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While the era of employee resignations may be ending, the era of remote working is not gone.  It is here to stay, and employers must address how to pay remote workers.  Historically, the employer’s place of work dictated the pay of employees who worked at or reported to that location.  Now, the labor market rates where the employee works, or reports may not be the employer’s basis for determining pay scale.

Most employers still pay employee based on historical work location or where the employee reports but tying pay scale to the employer’s operations location is changing.  Some employers now set pay scale based on where each employee lives.  Others set pay scale based on some calculation of average across a region or the nation (or the world, depending on employee engagement).  Which approach the employer chooses in the long run is dependent on the employer’s needs, circumstances, values, and goals.

This issue of compensation setting employee compensation the same regardless of location, by location or based on macro locations is a hot issue.  For small to mid-sized employers, setting pay the same across the nations or by location is often too overwhelming and administrative prohibitive (without using a professional employer organization (“PEO”), where PEOs work with small businesses to help them manage payroll-related taxes, certain human resources functions, access to benefits, and other employer-related administrative functions).

Employers who choose to pay based on major metropolitan areas usually set pay for remote employees using the closest zone.  However, this necessarily results in pay scales higher than smaller city locations from which the employee may be working.  But employers may have to suffer this higher cost in order to retain needed talent.

Other employers have decided to set pay based on national averages.  Depending on the employer locations, this may not result in significant overall compensation differences.  In other circumstances, it has resulted in lower salaries, especially if the employer pulls talent nationally and has work locations in large metropolitan areas.  For smaller employers, this may not be feasible.

But the employer location or employee remote work-from location may not be the best analysis.  Employers also are using a base compensation and then an adjustment based on the employee’s shown experience, growth, and skills.  This takes geography out of the equation.  This also allows employers to staff hard to fill or hard to retain vacancies with compensation based on something other than location.  This allows the employer to fill or retain talent for critical jobs, rather than location.  An employer may use one of the market rates noted above, and over lay a critical employee scale to hire or ensure retention of these positions.

Creating pay disparities for no reason, however, can result in employee unrest.  Transparency and clear communication are the key to employee engagement and to avoiding potential liability concerns in disparate pay, anti-discrimination, and anti-retaliation claims.

Some employers may not want to yet make long-term policy changes in the current talent market.  But remote working is here to stay.

Here at Epps & Coulson, LLP, we work to remain up to date with employment laws, trends, and practices as they emerge, and we can help employers in addressing these issues.  Please contact Dawn at:

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

Attorneys admitted to practice in California, New York, Colorado, Texas, and Oregon