Author: Linda Cox

It has now been over one year since companies across the world have closed their offices indefinitely for their employees to work safely from their homes due to COVID-19.  The workplace has transformed to adapt to the pandemic, but perhaps it has changed forever.  In fact, about 72% of companies’ total global workforce is currently working remotely, according to a Reuter’s article summarizing the survey of CIOs by Enterprise Technology Research (ETR).

Many CEOs have expressed their thoughts on the future of work, with some supporting a continued remote workforce and others looking forward to their employees’ return to the workplace.  Executives are now asking themselves how remote work and hybrid jobs can be used as a competitive and strategic advantage.  What will be the purpose of the future workplace, and how much workspace will be needed?  How important is workplace flexibility to attracting and retaining talent?  How will compensation be impacted should employees live and work in lower cost-of-labor communities?  One thing we know for sure—gone are the days of the daily commute to the office.        

So, when will we be back to normal?  Gartner has surveyed executives on return-to-normal predictions in both December 2020 and January 2021.  Business leaders are split on when a return to the workplace will take place.  The majority of executives (52%) are predicting it will take place during the third or fourth quarter of 2021, although there is a growing trend (35%) predicting it will take place in 2022.

The percentage of workers permanently working from home is expected to double in 2021, according to the ETR survey.  By 2025, an estimated 70% of the workforce will be working remotely five or more days a month. Technology is leading the way in the decision to permanently provide remote work opportunities.  Erik Bradley, Chief Engagement Strategist at ETR said, “The productivity metric is proving that remote work is working. So, we all thought that there would be some increase in permanent remote work, but we didn’t expect that to double from pre-pandemic levels.” A Gartner CFO survey revealed that over two-thirds (74%) plan to permanently shift employees to remote work after the COVID-19 crisis ends.

Executives have strong opinions on remote work and returning to the office workplace, as stated in The Wall Street Journal, March 15, 2021:

Citigroup, Jane Fraser, Chief Executive Officer: “I certainly imagine everyone back in [the office].  I do think from a cultural point of view—apprenticeship, the sense of belonging—you are better together.”

Salesforce.com Inc., Brent Hyder, Chief People Officer: “We’re not going back to the way things were…I don’t believe we’ll keep every space in every city that we’re in, including San Francisco.”

Spotify Technology SA, Katarina Berg, Chief Human Resources Officer, on allowing employees to choose remote work while also keeping the company’s offices open from Stockholm to New York:  “The office plays a very, very big, and very important part of the culture.  And we want it to do that in the future, too.  So we will keep those [office] locations, and we want the culture to really appear and grow within that environment as an office.  But we also want to give that freedom and flexibility.”

CEOs provided their insights, reported in the Wall Street Journal, September 23, 2020, on what they think about remote work:

Apple, Inc., Tim Cook, CEO, speaking at a virtual conference hosted by the Atlantic in September 2020: “In all candor, it’s not like being together physically. And so I can’t wait for everybody to be able to come back into the office. I don’t believe that we’ll return to the way we were because we’ve found that there are some things that actually work really well virtually.”

Berkshire Hathaway, Inc., Warren Buffett, Chairman and CEO, speaking at the annual meeting in May 2020:  “The supply and demand for office space may change significantly. A lot of people have learned that they can work at home, or that there are other methods of conducting their business than they might have thought from what they were doing a couple of years ago. When change happens in the world, you adjust to it.”

BlackRock, Inc., Larry Fink, CEO, speaking at the digital Morningstar Investment Conference on September 17, 2020:  “I don’t believe BlackRock will be ever 100% back in office. I actually believe maybe 60% or 70%, and maybe that’s a rotation of people, but I don’t believe we’ll ever have a full cadre of people in [the] office.”

Facebook, Inc., Mark Zuckerberg, CEO: “I think we’re going to be the most forward-leaning company on remote work at our scale, for sure, but we’re going to do this in a way that is measured, and thoughtful and responsible, and in phases over time.”

Humu Human Resources Startup Chief Executive and former HR Chief Google, Lazlo Bock, on the state of remote work:  “There’s sort of an emerging sense behind the scenes of executives saying, ‘This is not going to be sustainable.’”

