Can I pay employees less if they work remotely?

Many employees have found working from home beneficial for reasons such as flexibility with childcare, a dislike for the traditional 8 a.m. to 5 p.m. workday, an opportunity to relocate to a city that is closer to family, a lower cost of living, or the ability to save money and time on things like commuting and dry cleaning.

Further, many employers are wondering if they can benefit from a remote workforce by paying employees less. Google is reducing an employee’s pay if he or she is working from a remote location with a lower cost of living than the original job location, while JP Morgan said employees based out of their headquarters must work in the office to earn their full salaries.

On paper, reducing pay for remote employees due to a cost-of-living analysis makes sense for employers. However, it can cause several issues:
1. Legal Ramifications. A New York Times survey found that about 66% of women are responsible for childcare. Based on those numbers, it is possible female employees would prefer remote work to have flexibility with childcare. If a woman is being paid less than her male counterparts for doing the exact same job, the employer could be susceptible to the Equal Pay Act or gender discrimination lawsuits. Also, regardless of gender, an employee could feel slighted if he or she remains productive while working from home but is financially penalized for his or her remote work status. This puts employers at risk for wage and hour lawsuits.
2. Culture Consequences. Employers are saving costs with employees working remote from minor savings such as less money spent on breakroom coffee, paper, and office lunches to big savings from reduced or eliminated expenses for travel and commercial space. These cost-saving benefits to employers may be viewed negatively by an employee whose salary is reduced for working remotely. Employers are now faced with asking themselves, “How would lowering pay for remote employees affect my company’s culture?”

The effects of the pandemic on the workforce are still in their infancy and only time will tell whether paying remote employees less is a safe bet. Along with contacting an employment attorney, businesses should consider the practical ramifications before making that decision. Please contact AKC Law at 402.392.1250 if you would like to speak with one of our employment attorneys.