Remote work may mean salary changes: experts

When Mark Zuckerberg hosted a town hall in late May with Facebook's 48,000 employees, some were tuning in from new cities they had scrambled to move to as the pandemic hit.
Zuckerberg had a clear message for them: if you plan to stay, expect a change to your pay.
"That means if you live in a location where the cost of living is dramatically lower, or the cost of labor is lower, then salaries do tend to be somewhat lower in those places," he said on the video conference, where he announced more employees would be allowed to work remotely permanently.
Zuckerberg gave Canadian and American workers until Jan. 1, 2021 to inform the company about their location, so it can properly complete taxes and accounting and use virtual private network checks to confirm staff is where they claim.
The demand is part of a new reality Canadian workers are being confronted with as employers try to quell the spread of COVID-19 and increasingly consider making remote work permanent.
The shift means many companies are having to rethink salaries and compensation while grappling with the logistics of a new work model.
Only one-third of Canadians working remotely expect to resume working from the office as consistently as they did pre-pandemic, while one-in-five says they will remain primarily at home, according to a June study from the Angus Reid Institute.
Like Facebook, Canadian technology companies Shopify Inc. and Open Text Corp. have already announced more employees will soon have the option to permanently work remotely.
Both declined interviews with The Canadian Press, but Richard Leblanc, a professor of governance, law, and ethics at York University, said he wouldn't be surprised if their staff that relocates will see their pay change.
"It's inevitable because the cost and expense structure of work has changed," he said.
"If you, for example, decide, that you could do the majority of your work from well outside the Greater Toronto Area...and you want to buy a home in Guelph or in Hamilton, should we expect the base salary for those individuals might change? Yes, because your cost of living has changed and your expenses have changed."
If companies calculate salaries properly, neither the business nor workers should feel their salary adjustments are unfair, Leblanc said.
However, figuring out what to pay staff transitioning to permanent remote work is tough, especially with a pandemic raging on and forcing some businesses to lay off workers or keep companies closed.
Owners have to consider what salaries will help them retain talent, but also how their costs will change if workers are at home.
Companies, for example, may be able to slash real estate costs because they don't need as much — or any — office space, but may now have to cover higher taxes, pay for their workers to buy desks or supplies for their homes or offer a budget for them to use on renting spaces to meet clients.
"(Businesses) are looking at every line item on their income statement....because they want to make sure they can survive and thrive over the long-term," said Jean McClellan, a partner at PricewaterhouseCoopers LLP's Canadian consulting practice.
Companies like GitLab, an all-remote company in San Francisco focused on tools for software developers, may offer some clues about how Canadian companies opting for permanent remote work can tackle salaries.
When GitLab started offering permanent remote work years ago it built a compensation calculator combining a worker's role and seniority with a rent index that correlates local market salaries with rent prices in the area.
Anyone can visit GitLab's site and plugin a role, experience level, and location to find a salary.
GitLab's junior data engineers, for example, make between $50,936 and $68,913 if they live in Whitehorse, Yellowknife or Iqaluit, where the Canada Mortgage and Housing Corporation said the average rents for a two-bedroom home last October were $1,695, $1,100 and $2,678 respectively.
That salary shoots up to anywhere from $74,359 to $100,603 for those living in Toronto, Vancouver, or Victoria, where CMHC reported the average rents for a two-bedroom home last October were $1,562, $1,748 and $1,448 respectively.
Leblanc warned that varying remote work salaries can create "global competition for talent in an online world."
People who apply for permanent remote-jobs, he said, may find their fighting for the role against far more people than ever before because companies will be able to source talent living anywhere in the world.
The companies that don't offer remote work at all could also find themselves at a disadvantage if their industry starts to value flexibility and look less favorably at companies that don't offer it.
GitLab settled on its model and calculator because the company said they offer transparency and eliminate biases around race, gender, or disabilities.
Its co-founder Sid Sijbrandij wrote in a blog that the calculator was dreamed up because every time he hired someone, there was a conversation around reasonable compensation.
The negotiation would usually revolve around what the person made beforehand, which was dependent on what city they were in. Gitlab scrapped that model in favor of the calculator and also started letting workers know if they move their salary could change.
However, GitLab acknowledges that many people see paying someone less for the same work in the same role regardless of where they live as "harsh." The company disagrees.
"We can't remain consistent if we make exceptions to the policy and allow someone to make greater than the local competitive rate for the same work others in that region are doing (or will be hired to do)," it says.
"We realize we might lose a few good people over this pay policy, but being fair to all team members is not negotiable."
This report by The Canadian Press was first published on June 21, 2020.
Companies in this story: (TSX: SHOP, TSX: OTEX)
By Tara Deschamps, The Canadian Press