Although jobs that involve working remotely have been around for decades in some form or another, the coronavirus pandemic brought them front and centre.
There are several issues regarding salary and these working arrangements. The first is whether such jobs should be paid the same as the same job in the office. Generally, hybrid and remote workers are paid the same as those in the office. However, a cost-conscious employer could argue that employees who work from home incur fewer expenses related to work, such as commuting costs, meals and clothing suitable for work and therefore shouldn’t be paid the same as an employee who comes to the office every day.
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The value of remote work increases if the value of personal time that’s used getting to work is included in the calculation. If a differential is used, it could be based on the cost of living or compensation levels at the location the employee has chosen.
The common practice in Canada has been to determine salary levels on a geographical basis: nationally for senior management, regionally or nationally for middle management and professionals and locally for non-management. This practice will likely continue for remote jobs, since most of these roles tend to be professional and/or managerial and will be included in a national or regional scale.
Remote workers who are located outside of Canada can be paid simply based on their own qualifications and negotiating skill. Some international companies have established one rate for all employees with the same job worldwide. Some have established a minimum international rate with allowances for local conditions and individual differences.
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Most companies use a job evaluation system to establish a pay grade for a role. Such systems measure a series of factors such as skills, effort, responsibility and working conditions that are related to the job. However, there are two possible issues.
The working conditions measurement usually has four levels: private office, open office, some unpleasant conditions and a number of unpleasant or dangerous conditions. It’s relatively easy to rate the job on this factor at the office where conditions can be easily observed. However, employers may find it challenging to rate a home office, which could just be a spot at the dining room table. If the job is hybrid and the rating is different from the office, do employers prorate the rating according to time spent in each location? Employers must also consider how they establish these conditions, whether by an inspection of the remote work site or through information provided by the employee.
Pay equity is often specific to location. For example, Ontario’s Pay Equity Act requires that all jobs in a geographical area be compared for pay equity purposes. For hybrid jobs, the issue is which location should be used for pay equity purposes.
Read: Head to head: Should employers implement location-based pay for remote workers?
Most pay-for-performance systems require the use of performance appraisals to determine the size of merit increases and/or cash bonuses. This approach has become more challenging amid the rise of remote and hybrid working.
Managers have fewer opportunities to directly observe an employee’s performance and many will be uncomfortable assessing performance that they can’t observe personally at least some of the time. Appraisals for compensation purposes and appraisals for learning, coaching and development should be separated by timing and methodology. The traditional rating scale for performance may have to be significantly redesigned.
Coaching sessions will likely have to become more frequent and involve more use of key performance indicators, management by objectives and personal goal setting. Time and attendance software can be utilized to keep track of employees’ working hours, attendance patterns and related data.
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The usual employee benefits such as medical, dental, short- and long-term disability and life insurance will only be an issue for remote workers if they’re in another province or country. Employers in some Canadian cities, such as Vancouver, Windsor, Ont. and Niagara Falls, Ont., could conceivably have remote and hybrid employees who live in the U.S.
Workplace perks, such as onsite childcare, free or discounted meals, coffee service or fitness facilities simply can’t be provided to remote workers. Employers must decide whether to add a stipend to make up for the lost value of these items or simply attribute it to the cost of an employee’s choice of work location.
As usual, it’s essential to have a written policy on all these subjects. Once a policy has been developed and approved by the company’s chief executive officer, employers must remember to consistently communicate it to employees.
David Tyson is a Toronto-based human resources consultant. He’s the author of HR Manager’s Guide to Profit Sharing in Canada and The Canadian Compensation Handbook.