{"id":1279,"date":"2021-10-15T18:19:00","date_gmt":"2021-10-15T17:19:00","guid":{"rendered":"https:\/\/rethinkq.adp.com\/?p=1279"},"modified":"2024-09-03T22:04:10","modified_gmt":"2024-09-03T21:04:10","slug":"location-based-pay-hybrid-work","status":"publish","type":"post","link":"https:\/\/rethinkq.adp.com\/location-based-pay-hybrid-work\/","title":{"rendered":"In a remote world, should pay be based on location?"},"content":{"rendered":"\n<header class=\"entry-header bg-adp-tan block--article-header alignfull block--article-header\" >\n\n  \n\n<figure class=\"wp-block-image size-full entry--image\"><img decoding=\"async\" width=\"1920\" height=\"1080\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed.jpg\" alt=\"\" class=\"wp-image-1313\" srcset=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed.jpg 1920w, https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed-300x169.jpg 300w, https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed-1024x576.jpg 1024w, https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed-768x432.jpg 768w, https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/rural_cityroads_compressed-1536x864.jpg 1536w\" sizes=\"(max-width: 1920px) 100vw, 1920px\" \/><figcaption class=\"wp-element-caption\"><a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/N7cM6-wDDwY\" rel=\"noreferrer noopener\">Amir Saboury<\/a>&nbsp;and&nbsp;<a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/DUmAVQhFWZ0\" rel=\"noreferrer noopener\">Silviu S<\/a>&nbsp;Unsplash<\/figcaption><\/figure>\n\n\n\n<div class=\"wp-block-group entry--title-wrapper\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\"><div class=\"entry--social-share\">\n  <ul>\n    <li><a href=\"https:\/\/www.facebook.com\/sharer\/sharer.php?u=https:\/\/rethinkq.adp.com\/location-based-pay-hybrid-work\/&#038;t=In a remote world, should pay be based on location?\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/themes\/rethink-quarterly\/img\/facebook.svg\" alt=\"Facebook logo - click to share this article on Facebook\"><\/a><\/li>\n    <li><a href=\"http:\/\/twitter.com\/share?text=In a remote world, should pay be based on location?&#038;url=https:\/\/rethinkq.adp.com\/location-based-pay-hybrid-work\/\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/themes\/rethink-quarterly\/img\/twitter.svg\" alt=\"Twitter logo - click to share this article on Twitter\"><\/a><\/li>\n    <li><a href=\"https:\/\/www.linkedin.com\/sharing\/share-offsite\/?url=https%3A%2F%2Frethinkq.adp.com%2Flocation-based-pay-hybrid-work%2F\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/themes\/rethink-quarterly\/img\/linkedin.svg\" alt=\"LinkedIn logo - click to share this article on Facebook\"><\/a><\/li>\n  <\/ul>\n<\/div>\n\n          <span class=\"entry--tag tag-style\">Thought leadership<\/span>\n    \n  <h1 class=\"entry-title\">In a remote world, should pay be based on location?<\/h1>\n\n\n<p class=\"is-style-summary-style\">During the pandemic, some workers moved to places with a lower cost of living. Companies are now considering how much location should determine pay.<\/p>\n<\/div><\/div>\n\n\n  <div class=\"entry--meta content-width\">\n           <p class=\"authors\">By\n                        <a href=\"https:\/\/rethinkq.adp.com\/author\/aishwarya-jagani\/\">Aishwarya Jagani<\/a>\n\n             \n         \n     <\/p>\n    \n  \n  <p>15 October 2021  <span class=\"desktop-only\">\u2014<\/span> <a href=\"https:\/\/rethinkq.adp.com\/issue-3-place\/\">Issue 3: Place<\/a> \n  <\/div><!-- .entry-meta -->\n\n<\/header><!-- .entry-header -->\n\t<div class=\"entry-content content-width\">\n\n\n\n<p>Remote work, already on the rise before 2020, went mainstream during the pandemic. Now in the second year of Covid-19, even more companies are embracing ongoing remote or hybrid models of work, with employees based in other cities or other continents.&nbsp;According to the <a href=\"https:\/\/uk.adp.com\/resources\/insights\/people-at-work-2021-a-global-workforce-view.aspx\" target=\"_blank\" rel=\"noreferrer noopener\">ADP Research Institute<\/a>, more than half of employees worldwide were working remotely or in a hybrid arrangement at the end of 2020.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/business\/talent\/blog\/talent-strategy\/global-data-shows-surge-in-remote-work\" target=\"_blank\" rel=\"noreferrer noopener\">LinkedIn reports<\/a> that since March 2020, remote job postings increased 2.8 times globally, with even bigger increases in countries such as Brazil, Spain and the U.K.<\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h3 class=\"wp-block-heading\"><strong>Share of employees working at least partly remotely<\/strong><\/h3>\n\n\n\n<div class=\"flourish-embed flourish-chart\" data-src=\"visualisation\/7444233\"><script src=\"https:\/\/public.flourish.studio\/resources\/embed.js\"><\/script><\/div>\n\n\n\n<p class=\"has-text-align-left\">Source: ADP Research Institute survey of 32,471 workers in 17 countries in November and December 2020.