Salary Benchmarking in the Time of Coronavirus

In this article, we discuss why salary benchmarking and equal pay for equal work are more important than ever in the time of coronavirus.

According to the latest report from the Office for National Statistics, nearly half of currently trading businesses reported that their turnover had decreased below what is normally expected for this time of year.

Ever since the lockdown began in March 2020, a full seven months ago now, companies have been looking for ways to cut costs, leading some to pose the question: should employees take a pay cut now that many of them work remotely? After all, by working from home, they will save money on transport and day-to-day expenses.

Why is salary benchmarking important?

It plays a key role in ensuring pay consistency and transparency across your organisation, and what’s more, it should be an ongoing process. Getting salaries right is crucial to attracting and retaining top talent; these days, employees are more informed than ever about market rates of pay for their roles, which means having a good understanding of where your organisation sits is essential.

When we conduct benchmarking for our clients, we always ask where they are recruiting from and where people go when they leave. Are they recruiting locally or from a much wider geographical area? Are people commuting long distances, perhaps working half the week from home? Location and industry play a decisive role in salary benchmarking, and while some may benchmark against national data, others might look to regional or even city-specific figures.

Navigating the ‘new normal’

So where does this leave us in the age of coronavirus? Remote working has become a way of life for almost half of British workers, with many employers still reluctant to reopen their doors. But even once the worst is over, the pandemic has shown that working remotely at scale is both achievable and, for many employees, desirable on a more permanent basis. Which means they could reasonably be anywhere.

Given what we know, it seems increasingly likely that in the future, organisations may stop looking at local salary benchmarking data altogether, opting instead for national data with the possible exception of Central London. For the most part, this is good news. Benchmarking against national data offers a robust sample size compared to regional data, which can be less reliable and more likely to fluctuate from year to year. In the vast majority of cases, companies will be better served by looking at the national data

Should home workers be paid less?

In light of the shift towards remote working, conversations are starting to take place around whether organisations can offer lower base pay because they’re no longer spending time and money commuting to work. So, it’s important we think about why we are paying a base salary in the first place. Is it to reflect our employees’ skills and contributions? Or is it merely a reflection of their living standards and expenses?

By that rationale, we would expect to pay the employee who lives in Hampstead and drives a Mercedes a much higher salary than the employee who lives in Croydon and rides a bicycle, because their living standards and expenses would be much higher. The fact is that if two people are doing the same job, lifestyle is irrelevant; your employees have a right to equal pay for equal work. This being the case, there is no justification for reducing salaries just because they’re currently saving money on Pret sandwiches.

Finally, consider the counterargument. Since employees are no longer coming into work, they may very well point out that the company is saving money by no longer having to pay rent on its office space. Does this mean that employees are justified in asking for a higher salary? Chances are, that request would not go down too favourably.

If you would like to discuss salary benchmarking in your organisation, send us a message or call 0203 8806650 today.