What will increased remote working mean for tech salaries?

As remote working becomes more popular because of the coronavirus outbreak, people have less need to be near city centres – but what might this mean for tech workers’ salaries?

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While the Covid-19 crisis may have created a lot of uncertainty, what does seem sure is that the practice of remote working is here to stay. But in this area, like so many before it, the tech industry – which pioneered the approach in the first place by developing the tools to make it possible and was working in dispersed teams long before anyone else – once again appears to be shaking up established ideas and modus operandi.

For example, although many of the big tech players have committed to working-from-home policies until at least 2021, social media giant Twitter set a precedent in May by announcing that its employees would be allowed to work from home “for ever” if they so desired.

Facebook quickly followed suit, with chief executive Mark Zuckerberg saying he expected up to half of the company’s workforce to work from home within the next five to 10 years. But there was one caveat – staff salaries were likely to be adjusted in line with the cost of living in an individual’s chosen location, potentially leading to pay cuts for those thinking of moving away from Facebook’s expensive Palo Alto head office site and other global centres, such as London.

Retail giant Amazon, meanwhile, is taking a third way. It plans to expand six of its “Tech Hubs” in the US cities of Dallas, Detroit, Denver, New York, Phoenix and San Diego. Doing so will create 3,500 new tech and corporate jobs, indicating that, for it at least, the office is far from dead but is a space considered vital to promoting innovation.

So, bearing in mind that where big tech goes, the rest of the industry tends to follow, what are the possible implications of these moves in workplace terms?

In the short term, Rob Brown, vice-president for IT service provider Cognizant’s Center for the Future of Work, expects most tech staff to continue operating from home, but he believes that in a post-vaccine-based medium term, Amazon-like hybrid remote working/office models will become more common.

In fact, he describes Amazon’s approach as a “great way to blend the best of in-person and remote working”, not least because, for most tech staff, work is a combination of solo activities and team-based projects.

“A hybrid approach of two or three days of teleworking provides a much-needed balance,” says Brown. “Offices will not die out completely, although the notion of spending 40, 50 or 70 hours there each week will.”

The multiplier effect

Ken Charman, chief executive of digital reward system provider uFlexReward, agrees. He is no fan of the full-time remote working model despite the cost-cutting attractions for some employers, but believes there is a “very real multiplier effect in having people in the same location”, or even meeting now and then in ad-hoc hubs and collaboration centres.

“High-performance teams are based on social interaction,” says Charman. “The proximity creates a higher level of efficiency that leads to better-quality outputs – even if they are intangible, which can make them more difficult to measure.”

Bev White, chief executive of recruitment consultancy Harvey Nash, is another advocate of the benefits of providing workers with social space to get together, not least because of the positive cultural impact in terms of team cohesion.

“With offices, it’s a bit like living in the heart of a village – you tend to know what’s going on, who’s doing or saying what, and what makes things tick,” she says. “It’s a natural mixing pot and from that comes the culture and way you do things. But if you live on one of the remote hill farms outside, it’s much harder to get into all of that.”

“Offices will not die out completely, although the notion of spending 40, 50 or 70 hours there each week will”
Rob Brown, Cognizant

Although digital meetings and conferences have their upsides in that they tend to be very focused, the ad-hoc conversations that lead to true creativity and innovation are often lost. Body language cues are also masked, which can hinder effective collaboration.

As Caroline Collyer, head of people at software development company Bright, points out: “Creativity and innovation don’t take place organically in a remote working scenario – you have to create opportunities to make them happen.”

This conundrum is one she has been pondering recently. When the company surveyed its 40 staff to find out their views, it found that three-quarters currently prefer a mix of home and office working. In a post-Covid world, though, 40% said they would choose to work from home permanently.

The company also anticipates bringing in more talent from outside its Brighton base and, in fact, from around the world.

As a result, on the tech side of things, Collyer believes it can help to introduce software, such as proprietary freeware communication tool Discord, which “runs in the background at all times and encourages the kinds of casual conversations that lead to innovation”.

