L
ADING

Remote Workers Pay: Should It Be Adjusted?

Remote Workers

With the rise of employees working from home during the pandemic and the remote working trend likely to continue in the near future, many companies are contemplating a pay-cut to factor the changes to the employees work location.

Research carried out by Deutsche Bank found that enforcing a working from home tax could raise $48billion in the US and €16 billion in Germany. The impact to the employee is expected to be minimal, the equivalent to buying their lunch out each day. In the research the costs saved from commuting, lunches, office wear and laundry mean that, those working from home gain from not working in the office. However, this behavioural shift in the employment has is likely to continue a negative economic impact felt within the pandemic; transport requirements during peak commuting periods are likely to reduce, restaurants and catering establishments will lose the demand that was present before the pandemic as well as other businesses being directly and in-directly impacted.

Deutsche Bank suggests a 5% work from home tax to help recover the economy. In the research those with the option to work from home are more likely to have higher average salary, this causes the gap being the lower salary earners impacted the most by the pandemic and those working from home to increase.

The US saw a 45% increase in the number of employees working from home as a result of the pandemic to 50% (up from 5.4% prior to the pandemic). In a survey carried out by Deutsche Bank, of those who have started to work from home, 3 in 4 would like to continue working from home in some capacity post-covid. The majority of employees asked wanted to continue to work from home for 2 days per week (33%) whilst 19% wanted to WFH for 3 days a week and 16% for 1 day a week. The lowest percentages wanted to work from home on a full-time basis with only 4% wanting to work from home 4 days per week and another 4% wanting to work from home 5 days per week.

Using this survey data as an indicator, Deutsche Bank have calculated in the US alone, the WFM tax at a rate of 5% would raise $48bn per year.

Currently it is unclear if governments are likely to adopt the working from home tax with some countries such as the United Kingdom proving tax relief for those working from home as a result of the pandemic, due to the additional costs incurred for heating, metered water bills, broadband connection and more. Whilst Germany announce in December 2020, those working from home are entitled to a €5 per day rebate. However many companies are already undergoing a salary review to adjust remote workers salaries.

 

How will salaries change?

Some tech companies have already announced they will be revising employee’s salary based on changes to their place of work with Facebook requesting employees to inform them of if they move by the January 1st 2021. Those who have moved will receive a salary adjustment to reflect the employees’ location.

Salary adjustments can be increases as well as decreases depending on the employee’s location and the cost of living within that area.

 

What are the implications to Recruitment?

Many companies support remote hires, with some making this a large part of their future recruitment strategy. Remote working can provide companies with access to the right skillset to fulfil the requirements of the role regardless of the candidates’ proximate to the office.

However with salary adjustments likely to be made as a result of the user’s location, this could cause pay equity issues where employees are hired as their location determines a lower salary for the same skillset of other candidates in a more expensive location.

This salary adjustment for remote working could cause the gender pay gap in certain countries to widen with mothers opting to work from home more. Flexible working and working from home has previously been seen as a solution to bridge the gap in gender equality, yet applying an additional tax or applying salary adjustments could have a negative impact on women in particular.

 

Payroll Considerations for Remote Workers

As companies prioritise remote workers as a part of their recruitment strategy post-covid, employers are no longer limited by location. Companies will need to obey the employment and payroll law of the employee’s place of work. If collaboration is required across different time zone, employee’s standard working hours will need to reflect this as well as any compensation requirements for unsociable hours.

 

HR & Employment Law Considerations

As well as the caution required to assess the salary adjustments for existing employees and future employees, there are many HR and employment law considerations that need to be taken into account for an employer to be compliant with localized employment law.

If remote working roles continue to increase at the rate during the pandemic, employers will need to follow specific HR laws based on the employee’s place of work. Some countries such as X and Y have additional requirements in employment law for employees on remote worker contracts. Ensuring you have an international HR specialist to advise on these requirements is vital if your employees are based in locations around the world.

 

The article was written by Steve Cox, Chief Evangelist at IRIS FMP, an international payroll provider that handles payroll services in over 135 countries. It supports thousands of clients in these countries from small organizations to large multinational organisations.

Related posts