Types of Remote Pay

Should I get paid based on where you live? Or should your job responsibilities be the only deciding factor when working remotely?

Nearly half of employers in a 2020 Gartner survey said they will now allow employees to work remotely, full-time on an ongoing basis.

Meanwhile, Upwork's Future Workforce Pulse report indicates that by 2025, more than 36 million people in the US will be working remotely. According to the report, this represents 22% of the national workforce and marks an increase of 87% from pre-pandemic levels.

For employees, this presents an intriguing possibility: could they take their current salary, which was perhaps previously tied to a high-cost-of-living location, and move to a cheaper location?

If these employees work on Reddit, for example, the answer is yes. In an October 2020 blog post, the social content company announced that it will be eliminating geographic compensation zones in the United States, which means employees can work wherever they want in the country, but still receive compensation linked to pay bands.

From high-end cities like San Francisco and New York. Other employers, including Facebook, have taken a different approach, allowing employees to work remotely but adjusting pay to reflect the cost of living at the employees' new locations.

Will location-based pay and decentralized pay scales become the norm for remote workers? For most employees, it depends on the industry they work in, company policy, and how efficiently work can be done remotely.

Remote payment options

Before the advent of the Internet and mobile technology, most of the work had to be done on premises. And depending on the city and the cost of living there, what could be considered a good salary can be very different for the same job in different places.

Similar criteria still apply in today's era of telecommuting, as there are several options for compensating employees, including pay based on employer location, pay based on employee location, or a pay scale based on a national median.

Pay based on business location - Say, for example, you're a software developer currently in San Francisco. According to PayScale, the average salary for the position in San Francisco is $ 105,898 per year.

Pay based on employee location: If you take your skill set and experience as a software developer and move to Tulsa, Oklahoma, however, the average annual base salary for your position would be $ 64,297. This is not as bad as it sounds: the cost of living in Tulsa is actually about 49% cheaper than in San Francisco, and life is 80% cheaper.

Pay based on the national median: If the same software developer was paid based on the national median, the Bureau of Labor Statistics (BLS) reports that the median annual salary for this profession was $ 110,140 in 2020.

How should remote workers be paid?

Research-based consulting organization Global Workplace Analytics (GWA) estimates that 56% of American workers have a job that supports at least part-time telecommuting. However, in the wake of the coronavirus pandemic, GWA predicts that 25-30% of the workforce will be working remotely several days a week by the end of 2021.

Over time, this may or may not translate into full-time telecommuting from anywhere in the country.

The rise of telecommuting has complicated employers' compensation strategies. Should remote workers living in a different location be paid based on the cost of living in their city or state? Or should pay scales be defined for the entire company?

Some employers pay local compensation rates based on the cost of labor. However, employment is also a factor, especially in high-demand occupations.

To use the example above, the BLS estimates that the number of software developer jobs will increase by 22% between 2019 and 2029, much faster than the average increase for all occupations.

Businesses have a workforce with hard-to-find technical skills, and an emerging occupational prospect is more likely to pay off on a larger scale.

Employers are struggling with remote employee pay issues. The Society for Human Resources Management (SHRM) reports that employers face the decision to adjust compensation to align with local labor cost or continue to pay higher wages.

We hope you enjoy watching this video about types of remotes pay

Source: Running Remote

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