How to calculate for pay for remote workforce

The future of work is remote. That is the direction that the world was moving towards before the Pandemic hit in 2020. Now, work from home is a reality and not something that we are transitioning to gradually.

Where businesses were once reluctant to offer remote work, many are now scrambling to adopt the model. The remote work juggernaut has exploded with the Coronavirus pandemic.

But how to pay remote workers? This question is something that companies are grappling with. Continue with the old payment structure and not upset the cart? How to deal with the recruits, the contract workers, the professional freelancers?

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The answer to these questions is complicated, in part because remote work is being adopted for a variety of strategic reasons. Some organizations hope to attract top talent with flexible work opportunities. Others hope to tap into a workforce they were previously not considering. Still, others are viewing remote work as a potential cost savings mechanism.

Getting pay right for remote workers requires a thoughtful and well-articulated approach to compensation To get a fair compensation package for remote workers, certain factors must be considered. The location of the person, the salary data of the geographical locations, skillset, professional ability, the supply-demand factor.

Employers now realize that remote work is not less productive than work in an office. All statistics suggest that a fair number of people are working from home. According to a Gallup study, 43% of the US workforce works from home some of the time. A Global Workplace Analytics study found that 80% of the US workforce wants to work from home. 51% of workers will quit if they are not offered flexible working option.

56% are already in jobs that are compatible to working from home. 90% feel that works from home increase morale, and 25% of organizations have experienced lower turnover after allowing flexible timings.

A study by payscale, a payroll company, into salary data reveals that remote workers are actually paid more than people who work in an office. Currently, the national median pay for remote workers in the United States is $48,500 annually. Remote workers make 8.3 percent more than non-remote workers in the same job and with the same experience and 7.5 percent more than non-remote workers generally.

So we have established how people are eager to turn to this mode of work. And here are a few tips for working out the compensation based on the experience of other companies that have opted for remote work.

1)The same salaries to everyone independent of location. This is the model adopted by most companies. People working in the same job located anywhere are compensated similarly.

2)Adjust remote employee pay based on the cost of living. Some companies have a base salary for each role and multiply it by their cost of living. There is a pitfall here. If a person is staying where the cost of living is low, but his experience and skillset is high, then he or she might opt for a company that pays better. A way around can be to create different levels for the base compensations. That way, different experience levels too are covered. 

3) A more complex way to calculate salary would be to use a multifaceted formula to create fair compensation. It can include a salary benchmark, location, job level, experience, contract, and even the exchange rate.

In the debate for fair compensation, location independent pay is argued for by most people. A fair compensation is what the recipient perceives to be fair. Whenever accepting a salary or negotiating one, have a figure in mind. It should not be something arbitrary but based on your experience, skill, value to the company you bring, and also factor in the demand-supply gap. 

If the offer meets your expectations, then accept, negotiate or wait for a better one.

Anna Verasai
Anna Versai is a Team Writer at The HR Digest; she covers topics related to Recruitment, Workplace Culture, Interview Tips, Employee Benefits, HR News and HR Leadership. She also writes for Technowize, providing her views on the Upcoming Technology, Product Reviews, and the latest apps and softwares.

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