Pay Review or Pay Cut?

pay review or pay cutWelcome to this HR Blast on all things related to Pay and Benefits. We will look at:

  • Should remote workers be paid more or should their pay be cut
  • What benefits need rethinking in the light of increased remote working
  • New jobs, new organisational structure, changing roles… new approach to pay?
  • Staff with reduced pay, when are you going to reinstate the original pay? The dangers of falling behind market rates.

Should remote workers be paid more or should their pay be cut?

We touched on this topic in a recent employment law blast but return to it now as things are hotting up and businesses need to do some thinking, rather than announce an approach without thinking it through.

Here are a few of our thoughts, which will probably require your finance team to do some number crunching and then your top team to spend a good hour or so discussing, please don’t make a decision in haste!

Have you been asked yet…

This week a 20-year-old said he had asked his company for increased pay due to the expectation of increased household bills across the winter. As people turn their heating on and ramp up the temperature this question is going to get asked more and more often. This lad is currently required to homework 4 out of 5 days a week so he said that working from home had also forced him to upgrade his Wi-Fi. Notably, he failed to inform his employer that he actually lives at home, pays no rent, the Wi-Fi is free courtesy of bank of mum and dad and he also failed to mention that his brother and father are also in negotiation with their employers for a contribution to the bills. Isn’t life just complicated!

Any obligation to pay?

If we take his lying by omission out of the picture and go back to basics, is there an obligation to pay a benefit to cover the costs of home working? No. There is no legal obligation. However, some organisations feel they have a moral obligation or, otherwise, they pay an additional benefit to cover bills as that is part of their ongoing (and budgeted) strategy around engagement and retention.

So if you are being asked by staff, our first question to you is do you feel you have a moral obligation or will you choose to pay in order to enhance benefits/attract and keep the right talent? If so, how about starting discussions at around the £600 a year mark per home worker? This will of course be a benefit that needs to be declared.

Typical savings

You might however go back to the calculator and work out the average savings for your employees in not commuting and not having to buy lunch out each day. Then you might offset these savings against the amount you consider would reflect the increased costs of being at home to work. Perhaps you, like other employers, will then come to the conclusion that your employee is not so out of pocket after all, so no benefit need be paid.

Just for interest, we have seen reports of typical savings per week of between £40 and £50 – around £2K-£2.5K per year. Be careful though as we are in no doubt that the typical amount will vary considerably in different parts of the country.

Expectations

We are seeing an expectation of a new home working benefit by employees who have decided that if their employer is saving on office space and costs that those savings should be shared amongst employees in the form of a pay increase or home working benefit.

Be careful to manage expectations at this time, when the media has been suggesting to many employees that they are in the driving seat when it comes to such things. Our favourite expression comes to mind….who is managing whom?

Reducing salaries

Of course you might instead head down the path of reducing pay, rather than adding in a benefit and if you do this you are not alone. Silicon valley employers have led the way saying that if employees wish to move out of silicon valley to an area with a lower cost of living then salaries will be reduced by up to 18% (as reported by one of these companies).

Now shaving 18% off your staff costs bill would win you a few brownie points with your CFO or accountant!

Of course to do this you would have to know where in the UK (or world) your employees are currently living whilst they remote work. Not every business has a handle on this.

Should your HR function be chasing up to ensure they have full knowledge of current place of abode? Some companies have also started requiring staff to return to the UK whilst remote working, presumably to ensure no awkward tax situations arise… might this apply to any of your staff?

Whilst deliberating on all things pay, you might also think of other reasons to reduce pay – just one reason for this is that you can currently attract new starters for lower pay than you would have paid a year ago.

Don’t rush into any decisions, take your time to think it through.

What benefits need rethinking in the light of increased remote working?

Whilst many businesses are already operating a ‘shopping basket’ of benefits allowing employees to choose once a year how they spend the allocated money, many are still working with a fixed benefits system. Perhaps this is the year to throw that out and start again with a blank piece of paper – not forgetting a need to consult and get agreement to any contractual changes of course!

