By Andy Klose - Associate Partner
The rise of remote work after the COVID-19 pandemic has led to discussions among consulting firms about how to adjust pay for remote employees. This article explores the complexities of compensation strategies for remote work, including different pay models, remote work policies, and long-term perspectives within the consulting industry.
Exploring Pay Strategies
The question of whether consulting companies employ different pay strategies for their remote employees is a common one. To address this, we must first consider the various pay strategies employed by consulting firms (there are other as well as hybrid strategies in place):
- Employee location-based pay: In this approach, companies adjust salaries based on the cost of living in the employee’s location (which often applies also to remote employees). This ensures equitable compensation, with higher salaries in high-cost areas such as San Francisco.
- Office location-based pay: Some companies base employee salaries on the location of their offices, considering the local cost of labour which is not only driven by cost of living but also by talent supply and demand.
- Country-based Pay: Another strategy is to set salaries based on a national average or maintain consistent pay across all locations in the country. While straightforward to implement and to maintain consistency across the organization, this approach may not account for regional cost-of-living differences.
Given these pay strategies, companies with employee location-based pay strategies are less likely to differentiate pay for remote employees. Conversely, those with office location-based or country-based pay strategies may be more inclined to do so.
Remote Work Policies
Furthermore, the diversity of remote work policies further complicates the issue (there are other as well as hybrid policies in place):
- Fully remote: Some companies allow employees to work entirely remotely.
- Hybrid remote: Many companies offer a blend, where employees work remotely part-time and attend office meetings or collaborations as needed.
- Remote-friendly: Others permit remote work on an as-needed basis or with managerial approval.
Therefore, companies that have fully remote or hybrid remote work policies are less likely to differentiate pay for remote employees. This means that companies with remote-friendly policies seem to be more likely to consider different pay to their remote employees.
Long-Term View on Remote Work Policies
Additionally, consulting companies’ long-term view on remote work policies vary:
- For remote work: Advocating for remote work indefinitely, some firms commit to embracing its advantages.
- Against remote work: Conversely, other companies aim to return to pre-pandemic office norms, underscoring e.g. the value of in-person interactions.
- Undecided: Certain companies are struggling with the decision of whether to continue remote work or return to the office. They recognize the challenges of reversing current remote work trends or are unsure about the potential benefits, such as increased efficiency.
Only firms in the first category, which are for remote work, are likely to consider pay differences for their remote employees. The other two groups are less likely to do so due to a possible transition.
Conclusion
All in all, most consulting companies remain hesitant to implement different pay strategies for their remote employees due to strategic and ethical considerations:
- Strategic considerations: Companies typically choose office locations strategically, independent of individual employee locations, to achieve business metrics like revenue and margin. Thus, business outcomes remain unaffected by remote work. For example: A consulting company will charge the same billing rate to a bank in Manhattan regardless whether the consultant will be working in the New York office or remotely.
- Misusing financial leverage: Paying remote employees less could be seen as an attempt to force them to return to the office. Transparent communication about the reasons for this request would be more effective.
- Efficiency evidence: There is little or conflicting evidence (depending on the sources) that a full return to the office improves long-term employee efficiency.
In summary, creating suitable payment strategies for remote work requires thoughtful consideration and customised solutions. If you and your team require assistance, we are ready to provide support and expertise. Our aim is to ensure that your compensation approach aligns with your organisational goals while promoting fairness, engagement, employee satisfaction, and productivity.
Andy Klose is an Associate Partner at Vencon Research International and heads the company’s consulting unit.
Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firm its clients.