41% of new hires at larger companies are now distributed. How are you maintaining pay equity in a remote-first environment?
Remote work is here to stay, and along with those workforce-growing pains we’ve all been experiencing, there’s another factor that’s sprung up as a result of remote-first environments: pay equity. It’s crucial for your company to offer fair wages to remain solvent and competitive, so we’ve sought advice from eight HR professionals who weighed in how they’ve maintained equitable pay for remote workers in their companies.
- Develop the Universal Rule of Payment
- Find Your Baseline
- Conduct Regular Salary Benchmarking
- Assess Performance Both Quantitatively and Qualitatively
- Shift Hiring Practices
- Follow a Results-Based Approach
- Research the Local Market
- Factor in Local Transit Costs
Develop the Universal Rule of Payment
A quickly changing environment forces constant changes in payment policies to adapt them to existing conditions. It complicates salary administration, so we wanted universal regulation that fits any circumstances. We have developed one rule: adjust the pay to match achievements. In other words, we reward work outcomes over seniority or new qualifications. It’s clear and transparent, helping us keep pay equity even in a remote-first environment.
Find Your Baseline
Your baseline compensation should be based on the role before anything else. While there may be some argument that some employees may have extra work based costs to consider, such as your employees who may spend money on gas to the office, compared to remote workers who don’t. Unfortunately, this often morphs into an argument about what to “take” out of employees’ compensation rather than what to put in. This is why it’s important to competently research and develop a strong baseline compensation that ALL employees of the same level and role can be comfortable with.
If further compensation is needed it can be addressed as needed. This may help avoid unfair compensation differences which may be based on factors other than need. Every member of your team should be provided a wage they can live by.
Boye Fajinmi, Co-Founder and President, TheFutureParty
Conduct Regular Salary Benchmarking
Conducting regular salary benchmarking—both across your company and in comparison to the broader talent market—is absolutely crucial for maintaining salary equity in remote and hybrid environments. In many situations, pay inequity isn’t intentional. It creeps into an organization over time as the going rate for talent shifts and current salaries aren’t adjusted accordingly. An occasional check-in on salaries across your organization can prevent anyone’s pay rate from falling through the cracks and ensure everyone on your team is being compensated according to their value.
This process also helps you to be more transparent when it comes to conversations about compensation with employees because you can draw on measurable data when explaining how pay rates are determined and share that information with confidence, knowing your salaries are verifiably competitive compared to what other companies offer.
Assess Performance Both Quantitatively and Qualitatively
One of the biggest challenges we’ve faced when it comes to pay equity is that, in a remote-first environment, it’s much more difficult for us to assess an employee’s performance. To maintain pay equity in this type of environment, we rely on a combination of metrics and qualitative assessments.
We use our metrics to get a sense for who is performing well and who isn’t, and then we use our qualitative assessments to give those people feedback on their performance. This helps us identify where an employee needs improvement and what steps they can take to improve their performance so that they are earning their salary fairly.
Shift Hiring Practices
Companies are shifting their hiring practices to reflect this change as the workforce increasingly becomes remote. According to a recent study, 41% of new hires at larger companies are now distributed, meaning they work outside of a traditional office setting. This shift presents several challenges for companies, including maintaining pay equity in a remote-first environment. There are a few key ways to ensure that all employees are paid fairly, regardless of location.
First, it’s essential to be transparent about salary ranges for each position. This way, employees can know what to expect in terms of compensation and can negotiate for a fair wage. Secondly, companies should review their pay practices regularly to ensure no discrimination against remote workers. Finally, it’s essential to provide employees with the resources they need to succeed in a remote environment. This includes things like access to high-quality internet and adequate workspace.
Follow a Results-Based Approach
Ensuring pay equity in an organization must be a priority of business leaders. It doesn’t matter whether most of your employees are working remotely as long as they deliver and perform well. Don’t base an employee’s salary on where they work, but rather on how well they are meeting expectations. It helps to follow a results-based approach where an employee’s performance is measured by their output.
Research the Local Market
Distributed teams are here to stay as competition in the workforce increases and more companies allow employees to work remote. Maintaining pay equity in a remote-first environment requires a thorough review of your remote compensation strategy. I’ve found that the best approach to maintaining equity while also providing competitive wages is to employ a local market approach.
This approach entails using location factors to determine the base rate of pay. This can be a bit more legwork for HR than other approaches, but I’ve found it to be the most accurate and precise. By focusing on the local market, organizations can be competitive and honor the bottom line.
Factor in Local Transit Costs
One way you maintain equity across a distributed workforce is by giving them a FAVR car allowance. The reason FAVR does this is because FAVR programs are regionally sensitive and draw on local prices in order to reimburse drivers who use their own car for work.
For example, if you have a salesperson in Charlotte, North Carolina, and they’re making sales calls in Charlotte, they need to buy Charlotte gas and need to pay insurance premiums relevant to that location. So you, on your FAVR plan, can provide them with a tax-free reimbursement that respects their costs they’re paying every day for their car.