Distributed workforces are seen in all industries and can include employees from around the globe working from home, satellite offices or both. Creating a competitive salary scale is crucial for hybrid/distributed businesses because it enables your organization to hire talent based on experience and skills rather than geography.
Equitable pay for in-person and remote staff is important to today’s job seekers. 90 percent of employees today think they should be paid the same wage no matter where they choose to work from. And 80 percent of tech respondents in our Built In 2022 Tech Worker survey said making more money was the main reason they would leave their employer for a different business.
With these stats in mind, it’s safe to say that if employees are unhappy with their hybrid pay scale, they can easily leave and find a different employer with a better offer. The pressure is on for hybrid businesses to exercise fair compensation strategies for their partially- or fully-distributed workforce. And this article will dive into some of the ways employers can build those best practices.
Traditional salaries are based on the cost of living in a particular locale. These indicators often give significantly higher pay to people who live in major metropolitan areas with higher populations. This means people living in less populated locations would receive lower salaries to match the lower cost of living.
“It saves companies money because it is based on cost-of-living indicators,” said Jason Medley, chief people officer at Codility. “While this model makes sense in theory, it also comes with cultural complications like ‘perceived quality of talent’ in different geographies.”
Outside of false perceptions, there are other important factors to consider when determining remote versus in-person salaries. An employee with four children will spend more on education than an employee with two children, one child, or no children. These aspects must factor into the cost of living. The same is true for buying food and household items.
Currently 61 percent of employers pay remote workers the same as in-office employees for all jobs regardless of their location. However, more than a quarter (26 percent) pay based on location. Basing salaries on national averages is an easy way for your company to implement fair pay for everyone (and you can use our U.S. Tech Salaries tool to get that insight.)
“We realized that to attract and retain high-caliber talent, we had to offer the candidate the same level of income potential as any other position,” said Brian Dolan, CEO at WorkReduce. “Thus, our pay bands are solely based on experience. Since doing so, our company has doubled in size, attracting and retaining the best talent in the market.”
When building a pay structure, consider the following questions:
Based on these the insights you uncover, you can start evolving your distributed salary structure using the following tactics:
Complete a market analysis. Use a reputable source to define your talent market and market positioning based on the size and stage of your company. Get data for the existing and upcoming roles and specialties reflected in your organization. Also educate your executive team on the importance of conducting a market analysis and fill them in on where the pay gaps are.
Plan your ideal pay structure. Based on the insights from your market analysis, determine the next steps. Can you afford a role/national-based salary or should pay be driven by location? If location-based, will it be determined by an employee’s geo or the location of your HQ, for instance? Will you target new applicants from specific regions? If an employee moves from a low-cost to a high-cost geo, will you offer them more financial rewards?
Set up a pay scale for each role based on the chosen structure. Build a standardized pay scale for each role that can: ensure equity across the team, leave some wiggle room for negotiation and prevent rebuilding a new pay scale for hiring a duplicate role.
Ensure compliance. Know your local labor laws for the geos you’re hiring in or plan to hire in.
Be transparent. Explain the fundamentals of your hybrid pay structure to employees.
Document policies publicly and update them regularly. Train managers on how to speak to the structure and answer questions.