New approaches

On the organisational side, Bright, which employs an agile development methodology, has already introduced a quarterly two-week "innovation sprint", which focuses purely on experimentation, to supplement its usual scrum sprints.

But it is also evaluating whether it makes sense to encourage team members to meet regularly, perhaps once a month, on a face-to-face basis in whichever location or space suits them.

Another option is to enable teams to use part of their budget to fund a satellite office or co-working space for all or part of the group. A third possibility is to ensure the whole company gets together four times a year at an inspiring venue, not only to discuss important matters but also to build relationships.

As for the renumeration question and whether workers should be paid based on location rather than on their skills and abilities, attitudes are mixed.

On the one hand, Dominic Harvey, director at IT jobs board CWJobs, believes employers that “think they can reduce costs regionally are in for a surprise because working remotely effectively explodes any regional differences and you end up paying top dollar for top talent no matter where in the country”.

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Harvey Nash’s White, on the other hand, says she understands the logic of Facebook’s approach because pay in big cities is often weighted because of high food, travel and accommodation costs.

But as workers increasingly consider moving out of urban centres, she wonders whether it will become necessary to change approaches to renumeration in other ways. “If employers are no longer providing employees with subsidised breakfasts or lunch, for example, the question is: could they reuse those budgets for other things, such as local gym membership?” she says.

Put another way, one option to at least partially get around the thorny issue of location-based pay could be to provide employees with more diverse benefit and reward packages to even things up a bit.

But Bright’s Collyer believes the entire location-based pay issue simply poses employers a “moral dilemma”. For her, the idea of paying some people less for doing “exactly the same job as their colleagues, even though they have the same level of competence and ability, doesn’t seem right”.

A further problem is that this approach means setting a range of different pay scales for different regions of the country, or world – an activity that is not only complex, but also makes it “very difficult to demonstrate fairness and transparency”, she says.

Dealing with ethical dilemmas

“I can see the pros of paying regionally if you’re a large, public company because you need to balance fairness with profit margins to keep your shareholders happy,” says Collyer. “As to whether it’s likely to lead to a wider drop in wages, that depends on supply and demand, but it could well lead to a fall in talent retention as people are less committed and loyal if they feel something is unfair.”

Meanwhile, uFlexReward’s Charman believes the whole notion of location-based pay is a dangerous and slippery slope. He says the logical conclusion of introducing it in a world where activity in physical offices is less valued is ultimately to move jobs away from high-wage towards low-wage economies, with the notion of cutting wages in “affordable” areas just the first step.

Another implication is the likely replacement of job catalogues, which are currently mapped onto grading structures to establish pay, with what Charman calls “skills registers”. This would lead to the elimination of jobs in the traditional sense. Instead, project leaders would bring combinations of relevant skills into teams and pay for them based on the number of time units they require, rather than on a daily, monthly or annual salary basis.

“Permanent staff will feel like they’re working in the contract market, but will still get benefits like holiday pay, training and career progression”
Ken Charman, uFlexReward

“Permanent staff will feel like they’re working in the contract market, but will still get benefits like holiday pay, training and career progression,” he says. “They will be assigned to projects and, rather than having regular hours and a standard income, they will be paid like contractors, based on the number of units of time they have worked each month and on the value they provide.”

This situation would also result in fewer contractors in the classic sense, but those that continued to work in this way would be employed by large contract agencies on a pay-as-you-earn basis. Prices for both in-house and third-party skills would also be updated in real time to reflect spot market prices and current demand.

“Ultimately, we’re moving towards a global auction for work, and remote working and location-based pay just brings it that bit closer,” says Charman.

But Harvey Nash’s White is not so sure. Although she acknowledges that some employers will “consider this kind of dystopian approach for sure”, she believes everyone is simply trying to feel their way forward at the moment.

“It’s so early in terms of people’s thinking right now and there’s such a wide range of views and opinions on how things are likely to go over the next five years,” she says. “Things will change dramatically, but how is difficult to call – we’re all having to think of new ways of doing things as the old rules no longer apply.”

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