Gartner Research

Recalibrate Salary Costs in a Hybrid Work Environment

Published: 07 June 2021

Summary

As some organizations return to work, others evaluate continuing with hybrid or remote work options. This research can help executive leaders weigh the decision to adopt a hybrid work model and examine the potential for salary adjustments, based on employee relocation preferences.

Overview

Key Findings
  • Forty-eight percent of newly remote or hybrid employees would consider relocation if given the opportunity to work from home permanently.

  • Sixty-two percent of those who would relocate would also consider taking a pay cut tied to local cost of living.

  • Employees in senior-level positions are 1.2 times more likely than entry level and 1.3 times more likely than midlevel employees to relocate and take a pay cut.

Recommendations

As organizations begin to explore a hybrid work environment as it pertains to employee experience, executive leaders should:

  • Evaluate different employee groups’ preferences to best gauge which employees would be most likely to accept a revised compensation package that reflects the new circumstances of remote work, relocation and costs of living.

  • Foster a culture that accommodates employees’ relocation interests and offers adjusted salaries to design a more compelling employee experience for their workforce.

Data Insights

This research has been adapted from , which helps HR leaders weigh the decision to offer permanent remote work and salary adjustments to accompany relocation, based on employee preferences.

Since the pandemic has normalized widespread remote work, many organizations are now exploring employees’ postpandemicremote-work preferences, looking to determine the future of hybrid work.

This research highlights some of the key findings from a Gartner survey that examined employees’ salary adjustment willingness in relation to their relocation preferences. These findings will help executive leaders understand the potential for salary cost savings and improved pay equity in the hybrid work environment. The results revealed that, when given the opportunity to work from home permanently, many employees would consider relocation. Of the employees who would consider relocation, a majority would consider taking a pay cut.

In determining future remote-working preferences, the Gartner survey asked whether employees, if given the option to work from home permanently, would be open to relocating. Forty-eight percent of respondents who were newly remote or hybrid said they would consider relocating (see Figure 1).

Figure 1. Q: “If Your Organization Were to Give You the Option to Work From Home Permanently, Would You Consider Moving Away From the Area Where You Currently Live?”

Some organizations now allow employees to move to a new location and work remotely permanently, but they are adjusting salaries to accommodate for the local cost of living. A Gartner survey from August 2020 indicates organizations are likely to either weigh the organization’s headquarters location or the location where an employee lives when determining employee compensation, whereas a smaller percentage of organizations weigh the two locations equally. When an employee opts to live where the cost of living is lower, 20% of organizations adjust pay.

Of the 48% of employees who would consider relocating, 62% would consider a reduction in compensation (see Figure 2).

Figure 2. Q: “Would You Consider Moving Away From the Area Where You Currently Live and Taking a Pay Cut?”

Different demographics have varying likelihoods in taking a pay cut, should they consider relocating. Based on the preferences of newly remote and hybrid employees who would consider relocating, the following sections will show their willingness to consider a pay cut by age, location, level of seniority and family status.

Preferences varied among age groups. However, when examiningnewly remote and hybrid employees under the age of 50, roughly two-thirds would consider taking a pay cut when relocating. In contrast, 44% of employees aged 50 to 65 would consider their taking a pay cut (see Figure 3).

Since younger employees are roughly 1.5 times more likely than employees ages 50 to 65 to consider taking a pay cut, organizations should evaluate various age groups’ distinct preferences when determining if relocation accompanied by a reduction in pay would be appropriate.

Figure 3. Q: “Would You Consider Moving Away From the Area Where You Currently Live and Taking a Pay Cut (Based on Age)?”

Of those who would consider relocating, 67% of those residing in an urban area responded they would consider doing so even if it meant taking a pay cut. Compare this with 53% and 50% of employees located in suburban and rural environments said the same, respectively (see Figure 4).

Employees in an urban environment are roughly 1.3 times more likely than those residing in suburban and rural areas to consider taking a reduction in their salaries. Organizations should consider the location of employees when deciding who would be most likely to accept an offer to relocate and take a pay cut.

Figure 4. Q: “Would You Consider Moving Away From the Area Where You Currently Live and Taking a Pay Cut (Based on Location)?”

Roughly seven in 10 (72%) of those in senior-level positions say they would consider moving if it meant adjusting their salaries based on the local cost of living. In contrast, 58% of those in entry level and 55% of those in midlevel positions would consider taking a pay cut (see Figure 5).

Employees in senior-level positions are 1.2 times more likely than entry level and 1.3 times more likely than midlevel employees to say they would consider this.Organizations should weigh the level of seniority when deciding which employees would be most likely to accept an offer to relocate and take a pay cut.

Figure 5. Q: “Would You Consider Moving Away From the Area Where You Currently Live and Taking a Pay Cut (Based on Level)?”

About two-thirds (68%) of employees with children would consider taking a pay cut when relocating, whereas 54% of newly remote employees without children would consider the same option (see Figure 6).

Those with children living in their household are 1.3 times more likely to say they would consider taking a pay cut than those without children. It is important to take into account employees’ family status, especially as remote work continues to play a considerable role in giving parents the flexibility to be at home with their children.

Figure 6. Q: “Would You Consider Moving Away From the Area Where You Currently Live and Taking a Pay Cut (Based on Family Status)?”

Executive leaders must leverage these insights to support their organization’s evolving hybrid work model and initiate salary adjustments that can help the organization optimize salary costs while promoting pay equity.

Evidence

This research draws from Gartner’s 2020 Improving Employee Engagement Survey of 5,000 employees and managers globally and across industries.

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