The Great Debate – Should in-office employees be paid more?
Despite the benefits of working from home, employers confess to having mixed feelings. Faced with underutilised office space, the added demands of managing remotely and the nagging worry that employees may be taking a nap, and not a meeting, bosses are pushing back and insisting employees show up in person. Some have famously commanded a return to the office, while others have cajoled with promises of breakfast spreads and revamped offices. The results, in both instances, have been mixed. Is it time to entice office workers back with more money? This is the question we posed to our global panel of executive search professionals. Here’s how the conversation went.
Yes, if you value your corporate culture
Mpho Nkeli, Executive Chairman & Head of Board Practice at SPi / AltoPartners South Africa, weighed in on the side of in-office workers, citing growing concerns over how to maintain corporate culture and morale when your workforce is dispersed.
“These employees are incurring travel costs and enduring long commutes, and they are contributing to the maintenance of the organisational culture. They should be rewarded for that.”
“We are seeing candidates sacrifice salary to move to companies that have a work-from-home (WFH) policy. On that basis, a 5% discount on all WFH employees could be implemented, and the monies used to uplift the salaries of in-office employees. Alternatively, suspend increases for a year for those who WFH. The benefits of working from home far outweigh a 5% cut or no increase for a year.”
At the very least, says Marjorie Kean, Managing Director of the Diversified Search Group / AltoPartners USA, companies might consider covering transportation costs of in-office employees, especially if they want more people in the office.
…and want to keep your best and brightest
Ricardo Bäcker, Managing Partner at Bäcker & Partners / AltoPartners Argentina, believes employers could well end up compensating highly skilled employees whose job function requires them to work from the office: “People have realised that there is a way to juggle work and family responsibilities without sacrificing one or the other. Nobody is going to give up that autonomy willingly, especially if it avoids a tedious commute. Highly skilled employees have more bargaining power by virtue of being a scarce resource. It is therefore easy to imagine a scenario where they end up being compensated economically to make up for the flexibility enjoyed by their WFH colleagues, although the market and the candidate’s experience will dictate the extent of that compensation.”
No, it’s equal pay for equal work
Toral Patel, Managing Partner of Accord India / AltoPartners India (where a recent Economic Times survey showed that 90% of employees would prefer to work from home at least some of the time), says companies should be focusing instead on better ways to link pay with productivity, regardless of where employees are operating from: “Besides creating one more thing for HR heads to deal with, organisations already spend more on in-office employees in terms of infrastructure and resources.”
Besides, it could equally be argued that if anyone should be paid more, it’s employees who work from home. Patrycja Lachowska of Accord Poland / AltoPartners Poland confirms that when this topic is broached with CEOs, they are more likely to consider compensating remote workers for heating and electricity. Jaco Kriek, Managing Director of SPi / AltoPartners South Africa, points out that more staff working from home can be a significant cost saving to businesses, especially for start-ups, as employees then bear the cost of cooling or heating their workspace and provide their own office equipment, printer ink, internet, cleaning supplies and refreshments. In countries that suffer frequent power outages (such as South Africa), employees generally are responsible for ensuring their own uninterrupted power supplies.
Maybe. But Ts & Cs apply
Greta Frey, of MPB Recruitment Group / AltoPartners Switzerland, points out that while there is no reason to pay in-office workers more for doing the same job as their WFH peers, there is a place for exceptions, especially if in-office employees have additional responsibilities, such as training of new hires or having to routinely perform tasks that cannot be done by WFH employees.
How big is the demand for WFH really?
Post-Covid, candidates across geographies and industries are looking for the flexibility to work from home, at least some of the time.
“We are seeing a definite tension between what companies want and what potential candidates expect,” says Marjorie Kean. “We are finding that almost all candidates want a mixed work situation where they work from the office two or three days a week and have days they work remotely. They all ask about it, and the companies that offer this partial work-from-home option have a bigger pool of candidates. On the other hand, we are also seeing that employers are requiring more time at the office and are not accepting full-time WFH situations as they once did.”
Says Toral Patel: “A lot depends on the country, the company and the employee’s personal circumstances. Those in favour of a hybrid model tend to be working mothers with young children, or those caring for aged parents, while fathers of small children tend to prefer the office,” she notes wryly.
On the flip side, Mpho Nkeli points out that younger employees living in noisy apartment blocks or small homes with no dedicated workspace, go to the office to use the facilities. Ditto new entrants to the workplace who yearn to experience a work environment and therefore also tend to prefer the office where they learn better and don’t feel alone. If all the skilled and experienced managers are working from home, who will they learn from?
In Poland, says Patrycja Lachowska, WFH is so popular that new labour legislation demands that with effect from January 2023, an employer will be obliged to provide the employee performing remote work with materials and work tools, including technical devices necessary to perform remote work; install, service and maintain the equipment necessary to perform remote work (or cover the costs); pay for energy, electricity, telecommunications and any other costs necessary to perform remote work, and provide the employee with training and technical assistance to perform this work. Employers weighing up these costs with the convenience and predictability of having employees on site may well find it more cost-effective to incentivise people to work from the office instead.
What are the implications of paying in-office employees more?
Those opposed to the idea cite the cultural impact of creating a pay hierarchy among employees effectively doing the same job, just in different locations. “You run the risk of making it a political issue and creating an A-team of high earners who benefit from more facetime with leaders, and a WFH B-team who will end up feeling undervalued and marginalised. Since research has shown that the employees most likely to prefer WFH are women, disabled people and minorities, this could have serious unintended consequences: This is counter to what we want: an engaged, diverse workforce with the flexibility to attend to all their duties and roles as best they can”, explains Christian Rolin.
