As many will have realised over the last 15 months, there are plus points and minuses to homeworking. Saving time and money on the daily commute might represent a plus, it’s worth noting that homeworking doesn’t come free, but some may even end up worse off. From an employer’s perspective, it could end up leaving companies with pay and benefit strategies that are no longer fit for purpose; translating into recruitment and retention issues.
It’s still very early days and many companies are still unsure as to what their working practices will look like. But reward and benefit innovators are starting to think about this now. Here, we share some of those considerations.
What will become of pay differentials?
First, let’s discuss pay. The current question is whether it’s realistic to continue to pay regional salary premiums, such as London weighting, when employees may only be visiting the office a few times a month. This is particularly relevant where staff have relocated to an area where living costs are significantly lower.
There are also issues around organisations that don’t necessarily pay a premium, but they do have a location where staff are on higher salaries. Pay in London is higher than in other regions of the UK, whether organisations explicitly pay a London premium or not.
Last year, big cities across the UK saw people exiting. Sparked by life under lockdowns (and no doubt boosted by the stamp duty holiday) they were in search for larger homes, with gardens and more space for home offices. London leavers bought 73,950 homes outside the capital; representing the biggest exodus from London in four years and the largest amount spent since 2007, according to research by the estate agent Hamptons.
As companies recruit from a wider regional pool, it will require a rethink about how they pay their people. Will this be based on location, the value they bring to the firm, or something else? Those that have relocated or chosen to shift to a full-time homeworker – or hybrid worker – probably won’t be very happy if they continue to do the same work but see a reduction in their pay simply because they have relocated. Likewise, employees may deem it unfair if a colleague continues to be paid in the same way, despite living somewhere where housing costs are much lower.
Homeworking costs to people
People working from home may also feel that they should continue to receive an allowance because they are incurring costs such as electricity and heating whilst they are working.
EQ Data has developed a tool to help employers calculate the cost to people and business of full-time home or hybrid working. Using this, EQ have found that the average worker might actually be around £1,000 a year worse off from home working.
This is based on: the average cost of energy bill increases, internet usage and the creation of office space, minus average savings from not having to do the commute or buy lunches out and about, plus factoring in the home working tax credit.
In short, total reward packages and work life experience will become ever more critical to recruitment and retention.
The future of total reward
Pay differentials aside, it has long been the case that earnings growth has been hard to achieve without upping sticks and moving employer. Total reward, as part of an integrated benefit and wellbeing programme, was gaining importance pre-pandemic and that has only been accelerated.
The difference in the future might be how that total reward package is structured, in a way that suits the changing needs of full time home and hybrid workers. For example, it’s likely that reward and benefit innovators will look at using their combined negotiating power to leverage discounted rates from energy and broadband providers.
Equally, with commuters used to subsidised off-peak train tickets, train operators (now the government) will need to rethink how this works. Will they offer subsidies for organisations to encourage commuters back?
Communicating more tailored reward packages to employees demands a more personalised approach. Messages and channels can be customised to employee interests, needs and where they like to hang out. This moves on from the traditional one-size-fits-all approach that long since failed to connect.
What the predicted hybrid working shift will mean on a wholesale basis remains to be seen. But what is for certain is that recruitment and retention is likely to get harder. Reward strategies must look beyond pay, bonus, and pension. They need be aligned with organisations to help nurture a culture of inclusion, fairness, and flexibility. In this way, people can feel good about the organisation for whom they work. Those who take this approach, will be the winners in the future ways of working.
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Talk to EQ today about how we can help you with Hybrid Working strategy.