Is it time to add an ‘in-office’ weighting to pay?

Employers are used to adding a London weighting to salaries due to the expense of living and working in the capital. For those that want staff back in full-time, an ‘in-office’ premium could be the answer
Commuters in London

The debate around working from home has formed a new front in the culture wars. There are some who believe that the practice makes staff less productive and more easily distracted, while others feel that flexibility is a necessary requirement to cope with the pressures of modern life.

Nevertheless, in 2023, the option to work from home is now perceived as a commodity in the job market. According to a study by Stanford University economist Nicholas Bloom, the ability to work remotely, even if only for some of the time, is valued by employees as much as an 8% pay rise. The biggest attraction of days spent working from home, his research suggested, is the absence of a commute.

That commute is a net negative for many people. It takes up time the average amount of time spent commuting in the UK is almost an hour a day. And in the throes of the cost-of-living crisis, commuting can be a significant expense. In March, the average UK train fare increased by nearly 6%, the biggest such rise in more than a decade. 

People are also more likely to buy lunch or socialise with colleagues if they’ve been in the office, which although personal decisions, add to costs. There could also be expenses accrued from needing childcare if parents are not around for normal school drop-off and pick-up times. 

Companies that want people to work in the office every day should be mindful of wider socio-economic circumstances. For professions where remote work is not an option, paying staff more so that they can manage their commutes and costs in general makes cogent business sense. If people are less stressed about their personal finances, they are more likely to do their job well. 

For companies where the debate around working from home is still a debate, leaders should still factor in the current economic climate. 

In February, Bloomberg surveyed 500 mid-level employees whose companies had offices in central London and where 95% were permitted to work from home in some capacity. The study found that nearly three-quarters (73%) of the workers would quit their jobs if they were no longer allowed to work remotely at all, with an inflation-beating pay rise the only thing they said could change their minds. 

The fact is that, since the Covid-19 pandemic, people’s attitudes towards and expectations around work have changed. While many other trends (online shopping, for example) have fallen back to pre-pandemic levels, the shift to more working from home appears here to stay. 

To some degree, the practice of paying people more to work in the office full-time could be compared to London weighting. It is generally accepted that living and working in the capital costs more and so salary offers are adjusted accordingly. 

But, in 2023, London is no longer the only expensive place to live and work in the UK. Wherever staff may be based, the cost of physically attending the office has gone up.

If companies want to buck the trend of offering at least some remote work because they believe that being in the office offers something that remote work cannot improved productivity, better collaboration, more creativity that is their prerogative. But then they should be prepared to pay a premium.