5 Compensation Best Practices for Hybrid Teams

5 min read
May 26, 2022 6:15:00 AM

Remote work expanded almost overnight at the beginning of the pandemic and has become a mainstay of the modern workplace. Employers have cited increased employee retention, productivity, efficiency, and morale, among other benefits. Employees enjoy the flexibility, lack of commute, cost savings, and reduced anxiety and stress that remote work affords—and most don’t want to go back to the old way of work. In fact, 45% of Americans would either quit their job or immediately start a remote work job search if they were forced to return to their office full-time.

Organizations have taken note and many are embracing hybrid teams, where some employees work in the office, some work remotely, and some work a combination of the two. This transition has led many to consider how they should approach remote pay for hybrid teams, especially with regard to employees who relocate to areas with a higher or lower cost of market. There’s much to consider, so here are five best practices to guide you.

1. Choose a consistent approach to remote pay

There are a few basic approaches to remote compensation:

  • Global rate. Use a single market to set compensation for every team member—regardless of where they’re located. This may be the market where your company headquarters is located, while some companies choose another market or use the national median.
  • Zones. Group geographical areas with similar labor costs into zones, and tie each remote employee to a zone based on their location.
  • Local rate. Set pay for a distributed team by using local market rates based on where each remote worker is located. This might be done with custom pay ranges for each market, or calculated with a formula using location factors.

Carefully consider the pros and cons of each approach, and choose the one that best suits your company, values, and team members–then try to apply it consistently. This will help ensure fair pay practices and simplify compensation management going forward. 

Of course, you may choose to make exceptions for certain employees or choose one approach for your most in-demand talent and another approach for everyone else. Or you might only apply a new remote pay strategy to future hires and leave it as-is for your current team members. If you do, make sure you document these exceptions and consider how you will approach above-band employees in future compensation cycles.

2. Communicate, communicate, communicate

Remote and hybrid work have caused a significant shift in the modern workplace. Great communication is key to helping your employees navigate the new world of work—including changes to your remote compensation strategy.

Provide managers with advance notice of any changes so they can be prepared to answer questions from their team members. Then announce the changes to your employees well in advance, so they can digest the information and have time to adjust. Share why you’re making these changes, how employee pay could be impacted, and when the changes will take effect. 

This level of transparency can help build trust and a collective understanding of how employee compensation is determined at your company. Pay transparency is particularly important in a hybrid workplace, as employees may see large variations in pay between their pay and that of their colleagues or others in the community. For instance, two remote team members in different geographic locations with the same skills, experience, and performance may earn very different salaries if you use a local pay rate. But if your team members understand your basic compensation philosophy and why they earn what they do, they will be more apt to understand a location-based pay difference.

3. Run compensation analyses by remote status

Less visibility may contribute to remote workers falling behind on raises and promotions compared to their colocated peers. Run regular compensation analyses and track your promotion rate by remote status to monitor for this. 

You may have a problem at the job level if remote employees have a lower compa-ratio than their office-based counterparts. Or you may find that a lower average salary for remote workers is due to a smaller percentage of remote workers in leadership roles. Promotion rates, often driven by opportunity to work on challenging projects, may also fall behind in remote employee populations if not carefully measured.

Look closely at outliers to try to understand the factors at play, and make strategic adjustments as needed to improve remote inclusion.

4. Multi-source your salary data

Salary data may be limited in some regions, particularly as remote work allows people to relocate to areas where their industry or role are less common.

If you plan to use a location- or zone-based pay strategy, use two or three credible sources so you have the right data to build competitive salary ranges. These might include salary survey data companies such as Mercer and Radford, self-reported sources like levels.fyi (for technical talent), or a compensation consultant. You might even cross-reference salary ranges in job postings so you can understand what your competitors for talent are offering.

It’s also a good idea to get real-time feedback from your team. Sync with your recruiters and managers to learn whether your compensation package is competitive enough to attract and retain talent. If pay is a common reason for turnover or offer rejections, you may need to revisit your salary bands. You might also enable your team members to report discrepancies if your benchmarks or salary formula seem off. Review and address concerns, then either adjust accordingly or disagree and commit. This can help your team members feel heard and help your compensation team get your model right so you can reduce employee turnover.

5. Put the right infrastructure in place

Compensation was already complex before hybrid work created some new challenges. Now you may be managing pay across many different geographic areas with vastly different costs of market. Make sure you have the right team and technology in place to manage pay for your distributed workforce. 

Dedicated Total Rewards specialists can help ensure your team members are being paid fairly and according to your compensation strategy. Total Rewards staff typically account for 9% of total HR staff, though exact headcount may vary depending on workforce size and the HR tech stack in place. 

Sophisticated compensation management software can help you better manage and communicate the complexities of compensation for your hybrid team. If you’re going to tackle remote compensation at a reasonably high level, consider an investment to update your HR technology to more fully support your transition to remote work. 

The future of work is hybrid

Remote opportunities grew from under 4% of all high paying jobs before the pandemic to about 9% at the end of 2020, and to more than 15% in late 2021. This trend is expected to continue. An estimated 25% of all professional jobs in North America will be remote by the end of the year, and remote work opportunities will continue to increase through next year. Of the companies that allow remote work, the majority have a hybrid approach.

The future of work is hybrid and it’s important to take meaningful steps to ease this transition for your team. Take the time to think through your compensation strategy and adapt it to fit the needs of your hybrid workforce.

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