Advice

Remuneration in 2021: what employers need to consider

11 Dec 2020 By Lauren Brown

People Management asked the experts how businesses should adapt their pay strategies to fit the significant rise in flexible working

This time last year, nobody could have predicted what 2020 had in store, and nine months on from the start of the pandemic in the UK, this year has seen the complete overhaul of many thousands of working lives.

Changes to working habits that would otherwise have taken years to materialise have been massively expedited by the coronavirus crisis and employers that may once have been sceptical about remote working were forced to implement it regardless.

And as we head into the new year, many of these new ways of working – though introduced in a hurry – are likely to be sticking around, with many employees potentially reluctant to relinquish their new-found flexibility even after the mass rollout of a vaccine. And new ways of working potentially means new ways of paying those workers too.

A recent Willis Towers Watson study found that fewer than half (45 per cent) of surveyed employers thought their current job architecture was suitable for a flexible workforce, while nearly three-quarters (73 per cent) said they intended to continue fully paying remote workers the same rates as in-office staff next year – although 57 per cent said, going forward, new work requirements would require a rethought, hybrid approach.

Hazel Rees, senior director at Willis Towers Watson, said that the way work is structured and pay is managed is still based on roles being fulfilled onsite within geographically organised teams, but that “employers now need to take a step back and examine the future state of their organisation overall and decide how they can make the most of their new agile workforce.”

With the new year looming, People Management spoke to employment and HR experts about what they think employers should consider when it comes to pay and progression in 2021 and beyond.

Chris Goulding, managing director of specialist HR recruitment firm Wade Macdonald, said he and his team have already heard that some employers will be offering lower salaries to new members of staff as a consequence of increased remote working, because “some leaders feel this salary reduction will be viable as their staff will not have the same commuting costs.”

Others have apparently said that if roles are 100 per cent remote, then they would look to recruit people from areas of the country where people are traditionally paid less than others.

Joanne Caine, managing director of recruitment firm Cathedral Appointments, said she believed  that in the long term, there may be “issues around regional salary differences that will undoubtedly need to be addressed.”

But whether it is fair practice to offer different salaries depending on whether employees are working in an office or from home is very much up for debate. 

Charles Cotton, senior policy advisor at the CIPD, said that while differing salaries may become “more common as ways of working shift following the pandemic... it highlights an interesting question about what we reward people for and why, and what is fair.”

“As the economy starts to recover and organisations look to recruit more, salaries based on location could be something that is considered. It is unlikely that existing staff will have their location top-up taken away, but new staff might be offered a salary that reflects the new realities of remote working,” he explained.

“However, offering new staff a salary to reflect remote working could potentially have ethical and legal consequences, especially if some jobs are done by workers based overseas, so any businesses looking to do this need to have policies in place to ensure that any change to the existing approach is both legal and non-discriminatory.”

Cotton added that by advertising roles for people who can choose to work from home rather than be based in the office, organisations may have access to a much bigger talent pool: “They could reach candidates who would otherwise struggle to afford to live near a company’s headquarters, such as junior candidates or those who cannot relocate due to family commitments.”

But Jamie Mistlin, managing director and co-founder of Remoteably, said “it’s really disappointing to see some firms apparently trying to profit from employees who choose to work from home by pocketing the difference between their travel expenses”.

“Salaries are formulated based on the market worth of candidates, not where they live or their commuting expenses. If you don't pay people what they are worth, someone else will.”

Recent research by insurance firm Zurich found that offering flexible work patterns could also open up more diverse talent pools. Steve Collinson, head of HR, told People Management: “By offering roles that fit flexibly around family life, employers could open the floodgates to a much wider pool of untapped talent.”

Caine agrees: “This is an excellent opportunity for companies to employ talent that could be based anywhere in the country. Employers are now able, and more willing, to widen the talent pool and hire specialist candidates UK-wide.

“There is also a whole new set of skills needed for managing people remotely and developing interpersonal relationships, both of which have a positive impact on businesses,” she added. “Leaders and senior teams will need to create policies so this new remote way of working doesn’t impact organisational culture.”

It is likely that those anticipating raises and promotions in 2020 will have been disappointed, and many may understand why such moves have necessarily been placed on hold. 

But according to Catherine Wasilewski, principal legal consultant at Sellick Partnerships, it is “crucial that employers are making sure they are keeping their staff in the loop and handling the situation in the right way.”

“It should be the firm that is initiating these conversations and making sure employees feel valued and confident that things will eventually return to normal,” she explains, “[And] if there is a breakdown in this communication, employees might start to feel underappreciated and begin looking at what other firms could offer them.”

How career progression is envisioned may also have changed drastically this year, on the part of both employers and employees alike, with talent pipelines potentially blocked or redirected as a result of the pandemic. Just as Covid-19 may have delayed pay rises, it may very well be stalling career progression too. 

Helen Astill, founder of Cherington HR, explains that in light of this, it is “important that employers are honest with their staff about their plans and how things have been affected – either in terms of timing of promotions or training, or of the business strategy as a whole.

“It will not be sufficient to carry on “fire fighting” but will be important to review the company’s longer-term plans and revise their succession plans.”

She added that some employers have diversified into new areas or work as they have adapted to the challenging trading situation of 2020, which may open up – or have already opened up – new opportunities for staff that had not originally been foreseen.

Wasilewski believes that understanding the strain placed on employees this year and acting accordingly is ultimately vital to consolidating staff loyalty to their employer: “At a time when many roles are more isolated than ever before, the importance of small gestures should not be overlooked. Ensuring people feel involved, appreciated and like they are still part of a team is vital to their overall happiness and their engagement levels with the firm.”

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