Marriott International, Inc., Arne Sorenson, CEO, at Wall Street Journal’s Future of Everything event:  “It’s a much harder way to work for anything that requires a personal relationship. And as a consequence, I think we’re going to find that we maybe [will] not go back to 100% in the office all the time. Because remote work clearly works for many things, but I think we’re going to find that being together delivers value in productivity and creativity and relationships that is irreplaceable.”

Microsoft Corporation, Satya Nadella, CEO, speaking at a virtual conference in June 2020:  “Even in the Seattle region, where we have now sent a lot of people home, we’re realizing that some people would rather have workspace at work once the COVID-19 crisis goes away because they want dedicated workspace with good network connectivity.”

Morgan Stanley, James Gorman, CEO, speaking on the bank’s earnings call in mid-April: “If you’d said three months ago that 90% of our employees will be working from home and the firm would be functioning fine, I’d say that is a test I’m not prepared to take because the downside of being wrong on that is massive.”

Netflix, Inc., Reed Hastings, Co-Chief Executive, on working from home:  “I don’t see any positives. Not being able to get together in person, particularly internationally, is a pure negative.”

Stifel Financial Corporation, Ronald J. Kruszewski, Chief Executive, on professional development while working remotely:  “I am concerned that we would somehow believe that we can basically take kids from college, put them in front of Zoom, and think that three years from now, they’ll be every bit as productive as they would have had they had the personal interaction [of work in offices].”

Future of Work – Impact on Compensation

With many companies supporting a flexible workforce and remote work on an ongoing basis, it is important to consider how remote work and employee-initiated moves to lower cost-of-labor communities will impact remote compensation in the future.  For example, if a technology company based in Silicon Valley pays 20% higher than the U.S. national average, and employees elect to move to lower cost-of-labor locations, should the company continue to pay the Silicon Valley compensation premium or adjust payments to the rate of the remote locations?  These are important decisions that businesses need to make when establishing their compensation strategy.  A Silicon Valley company could potentially reduce its compensation levels by 10-20% when employees elect to work remotely outside of the high cost-of-labor locations.

VMware has announced that it will reduce compensation levels when a remote employee moves from Silicon Valley to lower cost-of-labor locations.  Facebook and Twitter are considering or have implemented similar localization policies.

Best-practices organizations, such as Dell, Inc., have tremendous experience in remote work, with 25% of Dell’s workforce working remotely even before the pandemic began and the number of remote workers projected to grow.

“I think if you were skeptical about work from home, you probably aren’t now…And I think we’ve all learned a lot in the last few months here. I think that will flow through and create opportunities.”
– Michael Dell, CEO of Dell

ERI’s Geographic Assessor is a powerful software solution and resource to support companies in making these critical compensation decisions.  The Geographic Assessor compares two or more locations based on cost of labor and/or cost of living.  It is able to capture this important data by country, state, city, postal code, and even customized locations for small to very large corporations.  ERI’s white paper, “How to Design a Geographic Salary Structure,” also provides guidance on the use and design of geographic salary structures.  ERI’s blog post about remote compensation also shows that there are different methods to tackle and determine pay for remote jobs.

Using the Geographic Assessor, the cost of labor can be captured in a comparison of the HQ location (e.g., San Jose, CA) to a customized list of locations at specific salary levels.  ZIP codes can also be used in the analysis of geographic differentials, and reports can be exported to Excel or PDF with ease.  Consider the sample below:

A cost-of-living comparison is also included in the Geographic Assessor.

The Geographic Assessor also provides a Two-City Comparison table that includes a base salary and cost-of-living comparison.  Consider this example below:

Last year sent shock waves throughout the world due to the Coronavirus, and the next twelve months bring hope that there will be a turning point in the global pandemic.  Now is the perfect time to address the future of work, return to a safe workplace, remote work, compensation strategies, and your 2022 compensation plan.  Will geographic pay be used within your organizations, and will pay be localized based on the employee workplace?  There are so many critical decisions to be made in 2021 affecting the future of work.