Reevaluating Total Rewards Strategies for the Growing Remote Workforce
Very timely article from WorldatWork, author Steve Brink.
Appreciate the key points from this. It is time to get creative with Total Rewards.
1. Understanding the Cost of Living and Cost of Labor Cost of living is the cost to live in a specific location and is based on the price of goods and services, housing and tax rates. Cost of labor is typically the predominant pay for a particular role in a specific location given criteria such as industry, years of experience, and/or seniority/responsibility. It’s a supply/demand-based approach, which has been used to set pay for years.
But with the rise of WFA, that supply-demand equation is being turned on it’s head. From a cost of labor perspective, the supply and demand of labor has been historically contained within a particular market. But now that we are able to acquire and employ talent across the world, our labor market is now global, which makes for a very different supply-demand equation.
In a perfect world we would create a new mechanism to determine cost of labor (i.e. international pay scales based on global supply/demand or skills-based pay). But those capabilities do not exist (yet).
In the midterm, some companies are looking to cost of living as a way to take their current compensation approach and weave it into this WFA world.
2. Setting the Pay Level
1) Align all Compensation with Company HQ
2) Current Market-Level Pay for Their Location
3) Develop Geographic Differentials Structure
4) Pay Based on Cost of Living
A newer concept and might be best aligned with an increasingly distributed workforce. In this approach, companies set competitive pay based on the HQ location, and then use a cost of living approach to adjust the compensation up or down based on where the employee lives/works.
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