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Out of office: what to consider when setting salaries for remote workers

Remote working, while far from universal, has forcibly swept into businesses across the UK and the world in 2020. For employees temporarily working from home full-time, salaries have of course stayed stable, outside of business saving measures like temporary salary sacrifices. However, now the idea of the traditional site-based professional setting is fast-becoming only one of several options available to employees in the long term, a debate is brewing behind the scenes as to how this shift may impact how hiring managers set salaries for new flexible and remote working roles.  

Afterall, it’s no passing phase. According to Gartner’s future trends survey, 74% of companies plan to permanently shift to more remote working even once the pandemic has passed. Tech titans Facebook and Google have both committed to hybrid ways of operating in the future, and appear to be laying the groundwork for a permanent shift away from full-time office working for their employees, and this will be reflected in their hiring practices moving forward. 

How to set a salary for a remote worker:

  1. Consider the location of your business and local costs
  2. Is the salary bracket in line with the employee's location?
  3. Look at national averages

Employees, too, have expressed their wishes to continue working from home. YouGov’s September 2020 survey found that fewer than four in ten British workers want to leave their house to go to work, with half of those surveyed stating that they would choose to work from home either every day (18 per cent) or most days (32 per cent). However, some might be more hesitant if faced with the prospect of accepting a different salary depending on whether a role is office-based, hybrid or fully remote.

The benefits of a remote workforce apply to employers and employees alike. Workers are offered ultimate flexibility to select – and switch up – their location, without being restricted to the areas surrounding their workplace. They save time and money on commuting, and with city-adjacent properties at less of a premium, can either move to cheaper parts of the country (or world), or save money on their current commuter belt/central homes. 

For hiring managers, it means being given access to a wider pool of talent outside of your physical catchment; and without the overheads of costly office space, your business’ budget can be funnelled elsewhere.

But having a geographically diverse team can make salary setting more difficult for hiring managers. Without the usual guiding determiners of location, relative living costs and building overheads, ensuring you’re making the appropriate offers can be tricky. A careful balancing act is needed between incentivising top talent and making the most of budget available. 

Assigning a ‘cost’ to your most valuable asset – your people – is a nuanced and precise activity. To help you feel confident when setting salaries for remote workers, here are some elements to take into account:

Leverage available salary market data

Comprehensive and to-the-minute pay data will be indispensable to give you the wider industry and national context when setting salaries. 

One source of information, our Salary Calculator, brings together over 16 million live UK salaries and job profiles, and will give you an idea of candidates’ average salary expectations for a given job role and experience level. Alternatively, you can look to bodies like the Office for National Statistics to find further earnings data for the UK and its component regions. 

Armed with this information, there are three overarching approaches that you can choose to take:

1. Salary brackets in line with business location

This option would mean that salary buckets are, largely, set in stone – unless the business location happened to change. Salaries would not reduce or increase if the colleague physically moved, and team members would be paid in line with the relative cost of their reporting office, regardless of their own location.

2. Salary brackets in line with the employee’s location

This would see employee’s sharing their planned whereabouts and having salaries worked out accordingly – an area with a lower cost of living would usually yield a lower salary. 

Facebook has been one of the most high-profile brands saying that it will go down the route of adjusting salary based on market, with many detractors voicing concerns around the ethics of paying different amounts for the same role and expecting the same outputs.

This would require a contractual policy drawn up to apply when colleagues change location, as well as agreed approach for irregularities (e.g. how to determine pay for a colleague who splits their time between two locations).

3. Salary brackets in line with the national average

The third option would involve disregarding local variations entirely and looking at the country as a whole to find your salary bracket. Regardless of the head office location and your employees’ locations, you would take a broad overview of salary trackers and future trends. 

This would not offer higher salary incentives for colleagues living centrally (and, often, closer to your physical office space), nor would it penalise with salary cuts those living more rurally or in lower-cost areas. This would offer your teams total freedom to live where they please. 

Consider your wider overheads

When investigating the three approaches listed above, it’s worth considering all the additional expenses which may arise in the future. For example, will you be requiring your teams to come in on occasion for ad hoc sessions, training and all-in meetings? If so, will your employees be able to claim on expenses for journeys, accommodation where needed and subsistence costs incurred in the line of these visits? Will you set an upper limit on how much will be covered – if, for example, a colleague is resident in a country outside of your headquarters, travel costs back to the home office location could quickly mount up! The projected costs for this ‘in-person’ time could be factored into your decisions around salary.   

This could also include the cost of equipment. In the course of each team member’s role, what – if any – additional materials might they need to carry out their jobs as effectively as they would in an office environment? 

This could be anything from laptops and monitors to industry body memberships and website subscriptions. The equipment needed will be classed as anything that ensures your teams’ productivity equals what would be expected when they come into the traditional work setting. 

If you’re offering a stipend to cover these pieces of equipment, it’s worth keeping in mind the added cost of this – and whether you will be contributing to any expenses incurred as a result of your employees working from home. Think heating, electricity required to run work equipment from a domestic setting.

Rather than looking at the salary in isolation, a more complete view of the total overhead, including both onboarding and ongoing costs, is helpful for long-term business planning.

Create a framework for assessing expertise and experience

In order to have a point of reference when making offers to remote workers it could be useful for you to establish brackets relating to:

  • Area of expertise 
  • Years of experience

For each business function and its associated roles, you’ll have an upper and lower limit. Between these, tiers would demarcate different levels based on specific skill-based competencies and valuable experience in role. 

Having a structure to follow when considering pay grades for non-office-based workers will allow you to standardise the offers you make. This will save you time in calculating pay for each individual colleague and ensuring that pay is fair and consistent across the board.

  • Being able to offer fully remote or hybrid working options to your teams and contractors opens up a new world of possibilities. The benefits can be seen as much in the practical (saving money, saving time) as in the holistic (promoting better work-life balance) – all the way through to the critical, like opening up roles to previously marginalised groups who have hitherto been excluded due to their location.

By putting clear and established policies in place around salary offers for those working away-from-office, you’ll have a surer footing in this growing trend, reaping the business benefits and building a happier workforce.

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