The Workforce in an Evolving Market: What is the New Normal?

2020 was a year like no other, with companies facing unprecedented challenges. Leadership had to make quick decisions about business continuity in an ambiguous market, virtually operating their organizations, and, of course, providing a safe and productive work environment for their workforces.

Now, a year later, the dust has settled, and companies are trying to understand what their new normal is. To gain insight into this shift in the market, we surveyed over 400 private and VCbacked businesses in our 2021 Remote Workforce Compensation Survey to gather information on how private companies responded to the pandemic and what the future holds for their workforces. Respondents’ industries ranged from technology to the life sciences. Here is a breakdown of respondents by industry:

Private Market Response to the Pandemic

Toward the end of the first quarter of 2020, companies had to plan for the possible financial impact of the pandemic. One of the first responses was layoffs—companies sustained capital by reducing headcount, which we saw happen on a national scale. In our survey, we found that 57% of private companies made no headcount or salary reduction, whereas 47% made some sort of reduction.¹ Of all participants that made a change, 83% of companies reduced headcount while the subset of 42% also reduced salaries.²

Below are the different types of business changes organizations made in response to COVID-19:

A year later, some organizations have refined their business continuity strategies and are now starting to consider if they will keep their workforces fully remote.

Remote-Friendly Work Is the Likely Future

Prior to the pandemic, an overwhelming majority of companies were office-based. ³ As employees were mandated to work remotely as a response to the pandemic, both employees and employers alike were able to reap financial benefits through these unprecedented times. While 82% of companies were office-based pre-COVID, most companies are now adopting a form of remote working, with a small number still unsure. ⁴ This finding highlights the opportunity companies may now have to offer a flexible work schedule as a benefit to their employees.

Workforce distribution pre COVID-19

Workforce distribution post COVID-19

Workforce distribution pre COVID-19

Workforce distribution post COVID-19

Hiring During the Pandemic

As companies were forced to support their newly remote workforces, we were curious about how this affected their future hires. And it turns out, the remote workforce might be here to stay—64% of companies have hired new employees as permanently fully remote shedding a light on the future of work.⁵

Has your company hired employee(s) to permanently work remote as a result of COVID-19?

Compensation for Your Remote Workforce

With this shift in the market comes another layer of complexity: How should companies pay their remote workforces? The reality is that companies are still unsure how remote work will impact pay long term. Of the companies that are adopting a form of remote working, 36% have not adjusted pay while 24% said they consider it too early to tell. ⁶ However, 21% have adjusted pay to reflect employee local markets, which may be important as companies are still looking at regional trends when considering pay.⁷

If your company is adopting a form of remote working, will salaries be impacted?

With unparalleled changes to the market as COVID-19 disrupted businesses globally, it’s taken time for companies to assess the best next steps for their businesses as the market evolves. And if your company, like many others, is considering a shift to a more remote workforce, you may expect a few growing pains. To start, there is no “best practice” when it comes to how companies should pay their remote workforces. And when it comes to looking at market data, you may find that some employees are moving to markets where there is not enough compensation data to report on and, as a result, you may have to get creative.

What we do know is that companies have options when it comes to defining their remoteworkforces’ compensation strategy. Some companies are looking at regional data for each employee, while others are considering the competitiveness of the role which dictates the region they will benchmark against. Companies are also considering benchmarking against metro areas such as the San Francisco Bay Area or the Tri-State metro area, and creating regional multipliers based off that data. That said, compensation benchmarking data may be a start, but isn’t necessarily the “end-all be-all.” Here is a quote to think about:

There’s no one-size-fits-all approach to compensation. Compensation must be a consistent strategy and should align with your company values and objectives and, as 2020 made it clear to us, compensation plans can benefit from being flexible and able to adjust.

Keep pace with the market by accessing Option Impact, our compensation database specific to private, venture-backed companies. With frequent updates, you can help ensure your company is staying consistent with the market. Contact us at compensation@shareworks.com to get started!