The looming return to the office – put off so many times in recent months – has many leaders grappling with how to re-populate expensive real estate they’ve been paying for, but barely occupying, for the past two years. For some companies, one solution has been to throw more money at the problem, paying workers additional sums for the perceived inconvenience of actually travelling to work.
Much has been discussed about whether fully remote workers should be paid lower wages – particularly if they’ve now relocated to lower-earning geographic areas. Yet, far less attention has been given to in-office workers: if they’re going to give up the benefit of working from home in 2022, will they now need to be paid for it? After all, surveys show most employees have little appetite for going back to the office full time. In fact, 54% of remote workers in a mid-February survey from business-intelligence firm Morning Consult said they would consider quitting their jobs if their companies tried to force their return.
With statistics like these in mind, some companies are now considering pay rises and perks to help soften the blow of coming back to the cubical either full time or, more likely, on a hybrid model of two to three days in the office and the rest remote. Yet, studies show that even that may not be enough for some workers, who now prize flexibility far more than compensation. Moreover, creating new compensation tiers for remote and in-office workers could actually exacerbate pay gaps for women and minorities, creating new equity problems over the coming months.
To give or to take?
Pay is often a way for a company to signal where it places value. So, if the company feels strongly about the power of in-person connections right now – and wants to impress that upon employees – pay rises for those who come in at least three days a week may be a useful tool, says Stanford University economist Nicholas Bloom.
Moreover, pay rises tend to be a much simpler solution than cuts. In behavioural economics, ‘prospect theory’ suggests individuals assess their losses and gains in an asymmetric manner, making it far easier to give someone something than it is to take it away. This is the reason many analysts believe that, instead of remote workers being forced to take pay cuts, in-office staff will likely see gains. Yet, those gains won’t always happen in obvious ways.
“Most companies I’m talking to are typically moving to a two-pay system,” explains Bloom. Fully-remote workers may see their pay frozen, while “folks that come back to the office are going to get a 5% to 10% pay increase, which isn’t really a pay increase but setting it to market norms [due to inflation]”. Bloom says quite a few firms are talking about the 10% pay difference.
Employers are trying to make the office a destination that you want to go to – Ruth Thomas
Additionally, some companies are building in other financial incentives for in-office workers, such as commuting costs. “People kind of absorbed that travel cost into their living expenses while they were home for 18 months and now that feels like an additional expense,” explains Ruth Thomas, a UK-based pay equity strategist with compensation data company Payscale. That’s why companies like Bloomberg now offer global employees a daily allowance of $75 (£55) for commuting.
Along with pay, companies are coming up with other creative perks to reward in-office workers. Simon Coughlin is the associate director of London-based PR agency Babel, which asks employees to be in the office for a minimum of three days per week to aid in collaboration and creativity. “We’ve found that there is a tendency for people to choose to be in the office on days other than Monday and Friday,” he says. “So, to entice people into the office on those days we have breakfasts, lunches and, on Friday, drinks starting at 1600.”
Beyond drinks and meals, some companies are offering return-to-office benefits like social programming and free gym memberships. American real estate data company CoStar Group even raffled off luxurious prizes to workers coming back into the office, including a Tesla and all-expense-paid trips to Barbados (its office occupancy reportedly shot up by 16% after the announcement).
“Employers are trying to make the office a destination that you want to go to,” says Thomas. “The ‘yacht club destination’ is what I’ve heard it described as.”
However, Bloom cautions these premiums may not last. “In some ways [these incentives] are revolutionary, but I actually think that will die out because it’s really a transitionary phase when we are coming off the pandemic into the post-pandemic,” he explains. Five years from now, he predicts, the need for these pay incentives will probably be gone, “because you are not going to hire new people into the fully remote roles [for a hybrid office]”.
Pay rises, commuting allowances and even raffles are some of the ways companies are incentivising workers to return to their office desks (Credit: Getty)
Who’s coming back to the office (and who’s not)?
In the short to medium term, Bloom believes the issue of how fair it is to be paying the same workers at different scales could become a big topic of debate. “Next year it will be hot news and maybe there will be lawsuits over this,” he says. “People will feel – maybe rightfully so – aggrieved over it. They may say ‘I’m doing the same job as my co-workers’, but that will just die out as these folks are not replaced.”
There have always been pay discrepancies between distinct groups, including contractors and employees or local managers and managers flown in from abroad, Bloom adds. “The painful bit now is that it’s so transparent,” he says.
People will feel – maybe rightfully so – aggrieved over it – Nicholas Bloom
Thomas has similar concerns that differing pay scales and perks could open companies up to litigation. “In pre-pandemic times, we all were just expected to come to work, and you didn’t have that choice, and you couldn’t say ‘I was caring for this person’,” she says. “But some of us have had nearly two years at home where we built in these caring routines into our lives and we’re not prepared to give them up.” She believes that people who have proved they can do their jobs successfully from home could potentially allege discrimination if they are excluded from pay rises offered to their in-office colleagues.
Thomas notes that there are clear demographic differences in who wants to come back to the office and who doesn’t. Some 52% of women want to work at least mostly remotely, compared with just 46% of men, according to Slack’s latest Future Forum Pulse report. Meanwhile, the report also found that, in the US, 86% of Hispanic and Latino workers and 81% of Asian and Black workers prefer a hybrid or fully remote work arrangement, compared with 75% of white workers. The study attributes this to minority workers experiencing fewer microaggressions and doing less code-switching in a remote scenario.
These differing preferences have the potential to exacerbate pay gaps – particularly if women and minority workers are more likely to stay fully or partially remote and pay rises are more likely to go to employees who return to the office. Thomas urges leaders to keep a detailed count of who’s back at the office by race and gender “so you can spot whether that’s going to cause you an issue down the line”.
Beyond issues of diversity, equity and inclusion, there remain real questions about whether pay increases and perks will be enough to lure employees back to the office in the first place, particularly given how hot the labour market is for those who could easily change jobs if their remote work demands aren’t met. A study from Switzerland-based International Workplace Group found that 72% of workers preferred long-term flexibility in where they’re based compared to a 10% pay rise.
Meanwhile, on the anonymous professional network Blind, users were asked whether they’d prefer a permanent work-from-home option or a $30,000 pay rise to go to the office. Of the more than 3,000 US-based respondents – who represented companies such as Amazon, Google, and Twitter – 64% chose flexibility over pay. For some workers, it seems, the pay rise would need to be very, very significant to override the benefits of home working.