- Develop a compensation plan. With more employees converting to a digital nomad lifestyle, organizations will need to develop a plan for how to pay them.
- Different than remote workers. Digital nomads are different from "remote workers" because, by definition, they move around to different locations on the globe.
- Another layer to geo pay. Organizations became increasingly focused on geo pay differentials post pandemic as remote work increased. Digital nomads add an entirely new level of complication to those policies.
- One solution. Each organization will have to determine what’s best for them, but finding a “home location” for payroll purposes for a digital nomad will make the process of compensating them much less complicated.
In the United States, 17.3 million Americans, 11% of the workforce, identify as digital nomads — traditional jobholders and independent workers — an increase of 2% from 2022, according to a August 2023 report from MBO Partners.
Another 70 million are either planning to become digital nomads over the next two to three years or are considering it, according to the report.
More than 60 countries currently offer remote work visa programs, a trend that’s going to accelerate, Prithwiraj Choudhury, an associate professor at Harvard Business School who studies future work trends, told Bloomberg.
Digital nomads are different from “remote workers” because, by definition, they move around to different locations across the globe. So, what's the best way to pay these types of employees?
‘The Ultimate Degree of Complexity’
There are some prerequisite questions that frame how an organization should think about compensation for digital nomads, said Paul Reiman, founder, managing partner and chief analyst at Novo Insights.
“How do you view remote working vs. in-office time?” he said. “You need to be embracing remote work before a digital nomad strategy would make sense, as digital nomads are the ultimate degree of complexity around remote work.”
Organizations also need clarity around whether they pay nationally or locally, and how much variance they want to drive with local pay, Reiman said.
Location-based pay policies are anchored in a “location” for the employee, so that even if the worker is moving every day, a system will have a “location” for the worker or position.
Organizations need to decide how to manage that administration for nomads, Reiman said, and then determine what geographically-aligned pay system to fit that location.
The more national — or the fewer local distinctions you try to make — the easier it is to accommodate nomads, he said.
“I’ve seen organizations create a ‘Fully Remote – USA’ location that gets aligned to either the lowest-cost location band or to the national average location band,” Reiman said. “The choice is a philosophical one, with no clear best practice.”
Meanwhile, if you are paying employees for specific services, such as creating social media videos or writing blog posts, you could also pay these employees a flat amount based on the specific deliverables they provide, said Justin Sun, global compensation adviser at Expedia Group.
“Flat rates can work well when the scope of work is well-defined and the emphasis is more on quantity rather than quality of work delivered,” he said.
Disrupting Geo Pay Policies
Geographic pay differentials became a bigger concern for many employers during the pandemic.
In response, many organizations are rethinking their pay philosophy and policy surrounding geographic pay strategies, according to WorldatWork’s "2022 Geographic Pay Policies Study."
Digital nomads can complicate these pay policies, said Sun, because they are often moving from one location to another.
“Assuming you have geographically differentiated salary structures, it may not make sense to adjust employees’ compensation up or down depending on how long they plan to work in a particular location,” he said.
When you’re trying to ensure employees in similar roles and locations are paid equitably, Sun advised having clear tracking on where employees are working at any given time, but acknowledges that it can be very challenging to manage from an administrative perspective.
Bring In the Nomads
Some organizations are a better fit for nomads than others.
While rooted in a remote strategy, Airbnb’s Live and Work Anywhere system support nomads, said Reiman.
Even that policy requires a permanent address for payroll purposes, which is how they view the “location” for the employee for payroll purposes.
“Airbnb pays nationally so there is no compensation impact,” Reiman said. “Airbnb is a logical organization for supporting nomads since they are in the business of promoting mobility and exploration.”
But it’s not just about how much to pay, said Reiman. Benefits also can be tricky for nomads.
For example, some providers have zip code based eligibility, preferred or exclusive networks may not scale nationally, and payroll tax withholding compliance can be very difficult.
“Consult with your legal and tax advisors to ensure you are comfortable with the risks that nomads create,” Reiman said.
Sun cautioned that even for companies like Airbnb that allow employees to “work from anywhere,” typically employees must still apply internally to work in another location, including having the proper visas in place before being able to legally work in a particular location and ensuring that the total time spent in a particular location doesn’t exceed a specific number of days.
“Having clearly communicated guidelines on what types of roles and employees are eligible to work remotely is critical,” he said, “and you’ll want to have a standard approvals process in place that includes your corporate tax, immigration/mobility and legal teams, where applicable.”
Employees should understand the requirements to join and remain a participant in the digital nomad program whether it’s maintaining consistent performance or having a quiet office space for taking meetings in, as needed.
An organization’s policy on working from anywhere should also be centered in its overall talent strategy, said Sun. For example, promoting employee flexibility or ensuring the organization has access to a wider talent pool.
“Whether you allow employees to work from anywhere should be grounded in your company’s overall compensation philosophy and employee value proposition,” he said.
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