How does remote work impact compensation?

By Philippe Asselin

How does remote work impact compensation?

Not long ago, 86% of the world’s workforce had work routines that likely involved many stressful activities to start the day. Traffic jams, laundry mishaps, road construction, and inclement weather could spell disaster for employees who may not have left early enough, while even the most prepared commuter might be caught off-guard by an accident or forgotten cellphone.

Then suddenly and unexpectedly in March 2020, a pandemic switched the “working from home” (WFH) setting on our messaging app from temporary to permanent for millions of employees. The average commute for many shrank from across town to down the hallway, and a tiny house suddenly seemed like a really bad idea. 

Some interesting takeaways on working from home:

  • 62% of employed Americans have worked from home during the pandemic
  • Of the 62%, 16% said they loved it 
  • Turnover is lower for WFH employees
  • Productivity is higher 
  • Employers can save over 11k per year per employee 
  • Commuting time reduced by over 60 million hours per day improves work-life balance
  • Better for the environment with less traveling

But is it all good news? There are still significant challenges to working from home:

  • Mental health declined to half of what it was pre-pandemic 
  • Job Satisfaction declined more than 50% 
  • High communication and collaborative environments can be more challenging than in-person work environments
  • Home working hours can stretch, and boundaries can blur with no ability to “leave” work
  • Some employees struggle with isolation
  • Mentoring, training, and coaching may be less frequent
  • Security Risks heightened with more significant internal tech spread to homes


It is important to note that the shift to WFH paralleled a global pandemic, which also carries significant weight over many of these impacts. Attitudes towards isolation factors, positive and negative feelings towards remote work, and overall job satisfaction could all be influenced by the pandemic itself, and it is difficult to isolate to what degree these attitudes will change as we move out of the global state of emergency. 

Perhaps it is too soon to tell if working from home is better or worse for employers and employees.  As we drift through it all, one thing that is never too soon to consider is how working from home will impact compensation.  Some companies weighed in on their intentions for remote workers, which typically landed in one of three or possibly four scenarios.  

The first remote work scenario is simple—

Here, employees that enjoy working remotely either full or part-time get to choose what they prefer, building higher levels of engagement among employees who feel trusted to make the decision best for them. Nothing changes in this option except the need for as much office space. Employees keep the same level of pay and work from home as much as they prefer, wherever that may be. The employer and employee can save up to a combined $15,000 per year, and the trees and environment can all collectively breathe a deep sigh of relief from the reduced carbon emissions of office space and commutes. Some concerns still exist: Will there be an unexpected desire of the workforce to return to offices, making this switch moot? Will productivity remain the same when the necessity of a pandemic wanes? 

The second scenario gets a little more complicated.  

This option decides to adjust salaries to the area that a company’s remote workers move to, or where they are sourced from. The profits could be greater for the company if employees decide to work out of areas with a lower cost of living, or lower if employees decide on higher cost of living regions. However, questions remain: Will market-savvy remote employees leverage their knowledge to become less likely to take a new job, holding out for the perfect company for them? Will workers accept lower wages for the same work if they decide to move to a low cost of living area?

The third scenario gets even more complicated.

This strategy consists of a top-down decision to make the workforce remote full time as much as physically possible. The company makes a dedicated effort to recruit remote talent from areas where their pre-set salaries will be beyond competitive, and focus on skilled talent intake. Jobs would be always labeled remote whenever feasible.  Recruiting methods become paramount to the company’s success, as the efficacy of traditional recruiting methods leads to potential errant hiring decisions, which can be far more costly in a less directly supervised role working from home.  The question must be asked, though: How do you balance potential damage to employee morale and trust for those who enjoy working in the office?

The fourth scenario is a hybrid and evolving perspective from companies choosing to take a more conservative approach. 

The companies that adopt this model probably believe that even though remote work has been around for a long time, all of the potential consequences have not yet been unearthed and evaluated to the scale we are now experiencing.  There might be expansions of remote work capacity in some areas while maintaining a robust onsite presence for team collaboration and evaluation.  Recruiting and compensation strategy at large will not change but will open to considering remote work on a case-by-case basis. These companies will not yield the benefits of the early adopters, but they may also avoid some of the unknown risks associated with new strategies. Questions to ask: Will this more conservative approach prove to be costly in the company’s ability to attract and retain the best talent? Will the company miss an unprecedented opportunity for exponential growth?

It is important to note that a company should have the data and methodology to pay competitive to market, or it will always fall short when compared to competitors in the long term. Most employers believe they are paying competitively and that they offer market competitive level benefits and variable compensation. Some companies compare their comp policies to other industries as a gauge, while others look exclusively within their own industry. 

Total compensation is typically the largest expense for most financial institutions and being even a little bit off can be very costly in dollars, engagement, productivity, and employee turnover.  Ensuring that your company has a consistent remote work strategy is essential in determining your overall compensation planning. There are no wrong answers except ignoring the question of what you’ll do in the new normal of comp. 

What is your remote work strategy and how will it impact your compensation levels? Does your company have the actionable business intelligence and consulting it needs for the right compensation philosophy during these challenging times? 


At BalancedComp, we are here to help navigate through what many find to be uncharted waters. Find out what is possible with BalancedComp.

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