When the history of the modern workforce is written, the last 18 months will be seen as something of an earthquake. Rarely has there been such seismic change in such a short amount of time, not just to the way we work but where we work.
The ongoing global pandemic is full of challenges and new complexities for payroll and HR professionals. Navigating those changes in real time — as the expectations of both employees and employers shift and expand — is a watershed moment. The way employees work has changed, which means the way companies pay, support, hire and retain them needs to change as well.
One thing is quite clear about this new landscape: Office workers don’t want to return to the old status quo. According to a global survey of 12,500 people conducted by IPSOS and the World Economic Forum, two-thirds of respondents said that workplaces should offer more flexibility with regard to coming into the office once Covid-19 restrictions are no longer in place. The ADP Research Institute (ADPRI) report People At Work 2021: A Global Workforce View found that 67% of workers feel empowered by a flexible work setup — a significant increase from 26% at the beginning of the pandemic.
In light of this research, CEOs and executives who insist workers return to the office full-time may risk reputational damage and losing employees. And, importantly, they may be missing out on the reality that hybrid work may actually provide the best of both worlds for employees. This was one of the key findings from recent ADPRI research into employee sentiment on the workplace. It revealed that hybrid workers reported more connection to their teammates than remote workers or on-site workers. This can only be a good thing for employers.
Once you accept that full-time office life is not coming back, countless questions follow. Chief among those questions: What do long-term remote and flexible work arrangements mean for the strict rules of payroll?
Charles Cotton, senior advisor for rewards at the U.K.’s Chartered Institute of Personnel and Development, cautions against assuming that the strategies that boosted productivity for some companies during what he calls the pandemic’s “exceptional period” will continue to work indefinitely. Once that X factor is gone, he says, “what organizations need to think about is what made it special, what made it successful, and replicate that as we return to normal.”
Who works where, and when?
While greater flexibility has been a boon for workers, it has created a lot more work and complexities for payroll and HR professionals. ADP’s Potential of Payroll research found that 61% of respondents were not able to adapt their payroll to meet many of the needs of their company during the pandemic, and 51% had limited confidence in their payroll compliance.
“You look at things like absence management, attendance tracking — these are core parts of an HR department’s job. Now you’re trying to figure out what someone is doing at home, what time they’re logging in, what time they’re logging out, and if they are incurring overtime liability,” says Scott Hamilton, global managing director for human resources and compensation consulting at Gallagher. “HR departments are working hard to make sure that they’re remaining compliant with the appropriate local, regional, state and national regulations around the globe, but it’s definitely more complex.”
The Potential of Payroll research showed that payroll accuracy was one of the first casualties of the pandemic. Before Covid-19, 52% of companies reported payroll accuracy greater than 90%. But within the first six months of the pandemic, that share of companies dropped to just 27%. Companies adopting a more flexible working model for the first time have to ensure they have the right payroll partner with the expertise and tools needed to help them stay compliant and guarantee a consistent employee pay experience.
The new variables range from the relational to the logistical: Companies need to ensure that fully remote teams can still forge a shared sense of purpose. This is, Cotton says, to avoid “the danger that it can become transactional because you don’t know your colleagues, you don’t know your clients or customers.” Managing a hybrid team also involves coordinating many different schedules and preferences for who works where and when.
Employers now have to address a very complex set of variables that includes the employee’s lifestyle needs.
Scott Hamilton, Gallagher
“Some organizations may find they’re going to have a smaller building with fewer desks, but you need to make sure you don’t have more people turn up to work one day than you have desks for,” Cotton says. Teams can use software to manage on-site workspace bookings, letting personal preference lead the way. Some people with roommates or small apartments might prefer to come into the office, while employees who are also juggling childcare responsibilities might want to mostly work from home.
Overall, Hamilton says, managers are beginning to see their teams more holistically than they did before the pandemic.
“Going from no virtual to all virtual in a short amount of time, it’s forced the integration of work and employee lifestyles,” Hamilton says. Whether recruiting a new employee or retaining an existing one, “it has created a unique situation where employers now have to address a very complex set of variables that includes the employee’s lifestyle needs.”
A different level of support
Historically, much of the conversation around flexible work has framed it as a perk or reward for employees — something they should be grateful for. That’s now changed, and it’s important not to overlook the fact that remote or hybrid employees may need support that wasn’t necessary before. This is especially true if a company is going fully remote, reducing the overhead of maintaining a physical office. It follows that some of those cost-savings should be passed onto the employees to help them do their jobs well.
“If an organization gets rid of the office, in that option people don’t have much of a choice, so the organization may be more prepared to support their employees in their home,” Cotton says. “While if it’s a hybrid, in that scenario the employer doesn’t have to do as much, but they still need to think about what the home set-up is like in terms of health and safety.”
Hamilton agrees that a fully remote workplace requires more support from the company.
“I think we’re seeing more organizations recognize that if they’re going to allow someone to work fully remote, that’s a different level of support from a technological, ergonomic and productivity perspective,” Hamilton says. “When the home becomes an outpost of the employer, you have to start asking these questions and dealing with them.” Some companies are offering a home office stipend to meet their IT and productivity standards.
Who earns what — and where?
Perhaps the most divisive area of the new work landscape is whether the location of work should affect how much employees are paid.
Cotton notes that in many countries it is illegal to cut the pay of existing staff without their agreement. But when it comes to determining salary for new hires in the remote work era, “The question then becomes how much do you pay? Do you factor in some kind of cost of savings, say for instance saving on the commute, train tickets or petrol for cars? But then you’ve got to take into account an increase in costs such as heating the house.”
He also notes that beyond salary, firms have to be diligent about complying with all regulations when it comes to tax, compliance, data sharing and benefits — and crucially, keeping on top of where all their remote workers are working from to comply with the correct regional tax rules.
The pandemic highlighted how companies were able to operate with a distributed workforce, but it also showed that many employees could actually work successfully from almost anywhere. Greater global mobility could lead to the possibility of requests from employees to work in a country other than that of their employment contract, possibly one where the company doesn’t have a presence. Businesses will need to deal with the tax and labor law implications of this.
Being able to hire from anywhere is a competitive advantage for companies. They can both draw from a wider pool of talent and enter new markets. But those firms need to make sure they have full knowledge of where their employees are working from and when anything changes.
Doing that means having a Human Capital Management (HCM) tech stack that’s up to date and ensures that data is being shared across borders and across the company in a legal way. One thing is for sure: No one is saying that the “work from anywhere” era has made life easier for HR and payroll professionals.
“Benefits are changing to address changing employee needs. Compensation is changing to address different work arrangements,” Hamilton says. “And there are a lot of complexities that HR and payroll professionals are faced with today that they weren’t faced with two years ago.”
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