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Working from home means no travel costs and less support for fancy sandwich shops. Some argue that means salaries should be cut.
It’s the question bound to bring forth strong opinions: should home workers be paid less. It’s an issue that’s been kicking around for some time. But with so many more people working from home since the pandemic kicked in it’s more pertinent than ever. No wonder it drew some much attention, and ire, when a Deutsche Bank document floating the proposal hit the headlines last year.
Lucie Mitchell has been looking into the question more fully.
Unprecedented numbers of people have been working remotely since the pandemic began. And according to a survey by Deloitte this week, many plan to continue beyond the crisis too.
A recent report by the Chartered Institute of Personnel and Development revealed that employers expect the number of people working from home will increase to around 37% of the workforce once the pandemic is over. That’s roughly double the pre-pandemic average of just 18%.
The rise of the remote worker, coupled with concerns about the sudden impact on commuter businesses, has brought questions about whether homeworkers should be paid less given they save on commuting costs and can relocate to cheaper areas.
Jamie Mistlin, co-founder of remote hiring agency Remoteably, is not in favour. “Remote workers should not be paid less than their office-based counterparts. Workers’ salaries should be based on the worth of their skills to the business and be guided by market rates.”
Lizzie Benton, founder of Liberty Mind, echoes this view. “Remote workers may have reduced costs in commuting, but this doesn’t account for the changes they would need to make in their own home to accommodate them working remotely, such as office furniture, as well as increased heating and electricity usage and enhanced broadband costs.”
Mistlin also points out that remote flexibility should be seen as a way to improve the efficiency and effectiveness of an employee. “Why penalise staff for not having to commute for two hours a day? Without the physical and mental toll of a gruelling journey into the office, employees can reinvest their time and skills into productive work that adds value to the organisation.”
Employees who incur increased costs through working from home can, in fact, claim tax relief. However, a report by the Equal Parenting Project revealed that just 4.5% of managers confirmed that they paid their employees the £6 per week that can be claimed back from HMRC, suggesting few employers and employees are accessing these tax breaks.
In Germany, the government is planning a tax rebate to cover work-from-home costs during the pandemic, such as increased utility bills, which will allow employees working from home to reduce their annual tax bill by €5 per working day, up to a maximum of €600 per year.
On the flip side, Deutsche Bank has suggested that employers pay an extra 5% tax on the salaries of remote workers due to many more people working from home and not contributing as much into the economy, as they are saving on things like commuting and eating out. The bank argues these gains outweigh any costs incurred from home working.
Yet Matt Stephens, CEO and founder of impact-driven fund manager Inpulse, argues that remote workers are still very much plugged into society. “They may still need appropriate work clothes, and they are likely to pop out to buy their coffee and lunch, as well as shop locally.”
Stephens can see why, to some CFOs, it could make logical monetary sense to conceivably pay remote workers less. “An argument could run along the lines that location independence is worthy of a reduction in salary, as they could choose to move to an area where the cost of living is much lower, and they gain back the most valuable commodity – time,” he says.
However, this is certainly not his view. “Reducing pay for those who choose to remain remote full time after the pandemic is not only harsh; it is also an act of self-sabotage to your employer brand and employee engagement. You will likely make your employees feel resentment, cause disengagement and make people question what your company really values.” Inpulse’s survey results out this week certainly seem to back this – 90 per cent of employees questioned said they would not take a pay cut to work from home.
So what alternative solutions could employers look at that could be seen as more effective and fair than cutting remote workers’ pay?
“Instead of changing pay, businesses need to look at the support they offer teams and invest in the right tools and systems that can help people gain that work-life balance that is so easily blurred during remote working,” suggests Benton.
Stephens concludes: “If the pay reduction can’t be justified on the grounds of value, contribution, company values or improving engagement, it is not helpful. Keep it simple, if your employees love working from home and are productive, don’t ask them to choose between being remote and their salary. Support them in their remote working and look to reduce costs in other ways.”