Whilst many have relished working from home, the results from recent CIPHR surveys, and other similar research, indicate that younger employees prefer an office or workplace environment. It can also hinder the pace of personal and career development – both potential drivers for increased turnover and barriers in attracting top talent. If the savings are just too significant to ignore, then organisations could consider alternatives to a permanent office, such as shared workspaces that can be hired on an ‘on demand’ basis.”

Justin Small, CEO of Future Strategy Club said: “The diktat that working from home is less productive has been proved completely false. In fact, COVID-19 has proven that working from home is more productive. Therefore, the talent is now dictating hybrid working terms to potential employers, and employers need to restructure how they think about their culture and ways of working.

“Any large organisations that don’t trust their employees and believe that if their employees are not at their desks they are not working, will struggle in this new post-pandemic world.

“What is now key is hiring strategies and processes – and these need to be recalibrated to hire employees that are more self-directed, independent, and can be trusted to make decisions. Line managers need to be retrained to enable talent to successfully deliver, rather than dictate how they work and what they should do. Trust is the new currency in building teams that can help organisations work in disrupted times.”