Should salary still be dictated by location?03 Apr, 20235 mins
Since the pandemic hit three years ago, hybrid and remote working have become a standard working practice for a considerable number of workers around the globe. Recent research shows that almost 85% of companies currently offer flexible/hybrid or remote working to their staff.
This has brought substantial benefits for employees in the form of reduced travel costs and better work/life balance, the latter being something which employers are particularly keen to focus on in terms of avoiding burnout and looking after their team’s mental health and well-being as part of an increased commitment to D,E&I.
Of course, working in this way benefits businesses, as happier workers tend to be more productive and less likely to leave. Plus, a remote or hybrid workforce often means reduced overheads associated with office space rental costs and equipment needed on-site.
Suppose many workers no longer necessarily need to be in a particular location to do their jobs. Is there an argument that salaries should no longer be determined by location?
Why has pay historically been geo-centric?
People have always needed to afford to live where they work. Therefore, in the past, businesses have often felt it necessary to pay higher wages to those living within travelling distance of workplaces located in more expensive areas to attract people to work for their company. One of the most well-known pay schemes which apply this logic is London Weighting, where many organisations offer employees based in the UK capital higher salaries than those found at other office locations around the country. Similarly, some companies offer slightly higher wages to those in other big cities and the lowest pay scale to those in more rural areas.
The theory is that location-based salaries are fair from a cost-of-living standpoint as cost-of-living varies significantly across the UK and worldwide. This is evident in this real-time map from cost-of-living monitoring specialist, Numbeo. Employers often argue that to attract and retain top talent in expensive areas, they must offer higher salaries for those locations.
How has hybrid and remote working changed the landscape?
Of course, many people still live and work in more expensive areas than others. However, with staff spending more time working from home, there is a clear argument that expenses such as travel and other daily costs are becoming less relevant when considering the wages on offer.
Remote working also raises the question that, if someone living in a rural area of Yorkshire, for example, can do the same job as someone living in Central London, should they be paid less if neither has to go to the London office regularly to do their job?
In addition, with D,E&I so high on the business agenda, employers are perhaps also keen to show that effort and achievement should be rewarded equally regardless of where you choose to live. The equitable approach would be to compensate all staff with pay related to their role rather than their location in the same way that wages would not be adjusted for gender or race.
Pros and cons for employers
However, the problem for people living in expensive locations such as London is that they still need high enough wages to maintain their lifestyle in the area. Suppose those individuals are the best candidates for a particular role. In that case, a company may deem it necessary to offer them a higher salary to secure a talented professional and stop them from going to a competitor.
In fact, with the cost-of-living crisis showing no signs of easing up any time soon, some are saying that London Weighting should be increased as it is not keeping up with inflation which could cause financial problems for those living in the city and perhaps even force people to move away, creating vacant properties and vacant jobs which are unlikely to be good for business.
On the flip side, however, with the cost-of-living crisis affecting almost everyone in the UK to the extent that there are now around four million workers considering taking a second job to increase their income and to help level up living standards and employment opportunities in the country, perhaps employers should be considering if they have a moral obligation to offer equal remunerations to all employees regardless of their location?
This is undoubtedly something for business leaders to ponder as they navigate the complex and sometimes conflicting landscape of inclusion, equity and talent acquisition.
Whatever your location, if you are looking for a new role or an employer looking to recruit for your team, contact McGregor Boyall today and find out how our expert sector specialist recruiters can help you.