Google recently rolled out an internal “pay calculator” for employees who choose to continue working from home. A Reuters news article mentions that Google employees who switch to permanent work-from-home arrangements may see their salaries slashed.
Google doesn’t stand alone in adopting such a policy as other tech giants such as Facebook and Twitter have also announced pay cuts for remote employees who move to less expensive areas.
In Singapore, a recent survey indicated that 9 in 10 employees here want some form of work-from-home arrangement. As Singapore emerges from our 100% work-from-home arrangement, we look at some reasons businesses here should (and should not) follow what Google, Facebook and Twitter have done.
4 Reasons For Cutting Salaries For Work-From-Home Employees
#1 They May Be Less Important To The Business
The reality is that if an employee is not required to do their work from the office, they are unlikely to be a part of the management team or responsible for the overall growth of the company. You can argue that such employees do not need to be paid at the top range and are more easily replaceable.
If a company values an employee less when they work from home than compared to if they were working in an office, they should be able to adjust salaries to reflect this.
#2 Work-From-Home Employees Are Less Engaged – Leading To Less Positive Outcomes
Even if an employee is not part of management or directly responsible for areas of growth in the company, they tend to be more engaged in an office than in their home. While there’s no central authority on this, a recent Forbes article cited new research showing that remote employees are less engaged.
Less engaged employees tend to also translate into less positive outcomes for businesses.
#3 It Is Much Cheaper To Work From Home
Employees who work from home may be enjoying a higher savings rate. They don’t have to pay for transportation and spend hours of daily commute. Work-from-home employees are not required to have presentable office attire. They also save money when eating at home and get to enjoy health benefits related to home-cooking. Office employees typically also have other expenses such as spending on coffee, mints, snacks and other work-related expenses.
#4 Remote Employees Are Competing With A Global Talent Pool
While work-from-home may sound like a valuable thing for employees in Singapore, what they may not understand is that they will eventually be competing against a person living in Malaysia, Philippines or China for the same job.
Employees in lower cost locations may be equally productive and ultimately cheaper than employees in Singapore.
Similarly, work-from-home employees will also be competing with a talent pool from Silicon Valley, Munich and Tokyo – there’s no reason why a high performing work-from-home employee cannot earn more either.
4 Reasons Why Businesses Should Not Cut Salaries For Work-From-Home Employees
#1 Why Even Offer Work-From-Home, When Businesses Don’t Appreciate It
If a business values an employee less simply because they are not working from the office, perhaps not adopting any work-from-home policies may be the way for such companies.
If they want to offer work-from-home policies, but prefer employees who turn up at the office, perhaps increasing the pay of work-from-office employees is another way to go about it. However, in the broad scheme of things, this still translates to paying work-from-home employees less.
#2 Google Isn’t Cutting Salaries Because Employees Are Working-From-Home
Most overseas examples for salary cuts due to work-from-home may not be so straightforward. For example, Google is salary cut for it’s work-from-home employees is location based rather than them choosing to work-from-home.
For example, workers in larger countries such as the U.S. have the option to work-from-home in New York or in Texas – which means they may have to pay starkly different taxes and/or living expenses. Singapore is not large enough for this to make sense.
#3 No Reason That An Employee Is Suddenly Less Valuable Because They Work-From-Home
If an employee is equally valuable to a company after choosing to work-from-home permanently, there’s really no good reason to cut their pay. The employee’s value should determine pay and not whether they come into the office or where they live.
In fact, if an employee spends more time working because they are commuting less, it could be beneficial to an employer. Work-from-home employees may also be saving the employer money by not taking up costly office space making use of office supplies and utility.
#4 You’re Going To Bash Employee Morale
No one has ever celebrated taking an involuntary pay cut. Doing so may cause morale to spiral and have disgruntled employees looking for the next job as soon as they can. The cost of staff turnover can be even more costly for businesses over the longer term.
Remote Working May Be The Future (Or Part Of The Future)
There’s really no right or wrong answer here. We simply covered some perspectives on why it does and doesn’t make sense to cut employee wages. If you have more insights to add to the conversation, do leave a comment on the article post on our DollarsAndSense Business Community Facebook Group.
In parting, we think the future of work would involve some aspects of work-from-home. So, rather than just cutting pay or keeping pay the same, businesses should think of they work-from-home policies more holistically.
Ultimately, as remote working gain widespread adoption globally, businesses need to value their employees’ contributions rather than fixate on where they are working from.