This debate could shape the future of work for all of us

There’s a fascinating debate going on in HR departments around the world right now. And this is fast becoming one of the most challenging topic for employers in the remote-work era. Not only that, the outcome of these discussions could have global consequences on the way we live and work. I am talking about the debate around localized salaries (where every person has an individual salary) versus international pay (where every person of the same seniority and title gets paid the same, regardless of location). But before we dive into that let’s look at the numbers and how big of an issue this could be.

When the pandemic hit, millions?of people moved away from big-city offices to smaller communities where they could work from home. In the US alone, 2.4% of Americans, or 5 million people moved because of remote work. According to surveys, this trend is set to continue as 1 in 10 Americans plan to move and work remotely. As a result, since January 2020 in the US alone, remote job postings have tripled, for tech jobs they have quintupled. The trend is similar in most countries, with workers choosing to relocate from big cities to smaller communities with a lower cost of living. This, combined with the pandemic and the wide adoption of remote technologies, is prompting more companies to ditch the office altogether. Globally?16% of companies are already fully-remote?i.e they have no office or headquarters whatsoever and they operate remotely 100% of the time. These include, Quora, Basecamp, Airbnb, Zapier, Buffer, Automaticc (the makers of Wordpress) and the list is growing, rapidly.

Whilst this has been a tremendous boost for remote working platforms such as Deel, (who have reported 20% growth month on month since the pandemic hit), this mass exodus of workers has become a nightmare for companies. HR departments everywhere are struggling to find equitable ways to compensate employees in a tight labor market. This is because location has always been factored into wages and traditionally, companies used to base pay on the cost of living in a particular region. If an employee moved from a high cost city to a lower cost city companies lowered salaries for workers. And vice versa if they moved from a low cost region to a high cost city. It’s a practice that has been going on for decades. And so the questions for these companies that have embraced remote work is how do you adapt to all these locations. And how do you pay fairly and equitably to retain existing staff and also attract new workers?

Some companies, such as Meta, Google and Twitter have answered this question. They seem to be favorizing a location-based pay model. In these companies, workers that still choose to live near an office or work a hybrid model gets paid a premium over the ones that have decided to go fully remote to a smaller community. But risking alienating existing workforce has been shown to be a bad idea. For example, Google’s plan to cut pay by 25% for remote workers, announced in 2021, has not been well received. In a recent survey, 53 percent of the Google workers spoken to have said that they would think about leaving the company if they moved and had their pay cut. That’s because generally pay cuts are bad for worker morale, performance, and retention.

Other companies have taken notice and do not want to risk alienating their workers. Or at least not in a tight labor market. So paying the same salary regardless of location is gaining traction, especially at remote first companies. For these companies the argument for location-based salaries is falling apart. For example, in 2021, online real-estate marketplace?Zillow announced it would no longer cut pay for staff who move from its key operating areas in the US. The cloud software business?Okta?announced a similar approach in March 2022. For these companies, compensation for staff should be based on merit regardless of personal lifestyle. For them equity means that if the work is of equal rank/value, the pay should be equal regardless of location. Aside from equity considerations, some also argue that coming up with a localized salary band for a remote workforce is near impossible. There are too many variables, and it's easier to do away with the complexity.

In April this year, Airbnb went further. Its CEO, Brian Chesky, announced Airbnb?staff can choose?remote?work from anywhere in the world with no pay cut, forever. And so, a Software Developer that choses to live in Mexico, Bali or India will be paid the same as a Developer who works in san Francisco, London or New York. If other companies decide to follow suit en masse this could have huge repercussions for our society. Indeed, for centuries we have tied work to a place and a time. This has given birth to the 9 to 5 office job on which our society revolves around. It has also favored big cities over smaller communities. And we still witness this exodus of workers from the countrysides to the cities around the world today.

But can you imagine the possibilities if work became fully remote? If the office didn't exist? It would open up a new paradigm for workers globally, with endless opportunities. Firstly, because fully remote work is not only about location, it's primarily asynchronous work. Async work (as it is know) is the future of work because remote work is more about when than it is about where. Think about it, if you can work in any time zone in the world then 9 to 5 becomes irrelevant then you can also decide to work at any time, on your schedule. This could be when you are at your most productive. For example, you prefer to write code in the evening when kids are asleep? No problems! You are at your most creative to write content at 7am on a Saturday? Go ahead!

This shift away from a location based pay could have a wide societal impact too. If this mass migration continues away from big expensive cities, to smaller communities. If workers decide to adopt a digital nomad lifestyle and move to other countries where the climate might be better there could be a massive societal impact. What would it do to rental and property prices in expensive areas such as San Francisco or Tokyo? What would happen to all this office space? Would we still need the infrastructure we have today to carry workers around to city centre tower blocks? Which city/country will benefit from the migration? Which city/country will be impacted?

This might make Alan Sugar and Boris Johnson more unhappy. But the millions of workers preferring to live a remote work lifestyle may disagree with them. For them it's important how companies decide to shift to remote work. And more importantly how they decide to pay could have far reaching consequences.