Agreed says Greta Frey: “Team spirit and morale will be affected if a division/differentiation starts to be made between in-office employees and those WFH for the same position. Output and performance should be the main criteria for any salary increases. If managers find it harder to evaluate people WFH, the solution is to train and support the managers, not penalise the WFH employees.”
So how do you fix the disconnect between what employees want– autonomy and flexibility – and what companies need, namely a sense of predictability and control?
Build better hybrids
The trick, says Raul Lacaze, Partner at Bäcker & Partners / AltoPartners Argentina, is for companies to accept and adapt to the new normal. “The ‘rules’ of interaction have changed. In this sense, the hybrid mode of work is a new social pattern. If you frame it like this, organisations will find it easier to re-formulate their value proposition. This includes rethinking conditions according to roles and their characteristics and adapting remuneration accordingly. By viewing it as a new modality that requires new rules, it is easier to imagine a compensation scheme different from that of a role that requires on-site performance.”
“The challenge is that both proposals, beyond having clear rationales justifying their hybrid or full on-site modality, should be attractive to entice or retain talent with the necessary skills to achieve business goals.”
Helen Gu, Senior Associate at The People At Work / AltoPartners Shanghai, concurs: “Companies need to adapt to this modern working model, with HR leading the way to ensure that people are equipped and comfortable using online systems, office automation and Cloud office to ensure smoother hybrid conditions.”
The global shortage of the very skills needed to ensure that companies transform and keep abreast of technology means that this debate is unlikely to end anytime soon. As Ricardo Bäcker points out, these are highly sought-after skills and candidates can afford to be demanding about conditions of employment, including where they work.
“Currently, it’s a spectrum: on the one side, some companies have fully embraced it, while others still take a conservative approach,” observes Greta Frey. “Generally, start-ups and smaller companies that reduced office space during Covid are happy to keep their WFH policy intact, with employees coming to the office for functions, project planning, strategy sessions and team building.”
“One employer told me that the office is where you come to have fun and connect with your colleagues, home is where you work. Quite a shift, right? They reduced their office space by two-thirds, gave employees desks and chairs from the office to take home, and bought them UPS and inverters to ensure connectivity during power cuts,” reports Mpho Nkeli.
This is especially popular among start-ups, adds Christian Rolin who notes the impact that WFH has had on office space and real estate: “We are seeing more companies adapting their premises to support more people working remotely, which means more meeting rooms, as well as making the spaces themselves more inviting so that they ‘nudge’ people back into the office.”
Then there’s the environmental impact. In countries such as India, where air pollution in the national capital region is an issue, there is a move to encourage companies to keep the hybrid option open, thereby reducing the number of vehicles on the road, and giving employees the option of not stepping out into toxic air. Incentivising people to join the commute will undo these efforts.
And empower leaders to be better
“Covid taught us all many new skills and opened up a world of possibilities. Those who have shown an ability to adapt have thrived,” says Toral Patel. Mpho Nkeli agrees: “Those who embraced technology have leapfrogged digitally to improve or even deliver new services to customers. These tend to be the same people who are keen to continue to offer WFH as they have seen the clear advantages to their companies.”
Ultimately, says Ricardo Bäcker, it’s a leadership issue. “Companies still need a presence in the office to spread culture, innovate, strategise, and socialise. Leaders need to use meetings effectively to ensure that they achieve these goals. Turning leaders into skilled conductors who can chair effective, purpose-driven meetings is a major new HR challenge in the hybrid environment.”
Leaders will also need to address management bias against WFH. As Covid has demonstrated, people who perform well in the office, are likely to perform well remotely too. The same principle applies to slackers: their presence in the office doesn’t necessarily transform them into model employees. That doesn’t stop many managers from hankering after the reassuring sight of a busy office, which has been the accepted working model since the first industrial revolution. The result is a hard-wired tendency to equate presence with performance. In an organisation that is merely tolerating – as opposed to embracing – WFH, talented working-from-homers could be passed over for promotions or miss out on plum assignments to their more pedestrian, but present colleagues.
To prevent this from happening, says Marjorie Kean, the new model should make companies use KPIs to evaluate employees fairly and accurately, making the issue of where employees work irrelevant.
Ultimately, says the team, the tight labour market and the premium on skills means that hybrid is here to stay. Smart leaders are investing in ways to make this work for everyone.
With special thanks to our contributors Ricardo Bäcker ─ Managing Partner at Bäcker and Partners / AltoPartners Argentina, Greta Frey – Senior Consultant at MPB Recruitment Group / AltoPartners Switzerland, Helen Gu – Senior Associate at The People At Work / AltoPartners Shanghai, Marjorie Kean – Managing Director Diversified Search Group / AltoPartners USA, Jaco Kriek – Managing Director of SP i/ AltoPartners South Africa, Raul Lacaze Partner at Bäcker & Partners / AltoPartners Argentina, Patrycja Lachowska of Accord Poland / AltoPartners Poland, Mpho Nkeli – Executive Chairman & Head: Board Practice at SPi / AltoPartners South Africa, Toral Patel – Managing Partner: Accord Group /AltoPartners India, and Christian Rolin – Partner at Peoplement / AltoPartners Denmark