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>Pay trends are usually locally defined \u2014 by law or by the market. But during the pandemic, as many companies went fully remote, there was an exodus of office workers from high-cost-of-living cities to cheaper ones, which may change the way companies set pay.<\/p>\n\n\n\n<p>Since the start of the pandemic, 75% of workers globally have changed or plan to change their living arrangements, according to the ADP Research Institute report <a href=\"https:\/\/uk.adp.com\/resources\/insights\/people-at-work-2021-a-global-workforce-view.aspx\" target=\"_blank\" rel=\"noreferrer noopener\">People at Work 2021: A Global Workforce View<\/a>. United Van Lines, a moving company in the U.S., <a href=\"https:\/\/www.unitedvanlines.com\/newsroom\/movers-study-2020\" target=\"_blank\" rel=\"noopener\">reported<\/a> that requests to move out of high cost-of-living cities such as San Francisco and New York increased by 23% and 45% respectively in 2020.<\/p>\n\n\n\n<p>This raises a prickly question: Should the local cost of living play a role in how much a remote employee is paid?&nbsp;&nbsp;<\/p>\n\n\n\n<p>The conversation has been intensifying since June 2021, when Facebook announced <a href=\"https:\/\/www.forbes.com\/sites\/jackkelly\/2021\/06\/09\/facebook-is-offering-a-choice-of-seeking-permission-to-continue-working-remotely-or-coming-into-the-office-50-of-the-time-in-its-return-to-work-plans\/?sh=736af62a7d0d\" target=\"_blank\" rel=\"noopener\">pay cuts for remote employees<\/a> who move to&nbsp; lower-cost regions, and Google made a <a href=\"https:\/\/www.reuters.com\/world\/the-great-reboot\/pay-cut-google-employees-who-work-home-could-lose-money-2021-08-10\/\" target=\"_blank\" rel=\"noopener\">similar announcement<\/a> in August. It\u2019s something other global companies are also considering: is location-based pay fair for employees and employers?&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Location-based pay in action<\/h2>\n\n\n\n<p>Many companies around the world have had entirely remote workforces for years \u2014 to save on office expenses and attract top talent \u2014 and have figured out location-based pay structures that employees find fair.&nbsp;<\/p>\n\n\n\n<p>Miranda Yen is the founder of <a href=\"https:\/\/vinpit.com\/\" target=\"_blank\" rel=\"noopener\">VinPit<\/a>, a vehicle search company registered in Singapore with over 100 employees based in China, Singapore, India, Pakistan and the United States.&nbsp;<\/p>\n\n\n\n<p>\u201cWe have a very diverse workforce. There is definitely a payment difference based on location,\u201d she says. \u201cWe take into consideration factors such as the local average salary system, the exact work type and industry salary standards. It depends on the labor market standards of the country, but also on exactly what kind of work you do, whether it is copywriting, marketing or IT.\u201d&nbsp;<\/p>\n\n\n\n<p>Many businesses that recruit worldwide end up paying employees in low-cost-of-living countries more than what the local job market dictates. Businesses keep their personnel costs lower, while employees are paid generously for their local markets.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.vmware.com\/in\/company.html\" target=\"_blank\" rel=\"noopener\">VMware<\/a>, a U.S.-based cloud computing company with 35,000 employees worldwide, announced last year that employees choosing to become permanent remote workers would get a pay cut if they left Silicon Valley for a less expensive city. At the time, Human Resources VP Rich Lang <a href=\"https:\/\/www.bloombergquint.com\/technology\/vmware-twitter-cut-pay-for-remote-workers-fleeing-bay-area\" target=\"_blank\" rel=\"noopener\">told Bloomberg Quint<\/a> that some employees could see pay cuts, while others could get a raise if they chose to move to a larger or more expensive city.<\/p>\n\n\n\n<p>\u201cWe adjust pay in line with our competitors\u2019 and industry practices, based on the cost of labor in any given market,\u201d says VMware public relations director Michael Thacker.&nbsp; \u201cSpecific pay adjustments are based on extensive research that we conduct to ensure competitive compensation for different markets.\u201d&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Considering location-agnostic pay&nbsp;<\/h2>\n\n\n\n<p>Some companies find location-based pay an unfair practice that can exacerbate pay inequality by gender or ethnicity. Some global companies pay employees on the same scale regardless of the worker\u2019s location, often pegging salaries to California market rates.