Are yesterday’s sought-after benefits such as company cars, subsidised on site nurseries, office gym membership or medical cover still as coveted as they used to be?

We are guessing that a lot of company cars this year have cost a lot in tax, but not accumulated that many miles on the road. Automobile organisations are also seeing a time is fast approaching when no one will own a car and the younger generation will never have to learn to drive. Time for a rethink?

There have been a lot of expensive gyms unused for months too in city centre locations. With the huge surge in home fitness are gyms coupled with the lack of travel into city centres are these still a valuable benefit? Time for a rethink?

Perhaps employee benefits to consider for 2021 are:

📡 A contribution to enhanced Wi-Fi (think gamers) or a second Wi-Fi line to house (think parents!)

🏠 Home office furniture for those who like style, comfort and/or expensive.

🎧 Stylish headphones and accessories for zooming.

💻 Upgraded laptops and additional screens for those who like all things top notch.

💷 A pot of money for self-study/self-learning.

💷 A pot of money for personal/life coaching.

😷 Unlimited free COVID tests (essential for those who still want to be travelling).

👕 Corporate pyjamas and other lounge wear.

👩‍🏫 Personal tutors for children.

🚐 1 week ‘time share’ of a company owned motor home.

🚴 Membership for a cycling or running club.

❤️ Membership of a dating site/club for those singles unable to socialise and meet other singles.

Come on… get your thinking caps on, if ever there was a time for a good rethink on all things related to benefits then the time is now!

New jobs, new organisational structure, changing roles… new approach to pay?

If your sales exec used to be up at dawn and on the road til 9pm every day and received a salary that reflected the huge time commitment of the job, does that justification of their salary still apply? Are you brave enough to have the discussions with staff that need to be had?

If you are taking out 5 jobs from your senior management team and replacing with 3 very different roles again, is this the time to rethink how you reach a decision about salary levels. If responsibility levels have changed, size of budget has changed due to economic downturn, geographic scope has changed etc, then it is a good time to rethink the salary. It could go down but equally, if you are moving out some tech dinosaurs and replacing with shiny Tik Tok influencers the pay just might go up! Don’t just keep on doing what you always used to do which is to replace like for like and on a salary just 3% up on their predecessor!

And what about all the new roles that are being created that currently have no salary attached? With a surge in automation we are finding some data entry and other low level roles disappearing whilst we have a surge in automated jobs. What are you going to pay these new people? If HR introduced new roles of   ‘manager of remote workers wellbeing’ and ‘human digital skills expert’ where are you going to pitch the salary levels?  Your starting point here is to decide what jobs existed quite happily in your business in January 2020 but just one year later those roles are no longer fit for purpose. What roles need to go? And in their place what new roles need to be created. Then you need to decide the appropriate remuneration. This process will no doubt take time, so the time to start thinking and planning… and budgeting is now.

Staff with reduced pay, when are you going to reinstate the original pay?

And finally, do you have a plan for reinstating those pay cuts that staff agreed to a few months ago? Be very careful not to let the pay cuts go on for so long that when the time comes for business to pick up, your key players head off to a different sector after retraining or head off to the competition who took a risk and reinstated pay much earlier than you did. Be careful not to lose your top players.

How we can help

We know there is lots here to consider and reflect on. If you need a remuneration and benefits expert for a project or coaching for your HR Director please do get in touch as we can recommend. Equally if you just want a sounding board, the Jaluch team is here to support!

As always, our advice is that any contractual change cannot just be forced through, work with your staff representatives and staff on these things to get agreement ahead of final decisions being made.

Jaluch is here for expert HR advice, delivering of training (including online training) and all manner of things relating to the people you employ and contract with. Don’t feel stuck, we can give advice on an ad hoc basis if required (no contract needed)

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