Fri, Jun 16, 2023 page9

• Remote work pay cuts send the wrong message

  • By Sarah Green Carmichael / Bloomberg Opinion
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  CEOs frustrated that workers are not coming into the office more often are trying a new tactic: tying in-person attendance directly to higher pay.

  At least one big law firm has explicitly linked office presence to employee bonuses. At other companies, the connection is more tacit. Google recently said it would use face time as a factor in performance reviews; executives did not have to spell out that these ratings influence compensation. Nor did IBM chief executive Arvind Krishna need to explain what he meant when he said “your career does suffer” if you work remotely; if it is harder to get a promotion, it is naturally going to be harder to get a raise.

  Leaders who want to experiment with this approach should proceed carefully. A compensation disparity hits differently when framed as a penalty for remote workers than as a bonus for commuters, and a clear policy is likely to work better than vague insinuations.

  Some bonus for regular in-person attendance actually seems reasonable. Commuting is time-consuming, and something most people find unpleasant. It is expensive, and not only because of the price of parking or train tickets — if you cannot be home in time to pick up your child from daycare, you will have to hire someone to do it. If you do not have time to cook, you will have to get takeout. The costs add up.

  A study last year by economist Jose Maria Barrero and several collaborators suggested that remote work lessened wage-growth pressures because workers value it so highly.

  As my colleague Jonathan Levin wrote at the time, “remote work has an ‘amenity value,’ much like a company car or an office gym.”

  Clawing back that amenity could be expensive: A survey of London workers conducted by Bloomberg Intelligence earlier this year found that employers would need to give hefty raises to lure people back to offices five days a week.

  However, the recent crop of CEO comments tying pay to office presence are not framing remote work as an amenity. They are calling it a performance problem for which remote workers should be financially penalized — and that suddenly makes it less palatable.

  Some of this is basic loss aversion, the psychological principle that bad is stronger than good. If you find US$20, you would be mildly pleased, but if you lose US$20, you would be seriously annoyed.

  However, there is more going on here. There are questions of fairness. Several studies have shown remote workers are more productive. Should workers not be paid for their output? Not to mention that polls have consistently shown a preference for remote work among groups at greater risk of discrimination, such as women, older workers, people of color and people with diabilities.

  Yet paying for face time, rather than output, is a practice companies have long used. It is part of the reason that men earn more than women do — on average, men tend to report spending longer hours working. Women — especially mothers —generally report less, because they do more unpaid labor at home.

  To be clear, people who log more hours do not necessarily get more done. However, many managers have overlooked that detail. A pre-COVID-19-pandemic study of consultants showed that people who pretended to work long hours were rated highly by their bosses, regardless of their output. Employees who were honest about working “only” full time were penalized — even though they churned out just as much work.

  This is why, for years, workers have used tricks to give the appearance of putting in more time than they are — leaving a jacket on the back of their desk chair, for example, or scheduling e-mails to send at odd hours.

  Many attempts to cut through the politicking and reward employees for their actual output — such as Best Buy’s long-gone “results only work environment” — have sputtered.

  This is not to say that all remote workers are more productive — or that there is no reason beyond company politics to show up in person. As pro-office executives are often quick to argue, even if remote employees write more lines of code or create more PowerPoints, that is not the only way to create value. Mentoring, collaborating, contributing to a positive company culture — these create value, too, and most are more readily done in person than remotely.

  However, as Barrero said, although remote and in-person workers might be contributing in different ways, it would be hard to say which type of worker contributes more value overall. Moreover, in-office workers are not necessarily working all the time they are present, even if that is what managers assume: Recent data have found that, during working hours, in-office workers were more likely than remote workers to play computer games, he said.

  “The key is to think about why you want the employees to be in the office,” Barrero said. “An extra day in the office where they would be doing the exact same thing at home just seems like capriciousness.”

  Indeed, but whoever said companies were entirely rational?

  If companies want to financially reward employees who take the trouble to come into the office more frequently, they should be explicit about it: Come in X many times, get Y amount of extra money. Then workers can decide if juice is worth the squeeze and executives will have to be honest about the bottom-line value of an occupied seat.

  Sarah Green Carmichael is a Bloomberg Opinion editor. Previously, she was managing editor of ideas and commentary at Barron’s and an executive editor at Harvard Business Review, where she hosted HBR IdeaCast. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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