- Compensation considerations. Organizations must determine whether a digital nomad’s pay will be based on market geography or work value.
- Ensure compensation and rewards philosophy is compliant. However an organization determines to pay digital nomads, it should first be reviewed by an attorney to ensure it is compliant with applicable laws.
- Location tracking. A digital-nomad policy should allow tracking of workers’ movements to help ensure managers are aware of their specific whereabouts.
More than 25 years after the term "digital nomad” was coined, organizations are increasingly relying on such workers.
In fact, almost a third (31.5%) of self-described digital nomads are now in full-time employment, according to a recent Flatio survey of more than 1,000 such workers.
“Digital nomadism is not just a trend,” said Radim Rezek, co-founder and CEO of Flatio, which rents accommodations to digital nomads. “it’s the future of business, travel and living.”
So how can organizations craft policies and processes that capture and capitalize on the benefits of digital nomads — those world-traveling workers who no longer rely on steady employment in a conventional, single office?
Crafting a Formal Policy
Organizations have been slowly updating their handbooks to include digital nomads, according to Tracey Malcolm, global leader, future of work & risk at WTW.
WTW’s 2023 “Dynamics of Work” survey found that only 21% of organizations were allowing globally remote work and had set up policies and frameworks around the concept.
“But with over half of organizations expanding their global reach through remote work, it’s worth establishing a policy and being aligned across HR, business and risk around digital nomad work practices,” she said.
From a rewards and compensation perspective, this means finalizing decisions on:
- Pay. Will it be based on a market geography or work value?
- Nomadic schedule options. Open or defined with duration ceilings for working in different locations?
- Reimbursable expenses. Coverage for travel.
- Taxation. Employer or worker obligations.
Ideally, the policy will also allow tracking of workers’ movements to make sure the company is aware of their specific whereabouts, said Sean Darke, an employment and labor attorney at Dykema.
“This is crucial when disciplining these digital nomads, as well as when the employment ends and the company needs to regain property, such as a company’s tablet, computer or phone,” he said.
Compensating Nomads
As opposed to a remote worker, digital nomad term implies the element of travel. In contrast with expats, however, digital nomads don’t seek a permanent residence or work for a company in their current country.
So when it comes to setting compensation rates for digital nomads, the first questions to ask are “Why are they not working at home?” and “Is this job naturally a digital-nomad job and would you fill this job with another digital nomad?” said Bryan Briscoe, senior vice president of total rewards at Marriott International.
Set a market rate that reflects employment factors — for example, someone working in a virtual call center who can do the jobs from anywhere.
“However,” Briscoe said, “if the person is doing the job as a digital nomad because you gave them an exception because you believe they are one of only three people in the world who can do that job, you probably have a different set of conversations.”
Many organizations are applying a home base for the digital nomad anchored to that location’s pay design, said WTW’s Malcolm. But some organizations’ pay designs and philosophies are evolving as they seek to simplify pay design.
Malcolm cited the example of a financial-technology company. “A five-zone regional pay structure was simplified to four zones recognizing the digital-nomad footprint and more agile work teams across their work locations,” she said.
The fluctuating workweek salary model is also becoming more popular in circumstances where the digital nomad’s hours change on a week-to-week basis, said Dykema’s Sean Darke.
“But whatever method is chosen, the company must have an attorney review the pay method for federal and state compliance,” he said.
Putting Up Guardrails
The digital-nomad trend has started to blur the lines between employee and freelancer, introducing new value for working experiences, but also new employment risks and liabilities.
Therefore, organizations should create clear expectations for both employer and employee, Malcolm said.
For some organizations, creating a digital-nomad policy is about employee engagement and experience and accommodating the employee need, whether it be extending working years of late-stage career leaders, or attracting and retaining key talent.
“In this context, the guardrails become effectively administering and tracking,” she said. “This may mean investing in and configuring the organization’s mobility platform or time tracking system in order to efficiently enable digital-nomad flexibility.”
An organization should document its commitment digital-nomad flexibility, stating its purpose and alignment to total rewards.
Good guardrails include determining the employment options that are part of participating in digital-nomad flexibility, Malcolm said, “so it is clear that as employees opt into this flexible benefit, it may impact the provision of other benefits or work rewards.”
Compensation professionals should also consult with other parts of the business to better understand how important this new segment of worker is to the bottom line, she said.
“Forecast how much of the workforce will be digital nomads,” Malcom said. “Consider if your current pay design and practices will connect effectively or be challenged by it.”
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