As the remote workforce steadily increases, employers have been forced to rethink their employment policies and practices. When it comes to remote workers, one major issue for employers to consider is how to determine their level of pay.

Historically, employers have had clear compensation rates based on average labor market rates, which often depend on geographical location. Remote workers are not tied to certain geographical locations, leading to questions about how to set their pay rates fairly.

In response, some employers are paying remote workers based on their geographical locations, whereas others are paying them based on pay rates tied to the national average. Other employers continue to pay remote workers based on labor market rates in the operating locations of their companies, regardless of where the workers live.

Each approach to setting pay rates for remote workers has advantages and disadvantages. An employer must consider these pros and cons and determine which approach it considers most “fair” and least administratively burdensome. These considerations have led some companies to impose broad “pay zone” ranges that allow for differentiation in pay rates based on location and others to reject geography-based pay rates altogether, focusing instead on employee skills, productivity, and growth.

Employers also may consider “carving out” certain types of jobs that are critical to their companies or that require skills that are in high demand in the current job market. They can exempt certain positions from the national pay scale that they have adopted for other employees to ensure that pay for those jobs remains competitive.

Any approach an employer chooses to set compensation rates should strive to be transparent with its employees about the pay structure and any changes it makes to that structure. Employers must be able to explain what they have chosen to do with compensation levels and why. In addition, with a surplus of jobs available, employees want to know why companies make certain salary decisions. Open communication with employees about salary levels also can minimize the possibility of disparate pay disputes and allegations of discrimination and retaliation resulting from changes in the employer’s pay structure.

Source: Hall Benefits Law

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