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.helpscout.com\/blog\/remote-employee-compensation\/\" target=\"_blank\" rel=\"noopener\">Help Scout<\/a>, a global software company headquartered in Boston, transitioned from location-based pay to location-agnostic pay in 2018. \u201cThe question is, what is the intrinsic value of the work? A&nbsp;taxi driver in Vietnam gets paid differently from a taxi driver in New York City, which makes sense,\u201d says co-founder and CEO Nick Francis. \u201cBut if you work online, the intrinsic value of your work is the same independent of geography. It&#8217;s not more valuable because it was created in New York City instead of Vietnam.\u201d<\/p>\n\n\n\n<p>\u201cOne of the reasons we moved to location-agnostic pay was employee feedback,\u201d he says. \u201cIt&#8217;d be difficult to argue that paying people equitably for the same work is unfair. We don&#8217;t ask them to live in a city with a high or low cost of living \u2014 it&#8217;s their choice. As a business, that&#8217;s not really our concern.\u201d<\/p>\n\n\n\n<p>Localized pay has traditionally been standard practice for companies looking to cut costs. North American and European companies have tended to set up software development and customer service centers in developing countries where labor costs are low. After the pandemic hit and remote work temporarily became the new norm, smaller operations especially continued to recruit from regions where the cost of labor is low.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>Working in your home country but getting paid in euros or dollars is a dream come true for anyone.<\/p><cite>Sanjana Murali<\/cite><\/blockquote><\/figure>\n\n\n\n<p>Sanjana Murali is a product marketing manager who works from her home in Chennai, India, for <a href=\"https:\/\/www.linkedin.com\/company\/leadfeeder\/\" target=\"_blank\" rel=\"noopener\">Leadfeeder<\/a>. The fully remote Finnish company, based in Helsinki, has a diverse team spread across 25 countries. Murali\u2019s pay is on par with European market rates, higher than a local job.&nbsp;<\/p>\n\n\n\n<p>\u201cI&#8217;m happy with my pay as it is way more than the Indian market rates. I&#8217;m completely satisfied,\u201d she says. \u201cWorking in your home country but getting paid in euros or dollars is a dream come true for anyone.\u201d<\/p>\n\n\n\n<p>But when global giants like Facebook and Google reveal their intention to cut the pay of existing employees if they decide to move to a less expensive area, the backlash should come as no surprise. Executive and HR leaders across the world have spoken out against <a href=\"https:\/\/www.forbes.com\/sites\/charlestowersclark\/2020\/06\/24\/should-location-decide-salary-why-decentralized-pay-scales-are-the-future-of-wages\/?sh=247b3fcd3403\" target=\"_blank\" rel=\"noopener\">this<\/a>.&nbsp;<\/p>\n\n\n\n<p>Regarding location-agnostic pay, Francis says, \u201cI don&#8217;t believe it&#8217;s going to be much of a debate 10 to 20 years from now. Location-based pay is only logical if location affects the value of the output. For most online businesses, this is not the case.\u201d<\/p>\n\n\n\n<p>While she supports setting pay based on location as well as skills and experience, Yen says cutting pay for existing employees is discouraging.<\/p>\n\n\n\n<figure class=\"wp-block-pullquote\"><blockquote><p>The companies willing to pay equitably based on the value of the work will attract the best talent.<\/p><cite>Nick Francis, CEO of Help Scout<\/cite><\/blockquote><\/figure>\n\n\n\n<p><strong>\u201c<\/strong>From the perspective of the business, it can really reduce a lot of spending in terms of management, salaries, space. But I also think there are some concerns,\u201d she says. \u201cIf a company is simply paying their employees different salaries for the same work just because they are in different locations, this system can easily backfire and result in a lot of talent loss. Some employees would probably get paid less for the same amount of work if they relocate to other areas, which can be demotivating.\u201d&nbsp;<\/p>\n\n\n\n<p>Workplaces are constantly evolving and adapting, and each company will have to figure out what works for their business. Remote or hybrid work, which was seen as a rare privilege until only a few years ago, is now the norm. Similarly, the debate about location-based pay vs. location-agnostic pay may look very different a decade from now as supply and demand and employee sentiment shape the future of work.&nbsp;<\/p>\n\n\n\n<p>Francis says, \u201cWe&#8217;re all competing for talent, and the companies willing to pay equitably based on the value of the work will attract the best talent.