Are UK employers considering pay cuts for remote workers?

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A new survey by HR software provider CIPHR reveals that over two-thirds (68%) of British businesses are contemplating pay cuts for staff who opt to work from home, despite many (53%) saying they’ve actually saved money by having more remote workers.

CIPHR polled 150 business owners, CEOs, and senior managers to find out more about employers’ attitudes towards staff working from home. All survey respondents work for organisations that pay location allowances and have some staff working from home due to the pandemic.

The majority – a significant 97% – say their employees will be allowed to continue working from home at least some of the time. However, that does come at a potential cost.

While two-thirds (68%) of employers have given all or most of their staff the option to work remotely (29% and 39% respectively), the same number (68%) are thinking about reducing the pay of employees that wish to work from home permanently.

People wishing to be fully remote are more likely to face a pay reduction than their hybrid working colleagues, with two-fifths of employers singling them out for cuts (39% compared to 29%).

Smaller organisations (those with 26 to 50 employees) are among the most likely to let all their staff have the option to work remotely (39%), compared to only a quarter (23%) of their larger counterparts with over 250 employees.

When it comes to location allowances (such as London weighting and other geographical premiums) it’s even worse news for employees. According to the results, 86% of employers have already suspended, reduced, or removed these payments during the pandemic because of home working. Most (49%) have only temporarily reduced them, and a quarter (23%) have temporarily stopped them. But 14% have made the changes permanent.

For the 14% of organisations that haven’t made any adjustments to their location allowances yet, 29% are reportedly considering doing so.

Pros and cons of WFH

According to the results of a separate CIPHR survey, nearly three-quarters (72%) of people have expressed a preference for working remotely in some capacity. Although many organisations have embraced this new way of working, opinions are mixed on how this might affect people and their careers long-term.

When asked whether they agreed that ‘working from home can have a negative impact on career advancement’ over half (57%) of surveyed employers (and 60% of those in large organisations) said they did. On the flipside, 61% of smaller organisations thought the opposite.

Looking specifically at the impact on younger staff at the beginning of their careers, the results are more clear-cut and in line with recent headlines on the subject. Three-quarters (77%) of employers agree that ‘it is more beneficial for younger employees to work in an office / workplace than from home’. That figure is largely reflective of most industries, although it was higher (over 90%) for certain employer groups – those in government and public administration, legal services, software, and construction, for example.

Smaller organisations bucked the trend again, with only 61% of smaller employers in agreement that being office or workplace-based was more advantageous for younger workers compared to working from home.

Commenting on the findings, Claire Williams, director of people and services at CIPHR, says: “Employers need to tread very carefully if they are going to look to remove location allowances or cut wages based on location, as a result of the shift to more home working. Not only because of the legal and ethical considerations and consequences but the long-term impact on employee loyalty and risk of increased turnover.

“If employers have very clear policies and contractual arrangements in relation to location allowances, then this will be easier to navigate. But that won’t necessarily make it more palatable for the employee who is receiving the news that their earnings are going to reduce through no fault of their own.

“That said, the impact of the pandemic on the economy and organisations across the globe means that some difficult and very commercially focussed decisions will have to be made to ensure long-term survival and success. Good communication is key, especially when explaining why certain decisions have been made to the detriment of the workforce.

“With survival in mind, it is to be expected that organisations will look to capitalise on the success of home working and release properties to make significant annual savings. However, this will also have consequences that should be considered.

“Whilst many people have relished working from home, the results from recent CIPHR surveys, and other similar research, indicates that younger employees prefer an office or workplace environment. It can also hinder the pace of personal and career development – both potential drivers for increased turnover and barriers in attracting top talent. If the savings are just too significant to ignore, then organisations could consider alternatives to a permanent office, such as shared workspaces that can be hired on an ‘on demand’ basis or ‘office hoteling’ being the more common phrase.”

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