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October 16, 2023
Since the pandemic, many of us have adopted working from home as the norm. While some have avoided going back into the office altogether, others have taken a hybrid approach, agreeing to return to their desk for specific days every week or to meet certain commitments such as weekly team meetings.
This has been one of the biggest shake-ups in employment trends in recent years. While some companies have been offering home-working arrangements for a long time, it hasn’t been widely accepted in the mainstream until now.
Many workers have realised they can be just as productive – and sometimes even more productive – when they work in their own home. Employers have been largely supportive of this change, but not everyone has been on board.
Large organisations like Amazon, Disney, JPMorgan and BlackRock have demanded that workers return to the office for at least part of the week. Many have threatened workers with dismissal if they refuse to comply.
Google is taking a very different approach that could pave the way for a change in employment trends. Instead of demanding workers return to the office, they are pledging to cut the salaries of those who choose to work from home.
This could be a huge incentive to encourage workers to embrace the commute and get back to the office. However, some employees might decide that the solitude of homeworking and the lack of commute more than make up for the pay cut. Let’s explore this in more detail.
The tech giant recently announced that workers who choose to work from home permanently could face a pay cut of 25%. Those workers with longer commutes will also be hit harder, facing higher cuts than those who are based closer to their offices. This isn’t about punishing workers, it’s about levelling the playing field.
The logic is simple: if you have used home working as an opportunity to move to a less expensive area and are now facing an unreasonable commute, then your salary will be cut to reflect your lower cost of living.
A worker living in London and commuting to a London-based office would be compensated the same as a worker working from home in London. However, a worker who has chosen to move to a less expensive area such as Brighton and is working from home instead of commuting to London will see their salary cut.
In its simplest form, this is an attempt to prevent workers from claiming London weighting while not residing in London. Companies typically offer higher salaries for workers when their offices are based in expensive areas, as this helps to attract workers to live in places where the cost of living is much higher. But the shift to home working has turned this model on its head.
With many people now working from home, they are essentially location-independent. Large companies believe that their salary should be linked to their living costs, and this is used as justification for the pay cuts.
This is a salary model used by many location-independent companies where their workers are distributed around the world. These companies often use location weighting, or a salary multiplier to determine how much a worker is paid. So, a worker who lives in Central London would be paid much more than a worker who lives in Birmingham.
Since switching to a work-from-home model is essentially a change in your contract, employers are well within their rights to renegotiate the pay on offer. Many workers are likely to face a fire and rehire situation, whereby they will be offered the same role on a lower salary if they continue to work from home.
This all depends on how much working from home is worth to you. For some people, the flexibility of being able to work in a space where they are comfortable will be worth the pay cut. Others will see more significant savings from skipping the daily commute, so the pay cut will not be noticeable.
Parents in particular will prefer to continue working from home, as it will allow them to be more flexible with childcare. However, this is one area that could see companies land in hot water.
This could be interpreted as a form of discrimination, as mothers are more likely to want to seek out a work-from-home arrangement to help with childcare. With companies already facing stark gender pay gaps, this could reverse any progress that has been made if the people most likely to face a pay cut are working mothers.
Workers also have the right to request flexible working, which can include working from home. Employers need to have a legitimate reason for rejecting the working arrangement. We could soon see a rise in employment tribunals related to losing the right to work from home. We could also see gender pay gap discrimination cases increase if these policies are adopted by more companies.
If a company is going to think about cutting wages for those who choose to work from home, they will need to make sure this is a location-based decision.
At a time when many sectors are demanding pay rises, this trend could see the start of salaries being driven down. Many candidates are looking for work-from-home arrangements, and employers feel they have no choice but to offer this. Employers might find they are in a position to offer remote working, but with the caveat that it comes with a lower salary.
Time will tell if this creates a two-tier salary system, with one simple way to boost your income being to opt for in-office employment. We could also see that homeworking is not popular in the long term, as the novelty of being able to work from your home office could eventually give way to boredom and a desire to be back around the water cooler again.
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