How Will Faster Internet Access Affect Employee Compensation?
Workspan Daily
July 06, 2023
Key Takeaways

  • Funding for faster internet access. The White House announced more than $42 billion in funding to upgrade high-speed internet in rural parts of the United States by 2030. 
  • All states will benefit. Every U.S. state will receive a minimum of $107 million in funding. 
  • Greater access to talent. Faster internet access for more people may produce a larger, more geographically diverse pool of potential applicants for employers.   
  • More geographic diversity may cause employers to rethink their geo pay policies and practices. Employers will need to do a thorough, data-driven analysis that incorporates geographic differentials, inflation, rising wages and a tight labor market.  

Approximately 8.5 million households and small businesses will gain high-speed internet access by 2030, under an initiative announced recently by the White House. Labeled the Broadband Equity Access and Deployment Program, the initiative offers $42.45 billion in total funding, with each state set to receive at least $107 million. 

State-level allocations will be based on a newly released Federal Communications Commission coverage map, which details gaps in internet access. Funding for the program was authorized by the $1 trillion infrastructure law President Joe Biden championed in 2021.  

Compensation experts agree the program will likely benefit organizations by increasing the overall pool of candidates and expanding the geographic areas available to remote workers.  

But some roles cannot be filled remotely, so companies will have to consider how on-location roles are valued in comparison to roles that can be performed remotely, said Nancy Romanyshyn, senior director of total rewards strategy and solutions at Syndio.  

In addition, the new high-speed expansion may cause employers to create or revisit policies around geographically based pay. 

Location, Location, Location 

The new initiative will likely make it easier for Americans to pursue jobs from remote locations, said Vince Cordova, a partner in Mercer’s Mobility Practice. But that expanded pool may spark a variety of unforeseen challenges, which is why he encourages employers to use “ring fencing” strategies whenever appropriate. Ring fencing is the concept of drawing a geographic circle around a job posting (for example, 100 miles around the city of Provo, Utah), and only candidates who live within the ring will be considered for the position at a pre-set compensation point. 

Location is often incorporated into how companies pay their employees, but the rise of remote work has led some to question the extent to which location should influence pay, said Romanyshyn.  

To adapt to the coming high-speed expansion, employers will need to conduct a thorough, data-driven analysis taking into account geographic differentials as well as inflation, rising wages and a tight labor market.  

Romanyshyn said employers will need to consider several key questions, such as:  

  • Where are your employees located?  
  • Where have they moved to?  
  • How many employees are paid differently because they’ve moved to a market with a different cost-of-labor?  
  • What should they be paid?  

“It’s crucial for employers to have comprehensive data to make the most informed, equitable decisions and navigate this shifting landscape,” she said. 

Regional vs. National Pay Structures 

Whether organizations should utilize a national-based pay structure or a more-targeted regional-based one will vary based on the organization’s philosophy and policy on hybrid/flex work, said Lesli Jennings, WTW North America practice leader for work, rewards and careers.  

“For example, if the workforce is fully remote, then the company is likely targeting national pay rates, versus geo-specific cost of labor differentials,” she said. “If the workforce is a mix of onsite and hybrid, we are finding that the safest bet is to place the geographic differentials where the work or jobs are primarily or typically located — if that is in fact how you define your competitive labor market.” 

But organizations can create pay inequalities if they do not consistently adjust pay up or down when employees move to new locations that have different living costs, said Justin Sun, a global compensation advisor at Expedia Group. 

Tips for New Geographic Pay Structures  

What should companies consider if they plan to create new geographic-pay structures in response to the expanding pool of job candidates who will be gaining high-speed internet access? Such organizations should first determine how many different salary structures make sense for them, advised Sun. Factors to consider include the overall office footprint and which differentials should be applied to locations falling into higher and lower cost structures. 

Sun offered some questions to consider when creating a new geographic-based pay program: 

  • Will you design pay programs based entirely on labor costs, or will you factor in the cost of living and inflation?    
  • Will employees have their compensation adjusted when moving from a higher cost to lower cost location? 
  • How much discretion do managers have in final pay decisions?  
  • How will your organization field employee requests to shift their roles to being fully remote? 
  • What criteria will you use to determine whether these requests are honored and who’s eligible to work remotely?  

Sun noted that resources from the Economic Research Institute and survey vendors like Aon Radford and WTW can provide valuable insight into differences in cost of labor between locations based on published market data. 

The Need for Transparency 

In the age of growing pay transparency, organizations need a clearly defined flex work/hybrid strategy, said WTW’s Jennings. “There needs to be clear criteria and rationale for why certain jobs are remote and others are on-site/hybrid, as well as clear rationale as to the aligned pay philosophy,” she said. 

In addition, front-line managers need to be able to speak effectively about how pay opportunities are set, how decisions are made, and how pay can grow over time with career progression, Jennings added. 

But regardless of the organization’s compensation program, employees should always know how their choices about location will affect their overall compensation, said Vince Cordova, a partner in Mercer’s Mobility Practice. 

“If you give them the choice to go remote,” he said, “they shouldn’t find out later it could come with a penalty.” 

Editor’s Note: Additional Content  

For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics: 


 

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