\u201d<\/p>\n\n\n<div class=\"block--author\">      <div class=\"block-author__inner\">\n        <div class=\"author--image\">\n                      <a href=\"https:\/\/rethinkq.adp.com\/author\/aishwarya-jagani\/\"><img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/10\/profile_aishwarya-jagani-298x305.jpg\" alt=\"\" \/><\/a>\n                  <\/div>\n        <div class=\"author--info\">\n                      <a href=\"https:\/\/rethinkq.adp.com\/author\/aishwarya-jagani\/\" class=\"author--name\">Aishwarya Jagani<\/a>\n\n          \n          <p><span style=\"font-weight: 400;\">Based in India, <\/span><span style=\"font-weight: 400;\">Aishwarya Jagani<\/span><span style=\"font-weight: 400;\"> is an independent tech journalist who has written about authoritarian tech, climate change, racism and diversity. She has written for publications including The Postscript, Bustle, The Quint, Unbias the News and Secure Futures. <\/span><\/p>\n          <div class=\"block--author-social\"><ul class=\"author--socials\"><li><a href=\"https:\/\/www.linkedin.com\/in\/aishwaryajagani\" title=\"LinkedIn\" target=\"_blank\"><i class=\"fab fa-linkedin\"><\/i><\/a><\/li><\/ul><\/div>\n        <\/div>\n      <\/div>\n       <\/div>\n\n<div class=\"block--recommended-content alignwide is-style-bg-adp-tan\"><div class=\"block-recommended-content__inner\">\n\n<h2 class=\"wp-block-heading\">Read more<\/h2>\n\n\n<div class=\"block--article-pushpoint pushpoint__small\">      <div class=\"block-article-pushpoint__inner\">\n        <a href=\"https:\/\/rethinkq.adp.com\/financial-wellness-programs-pandemic-recovery\/\">\n        <div class=\"pushpoint--image\">\n          <img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2021\/09\/EH12F9-1-1084x576.jpeg\" alt=\"\" \/>\n        <\/div>\n        <div class=\"pushpoint--info\">\n                    <span class=\"pushpoint--title\">Financial wellness programs essential for pandemic recovery<\/span>\n          <p>As the Covid-19 pandemic has strained people\u2019s wallets around the world, more companies in Nigeria are\u00a0providing financial literacy services to employees.<\/p>        <\/div>\n      <\/a><\/div> <\/div>\n\n<div class=\"block--article-pushpoint pushpoint__small\">      <div class=\"block-article-pushpoint__inner\">\n        <a href=\"https:\/\/rethinkq.adp.com\/the-crisis-of-care\/\">\n        <div class=\"pushpoint--image\">\n          <img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2022\/09\/vladimir-fedotov-YLmPK-XA1cM-unsplash-1084x576.jpg\" alt=\"\" \/>\n        <\/div>\n        <div class=\"pushpoint--info\">\n                    <span class=\"pushpoint--title\">The crisis of care<\/span>\n          <p>Shortages, overtime, burnout: In the third year of the pandemic, health care workers are not OK. \n<\/p>        <\/div>\n      <\/a><\/div> <\/div>\n\n<div class=\"block--article-pushpoint pushpoint__small\">      <div class=\"block-article-pushpoint__inner\">\n        <a href=\"https:\/\/rethinkq.adp.com\/rethinking-just-in-time-staffing\/\">\n        <div class=\"pushpoint--image\">\n          <img decoding=\"async\" src=\"https:\/\/rethinkq.adp.com\/wp-content\/uploads\/2023\/05\/istockphoto-511521036-1024x1024-1-1084x576.jpg\" alt=\"\" \/>\n        <\/div>\n        <div class=\"pushpoint--info\">\n                    <span class=\"pushpoint--title\">Rethinking just-in-time staffing\u00a0<\/span>\n          <p>Lean staffing helped many businesses survive the 2008 financial crisis. But has just-in-time staffing become too risky?\n<\/p>        <\/div>\n      <\/a><\/div> <\/div>\n<\/div><\/div>\n\n\n<section class=\"wp-block-group alignfull section--sign-up has-background\" style=\"background-color:#7967ae\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<p class=\"has-text-align-center is-style-default has-white-color has-text-color has-large-font-size\"><a href=\"\/sign-up\/\">Sign up<\/a> to keep up to date with ReThink Q.<\/p>\n<\/div><\/section>\n","protected":false},"excerpt":{"rendered":"<p>During the pandemic, some workers moved to places with a lower cost of living. Companies are now considering how much location should determine pay.<\/p>\n","protected":false},"author":1,"featured_media":1313,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[115],"tags":[68,134,43,136,135],"coauthors":[120],"class_list":["post-1279","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-thought-leadership","tag-covid-19","tag-hybrid-work","tag-pandemic","tag-pay-strategies","tag-remote-work","issue-issue-3-place"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>In a remote world, should pay be based on location? - ADP ReThink Q<\/title>\n<meta name=\"description\" content=\"During the pandemic, some workers moved to places with a lower cost of living. 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