Should Remote Workers Be Paid Less?

Should Remote Workers Be Paid Less? 

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Figuring out compensation for your remote workforce is a tricky business. 

Should you pay everyone the same salary regardless of where they live — or should you be taking the cost of living into consideration? And what about the extra costs to your company represented by onsite workers vs. their remote colleagues? 

These questions don’t necessarily have one right answer — it all depends on your organisation’s compensation philosophy and what you consider fair. 

But if there’s one thing we like at Figures, it’s cold, hard data. So we thought we’d take a look at what’s actually happening in three major European countries: the UK, France and Germany. 

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What the data says

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We compared salary data collected by Figures in August 2023 across three key European markets. We wanted to see if there was a pay gap between remote workers and employees working onsite in each country’s capital city. 

Here’s what we found: 

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As you can see, the UK and France have a pay gap in favour of onsite employees in London and Paris. But surprisingly, employees in Germany seem to be paid more if they work remotely. 

However, the simple reason for this is probably that Berlin isn’t the best city to choose for this analysis, despite being Germany’s capital. Our data suggests that salaries in Munich are about 7–8% higher than in Berlin, because of the higher cost of living there. That means that Munich is a more useful comparison to London or Paris.

And when we look at the figures for Munich? We find a 7.6% pay gap in favour of onsite workers — even bigger than the gap in the UK or France. 

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Reasons for paying remote workers less than onsite employees

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So, we’ve established that companies in the UK, Germany and France do, in general, pay their remote workers less than their onsite counterparts — at least in the cities with the highest cost of living. The question is, why? 

Here are some of the reasons why organisations choose to pay their remote employees less than those who work in the office. 

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1. Remote workers don’t have to live in high-cost-of-living areas

An employee earning 30,000€ in Paris or London doesn’t have the same disposable income as someone earning the same salary in a smaller town or city. So if an employee has to live in one of these high-cost cities to commute to the office every day, it makes sense to compensate them with a higher salary. 

It’s worth noting that this isn’t necessarily an argument for paying remote workers less than onsite ones. Instead, it’s about paying everyone according to where they live, regardless of whether they work remotely.

For example, Google pays its employees based on the market rate where they work, whether that’s at home or in the office. That means that an employee working from the office earns the same as someone working remotely in the same city, but more than those who choose to live somewhere with a lower cost of living. 

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2. Remote workers save on travel, clothes and food 

As well as giving employees the option to live somewhere cheaper, remote work also lets employees save on the cost of actually going to work. People who work from home 100% of the time have no commuting costs, don’t have to shell out for officewear and can save money by eating at home too. 

Depending on your point of view, this could be a justification for paying remote workers less — or rather, paying onsite workers more to accommodate the extra expenses they have to incur just to come to work. 

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3. (Some) remote workers prefer lower pay to in-person work 

One of the biggest benefits of remote work for employees is that it promotes a healthy work-life balance. Remote workers can work when they’re most productive and take breaks when they need to. And they don’t need to spend hours sitting in the car or on a train just to get to the office. 

And, according to a recent survey by Hays, 56% of UK employees would accept a lower-paid job for a better work-life balance. That means that many employees would actually prefer to work remotely than to earn a higher salary — so why not give them the choice? 

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Reasons for paying remote workers (at least) as much as onsite employees

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Of course, there are also some arguments against paying remote workers less than their onsite colleagues — here are a few examples.  

1. Remote workers cost the company less than in-person workers 

When an employee works on your premises, there are a lot of costs involved. 

That includes things like electricity, internet and other utilities — costs which are generally passed on to the employee when they work from home. It also includes smaller expenses, like toilet roll, hand soap and coffee pods, which all add up too. Plus, even the cost of your office space itself could be drastically reduced if you had fewer employees coming in every day. 

Put simply, your remote employees cost you a lot less than your onsite ones, irrespective of their salaries. Of course, some employers do offer remote work stipends to help employees with the cost of office equipment — but these still tend to be much less expensive than the cost of having someone in the office full-time. 

With this in mind, some companies choose to effectively pass on this saving to their remote employees by paying them the same as their office-based colleagues.  

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2. Remote workers are (at least) as productive as onsite employees

Before the events of 2020 forced many companies to go remote, a lot of company leaders worried that their employees just wouldn’t get the work done if they were allowed to do it from home. So it was a pleasant surprise when many organisations found that their people were just as productive when working from their home offices (or kitchen tables) as they were on site. 

In fact, a study from Slack’s think tank, Future Forum, found that remote and hybrid workers are 4% more productive than those who work in the office full-time. And employees themselves agree: 35% of respondents who prefer working from home say they feel more productive, according to a Gallup poll.

This leads many organisations to the conclusion that they should pay their remote employees the same as their onsite workers, simply because they’re getting the same value from them. 

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3. Reducing pay for remote workers can cause resentment 

Here’s the thing about paying your remote workers less than your onsite ones: however you justify it, it could lead to resentment and a drop in engagement if you don’t handle it right. 

Remote workers who know they’re being paid less than their office-based counterparts might feel that they’re valued less — which can easily lead to retention issues over time. Ultimately, this could badly hurt your employer brand, making it more difficult to find and attract the right candidates going forward.

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What’s the right thing to do?

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So, what is the right way to set compensation for your remote workers? In our view, there are three ways of looking at it: 

1. Remote workers have the freedom to live in areas where the cost of living is lower. Therefore, they should be paid less than onsite workers who have to bear the expense of living in a capital city. 
2. Remote workers represent a smaller cost to a company than onsite workers. Therefore, they should be paid (at least) the same as their in-person counterparts. 
3. The important thing is to align compensation across the organisation, regardless of where people live (FYI, this is the way we do things at Figures). 

In our opinion, none of these viewpoints are inherently unfair, and there are strong arguments for each of them. Every company should decide what it considers to be a fair system — and then stick to it. 

Because what is unfair is when a company doesn’t have a policy in place at all. In these situations, remote workers’ salaries might vary depending on how well the employee negotiated or what a particular hiring manager thought was best. 

And if we know anything, it’s that these sorts of inconsistencies do cause resentment and problems with retention — which can hurt your business over time. 

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Learn more about fair compensation 

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Want to make sure your compensation strategy is fair for all of your employees? Our ultimate fair compensation checklist will set you on the right path.

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