Would companies hire and pay premium salaries when they can hire people in other countries willing to work for much lesser?
Roughly 7 months into this pandemic, most people have started building their PoVs on remote work and a possible model of what the future of work looks like (when we have a safe way of going back into offices).
We have 3 possibilities of what the future looks like –
- Primarily in office: Team is expected to come into the office regularly, but is allowed to work from home subject to approvals. This was how most companies were operating pre-pandemic
- Hybrid model: Teams can choose to work from office or home (as per their choice) with limited restrictions imposed. Companies would retain office spaces for teams to work from, as necessary
- Fully remote: This is a scenario where companies will never return back to an office. All employees can simply work from any place of their choosing. Large tech organizations like Quora and Twitter have boldly announced that this is the future for their teams
Let’s look a little more closely at #3 – The fully remote work scenario, as it is a dramatic scenario but very interesting to examine.
Remote work – Remote pay scale?
Imagine being a high tech start up in San Francisco. You are likely paying $200,000 a year to your top engineers who have maybe 7 years of experience. Over the past few months, all your engineers have been working remotely – many have gone back to their home towns, and many others have temporarily shifted residence to a scenic hill station nearby while a few have chosen to stay back in their rental apartment. While they are all productive and contributing as they need to, you realize that you may never have to go back to paying high office rents in San Francisco again! Wohoo!
But wait, if people are never coming back into an office, is the office rent the only avenue for cost saving?
Would you pay $200,000 for an engineer who is permanently working from say South Dakota (who you are never going to meet), when you can hire an equally competent engineer from India who would gladly work for 1/6th the price?
While engineers in India would rejoice at this thought, would that be acceptable for engineers in the US?
While this was one example, the thought extends to every company in every part of the world – when you take a call to be a fully remote organization, you have virtually unlimited access to talent. If you are based parts of the world where talent is more expensive, this comes with a very good price tag. Yes, it would be an initial challenge to train some of these employees on the cultural values of your organization and help them understand the market you serve, but the cost-benefit ratio really does work to your advantage.
Salaries, like most products and services, is a market driven function. When companies can hire great remote talent for a fraction of the price, will they be willing to pay a premium for existing employees and local talent?
How will employees react to this?
Due to the uncertainty during this pandemic, most companies have not yet formulated or committed to long term strategies around remote working, but they will commit soon enough. In scenarios where FULLY REMOTE work is embraced, employees might have to make their peace with either taking pay cuts or risk losing their job.
As an employee, you can save money when working remotely –
- Move to a cheaper part of the city (or to another part of the country/world where living is cheaper)
- Time and money saved on commute
- Clothes and accessories required to look professional in an office set up
Although, you might have to spend more on certain other avenues like –
- Setting up a home office
- Increased cost of internet, electricity, etc.
- Cost of food (in case your office was providing you food services)
Will the net of these expenses and savings justify a reduction in pay?
Will employees be willing to accept that their skills are now worth less given easy access to remote talent from other parts of the world?
If I were to guess, I would say that employees won’t be ok with it. They would be eager to come back into the office and go back to the grind we were used to seeing previously, rather than adapting and adopting a new lifestyle where they make lesser money in the bank at the end of any given month.
This is the primary reason why I feel the future of work will either be a hybrid model or a primarily work from office model – The refusal of a large portion of the work force to accept lower salaries.
Do you agree with this hypothesis? Do you envision a future where remote work is a reality? I would love to hear from you in the comments section below!