Why we should pay remote workers more than office workers, not less

I’ve seen a number of articles recently about organizations proposing to cut or freeze the pay of people who opt to work remotely, or to give incentives to encourage people to come back to the office. Here is an example from the BBC

But why would you pay more for people to come into a place that’s more expensive for you to provide and less popular and  convenient for them, unless of course you’re going to get more productivity?

Let’s start with costs. Providing an office and the facilities around it are significantly more expensive for employers. We may need to pay people more to compensate for the expense of living and commuting in cities like London and San Francisco. We need to pay for the office facilities, rent and rates, capital costs, parking spaces, meeting rooms, rest rooms, furniture and other physical things that come with it. All of this requires maintenance and cleaning.

If you’re a Silicon Valley tech company you may provide buses, free meals, creches, gyms, dry cleaning and a host of other location-based benefits.

Once people are at the office, we need to provide heat, light, drinks, and restaurant and catering facilities and subsidies.

There are probably lots of other hidden costs that are not immediately evident, such as insurance.

It’s clear that this is massively more expensive than enabling people to work from home.

So why would we pay people more when they are more expensive to employ?

Is it that they are more engaged, or that job satisfaction is higher? Quite the reverse, research before the pandemic found that people who worked in a hybrid pattern were the most engaged of all people. Flexibility is wildly popular and research is showing that people are prepared to give up both salary and their existing jobs in return for more flexibility.

We are hearing some anecdotal evidence from our clients that it’s their best people who are leaving for more flexibility. Your top talent always has a choice, whereas average and poor performers may have to stay put.

Goldman Sachs, who have probably taken the hardest line throughout the pandemic about getting people back into the office five days a week, gave people two weeks’ notice to come back into the office recently, only 50% of them turned up.

So it’s likely that these more expensive people will be less engaged than their remote and hybrid colleagues.

So maybe we’re paying them more because they are more productive? I’m sure your organization has its own experience of this, but many of our clients have found that productivity actually increased during the period of remote working. See this academic paper for examples and  a nuanced discussion of productivity when working form home. Engagement is one of the closest drivers of productivity, so lower engagement is likely to lead to lower productivity.

I would be surprised if people who have to add a significant commute onto their working day will continue to maintain these productivity gains, particularly if they are forced back against their will and have friends who now have more flexibility.

Our experiences of returning to the office can be fun, but it does remind us of all the time we spend as we catch up with colleagues, share the latest gossip, take our coffee and lunch breaks, get interrupted in our open plan office etc. One of our clients who went into the office for the first time recently said “I had a lovely day, but I got nothing done”.

I guess we’ve learned during the lockdown periods that some of this activity is necessary and valuable, but do we need it five days a week?

There are some, usually unfounded, concerns about issues such as how do we maintain our corporate culture (when a number of remote first organizations including my own have existed for many years and done this successfully) or whether we can stay creative when working remotely (even though most organizations I speak to felt they had been more creative and innovative over the last two years than before the pandemic).

All of these are solvable and none of them require people to be in the office every day.

So just to recap, the idea is that we take people who are more expensive to employ, probably less engaged and with lower productivity, and maybe even with lower calibre, and we pay them more?

Surely it would make more sense to pay more to remote workers to discourage them from coming into the office and invest some of the savings in developing new ways of working to overcome some of the potential disadvantages.

Or have I missed something? What do you think?