Is Work From Home now part of Total Compensation package?
Companies are using it as a benefit to attract quality talent.
Its been roughly 500 days since most tech companies in BayArea (and outside) issued their first work from home (WFH) guidance against COVID-19. And now (in H2-2021), a lot of employees are expected to head back to work. But will they?
Every day we read news articles highlighting research/surveys stating that most people don't want to go back to the office. I have talked to a lot of friends in the tech industry who share the same feeling. They don't want to go to work most days of the week. But for some reason, every internal company survey says 60-75% of employees want to head back to work. 🤷🏽♂️
I am not saying that employers are lying, but there seems to be a disconnect somewhere. And I think its in the way the data is being interpreted i.e.
MOST (60-75%) employees want to get back to work for at most one day a week and not at least three days of the week.
The remaining employees want a complete remote.
Interpreting that most people want to get back to work to most people need to get back to work three days a week seems like a disconnect.
No one wants to head back to work five days a week. To accommodate that, the best plan that most employers are presenting today is to have a three days office and two days WFH split.
The problem with that split is that WFH is no longer a perk like it once used to be. It has now become a benefit. So now, companies need to re-evaluate this proposal from a benefits POV and not a perk.
Perk Vs. Benefit
Perks are something extra in the form of an incentive or reward that a company gives and the salary—for example, phones, company cars, and even free food.
Benefits are something that covers employees' expenses from their take-home income—for example, health insurance, 401K, commuter cost, etc.
Pre-COVID, WFH was a perk. Companies offered that to employees on top of salary. Not every employer offered WFH, and it also varied role-to-role.
During-COVID, WFH became a mandatory perk. Everyone had to offer that for every role.
Post-COVID, WFH has now become a benefit because
Post-COVID, companies are using WFH or fully remote as a benefit to attract employees.
Why WFH is a benefit for employees
The biggest concern in returning to the office, apart from getting sick, is the commute. But you may say employers cover the cost of the commute, so that should not be an issue.
It's not about the cost of commute that covers parking, tickets, or gas. And even if it was, most commuter benefits from employers cover only $100-300 per month in actual cost.
A significant portion of the commuter cost is the time spent during the commute. Employees have to spend astronomically high time commuting, especially in the major cities like San Francisco, New York, Chicago, etc.
Let's look at the math.
Commuting Math
John Doe (JD) is an employee working in BayArea in tech. We will ignore stock options and use pre-tax money to simplify calculation as one will move the cost higher and the other lower.
JD base is a full-time employee (40hrs/week for 52 weeks) and makes $150K per year.
The average BayArea commute time, as reported by The Work Research Group, is 35 minutes one way (which I don't think is correct). It feels like 90 minutes, to be honest. But let's settle for 60 minutes end-to-end one-way commute. This brings the total commute time to be 120 minutes or 2 hours per day.
Using the most common WFH split 3/2, the raw cost of commuting is $432 per week for JD. Scale that to 52 weeks. That's $22,500, which is 15% of JD's total base salary.
So if an employee doesn't commute, they are making (or saving) 15% of their total take-home pay. This number goes higher (~25%) if you have five days of commute. This is just in time saved and ignores the cost of car, gas, trains, parking, etc.
Also, it is important to note that we are not even using the cost of the hour. Most parents (including myself) would value my morning hours 7-9 AM and evening hours 5-7 PM higher than my 9 AM-5 PM hours because of parental duties. And unfortunately, my most precious hours overlap precisely with the commute hours.
But does this math makes WFH a benefit?
Let's look at two scenarios:
Company A is paying JD $150k PY and has a 3/2 split.
Company B is paying JD $150k PY and can WFH 5 days a week, i.e., fully remote.
Working for Company B, JD is relatively making 15% more. Which one do you think will JD join?
This is the reason WFH or fully remote is now a benefit. A lot of companies are offering fully remote as one. And these companies are using this benefit to attract quality talent.
Understanding the Employers' perspective
If we only looked at the employee's side of the story, it's only 50% complete. Let's try to understand the employer's perspective.
The most common quoted reason for returning to work is that it will encourage more hallway/impromptu conversations and will help energizes the team.
Other possible reasons that are not publically stated but exists are:
Employers cannot track the productivity of their employees.
Employers are paying city salaries to people who are moving to remote areas.
Employers cannot prevent employees from working on their side project on company time.
Employers have a 10-year lease on the buildings, and it's not being used.
Employers have to deal with time zone differences and more travel expenses when employees want to travel.
All these may seem to be valid reasons for employers. But as people will return (or not) to work, we will get more data on whether these reasons are valid. Assuming they are valid, let's explore these based on current information if they are valid concerns.
Hallway Conversations: There is no data yet to suggest that being in the office three days a week vs. one day a week will lead to more hallway conversations. One day a week may result in deeper conversations because one day is a constraint. Note that I am just talking about hallway conversations. Meetings can still happen online.
Reducing salary for remote employees always causes a significant backlash and negative publicity. But tech employees' average tenure with the employer is 2.5-3 years. Once the employee moves, the company can reset to newer salaries. However, this would require companies to identify how to do compensation for each remote location for each role. That's a complex problem. And if employees stick with the company and get paid higher, I think it's better for the company because recruiting an engineer is costly.
Employee's productivity: The one thing that the tech industry loves to build is productivity tools 🙄. I am sure a startup will solve this or, at best, look at company deliverables. If the company is delivering on its goals, then employees are doing their job.
Side projects: While that may be a concern, no one says that those side projects are not for their current employers. Google did that with 20% time. And even if employees are finishing their work, why does it matter.
Building lease: Honestly, this is a problem, but WeWorks solved this in the past. We need a modified version to solve this at the employers' scale.
WFH is now part of Total Compensation (TC)
Whether employers like it or not, WFH is a benefit that employees are looking at when evaluating their total compensation across several companies' offers.
Every individual value their time differently. It's tough to understand how much one individual values come to the office over another. That said, what many employers are missing is the potential of the new pool of candidates that may become available with working remote/anywhere options.
Silicon Valley has a lot of talented people, but not all talented people are in Silicon Valley.
So what's the solution?
I don't know, you don't know, employees don't know, and employers don't know. The only solution is to experiment and figure out what works.
Some people will prefer 1/4 split, i.e., 1-day office and four days WFH, to break up the week. Some may prefer a full remote within the same state, and others may prefer work from anywhere. We all need to acknowledge everyone's preference and figure out a solution that works.
We have to come up with a new way to communicate and work. We need new tools, new methodologies, new organizational structures such as smaller teams with focussed work, etc., to accommodate engineering talent needs.
I am confident that the tech industry will figure out a solution for this one way or another. It always has and always will and will pave a path for other industries to follow.
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