As our foray into remote work continues to show promising results, more and more companies are announcing their plans to allow it on a permanent basis. But as we make this shift, it’s important to be clear and consistent about how we will approach remote pay.
Employees are making important life decisions right now, including where to live and how to handle childcare. Their compensation plays into those decisions, so it’s important to let them know if there may be changes ahead. For instance, an employee may want to relocate somewhere with a lower cost of market in order to afford a distance learning tutor for their children. Or an employee may need to upgrade to a larger home in a new area to accommodate dedicated office space. If you were to decrease their salary after the fact, it could cause undue hardship. It’s important to communicate about changes to your remote compensation strategy with plenty of notice, so employees can factor it into their life decisions. Here’s how:
1. Make a decision
Office-based work has historically meant that employees were paid local market rates based on a company’s physical office location. But many are no longer tied to a finite number of offices, and it’s important to fully consider how to pay remote employees.
There are a few basic approaches to a remote compensation strategy:
- Global rate: Use a single market to determine everyone’s compensation—no matter where they’re located. This may be the market where the company headquarters is located, although some companies choose to use other markets.
- Zones: Group geographical areas with similar labor costs into zones, and tie each employee to a zone based on their location.
- Local rates: Use granular local-market compensation to differentiate pay for employees in different locations.
Once you decide on an approach, determine how you will retrofit remote compensation for existing employees. Some companies are changing compensation at some future date or as employees move, while others plan to align newly remote employees to local target rates over several review cycles.
For instance, Figma recently announced they will take a hybrid approach to remote work, and asked every employee to choose whether they would like to associate with a hub or be remote. Remote employees will be paid local market rates, effective immediately for new hires, and in 2021 for current employees. This will give employees plenty of time to decide if they’d like to stay within their hub and keep their current salary, or relocate with a potential change to their compensation.
2. Communicate your decision multiple ways
In a remote setting, you can’t communicate too much—especially in the beginning. Get everyone on the same page and aligned with the same information and details. Repetition is key, and you should utilize multiple channels to ensure clear, wide distribution.
For example, hold a company all-hands meeting to discuss the changes to your remote compensation strategy. Discuss why you chose the approach you did, how you determine individual compensation, how to communicate grievances and concerns, and when it goes into effect. Follow-up on the all-hands with a written summary of what was discussed at the meeting, and include your written remote compensation policy. Post the meeting summary and remote compensation strategy in Slack or Teams to ensure good distribution, and in your company Intranet so it can be accessed asynchronously.
For instance, GitLab details their remote compensation strategy in their public, internal employee handbook. It outlines things like why they pay local rates and how they make compensation decisions. This allows their fully distributed team to access this information anytime, anywhere.
3. Resist exceptions
A well-documented and communicated remote compensation strategy can help you apply it consistently, but you will always have people who dispute their individual compensation targets. A dispute process can be helpful for fine-tuning your remote compensation strategy, particularly as salary data sources often lag the market and aren't always accurate for remote positions. But if you determine the employee’s compensation is aligned with your strategy, it’s important to disagree and commit. Making an exception could lead to unfair compensation practices and pay equity issues – and open you up to more exceptions.
You may find there are times when you need to make exceptions to win and retain high-value talent. If that’s the case, consider re-evaluating compensation for all similar employees. Low offer acceptance rates, or high turnover due to compensation, can be an indication that your salary ranges need to be updated.
In the event that a true exception must be made, track it so there’s visibility into why some employees are above-band.
Final thoughts on communicating changes around your remote compensation strategy
Your employees rely on their compensation to pay for their bills, food, leisure activities, retirement, and more. Any changes you make to compensation should be carefully considered, and communicated with plenty of notice so employees can prepare and adapt. Particularly as COVID-19 has turned our world upside-down, your employees need to take compensation into account as they consider personal life decisions. They may be considering relocation to have a bigger house, lower cost of living, or closer proximity to family. Let them know if their compensation might be impacted, and by how much, before they relocate.