Ever wonder how remote work and return to office actually panned out in 2023? Pequity has the data to tell the story
Throughout 2023, there was an abundance of guidance on managing compensation from online publications and consulting firms, yet this often led to missing the forest for the trees. At its core, compensation is simple: a set of tools for leaders to inspire and empower their teams, a concept highlighted in Robert Fray's 1993 essay "Empowerment or else." The complexity of compensation arises from its blend of tangible (like cash and stock options) and intangible (such as career growth and flexibility) elements. One key intangible aspect is work location flexibility. This trend has been in the spotlight over the past few years and is now particularly pertinent for upcoming compensation reviews, especially if there are conversations about smaller pay increases.
Since the pandemic, there's been a significant shift in work location flexibility, offering workers more control over their work environment and schedule. Regardless of the mixed opinions on remote work, understanding and adapting to it is vital. At Pequity, our analysis of global remote and hybrid work trends, drawing on data from the National Bureau of Economic Research, Boston Consulting Group, and the Flex Index, aims to provide insights on how to integrate this flexibility into effective compensation strategies.
Return to office rates are mostly flat
2023 was dubbed the year of “return to office.” Amid bank failures, VC capital drying up, and the subsequent mass layoffs, several high-profile technology and finance firms mandated a return to office. Some of these directives seemed to be based on worries about the broader impact of missing commuters on local economies; other edicts seemed to be simply based on leadership preferences. Overall, it seems the return to office rates have mostly flat-lined or seen minimal increases in most major industries. From an analysis of 533,927 posted jobs in the US between 2019 and 2023, Pequity found that roles in technology, finance, and management seemed to offer the most work location flexibility[1]. More than 25% of all advertised positions are either remote or offer hybrid options in technology and finance. Most strikingly, given the media focus on return-to-office - the data suggests that work location flexibility is now more commonplace in most industries than it was in Q1 2021.
Employees value work flexibility
As more employers offer remote work, one question could be if workers enjoy this benefit, or if it’s just another cost cutting measure. From the data, it would appear that employees desire more work-from-home flexibility than what employer’s plan to give, which would point to them assigning a greater value to this offering. This hypothesis is based on a recent representative sample of 140,000 US workers who are already working flexibly from home to some degree. These workers were asked how often they would like to work from home, and their responses were compared to what their employers reportedly planned on offering for work-from-home access (e.g., two days work-from-home, three days in-office). On average, employees want 0.5 days more than what they are currently permitted to do by their employers or more than what employers plan to offer[1].
In the same dataset, the gap between employee desires and employer plans gets even larger when the audience is segmented by gender, with female employees reportedly desiring an average of 0.75 more workdays from home. This could be a result of females being primary caregivers in parenting situations and could have implications for future policies around benefits like childcare and maternity leaves.
Employees working flexibly are just as productive - if not more
While it's hard to quantify productivity for every individual employee, on an aggregate basis, an analysis by the Flex Index and the Boston Consulting Group suggests that from a survey of 554 public companies, the ones offering fully flexible and structured hybrid work environments significantly outperform their peers in revenue growth. From 2020 through H1 2023, the average fully flexible public company outperformed its peers by 16 percentage points on an industry-adjusted basis. Some could conclude this outperformance would be due to smaller companies being able to grow faster in percentage terms due to them having smaller dollar targets – however, this particular study was done on public companies and their peers, which would point to even mature companies benefiting from this work-from-home access. Further, even excluding technology firms from the study, companies that offered flexible work-location policies outperformed their peer's revenue growth by 13 percentage points.
With such large advantages to work-from-home, it may seem dissonant to the media portrayal of so many companies requiring working in the office. Interestingly, this same analysis reports that this media coverage for large companies changing their policy to require a 5-day in-office work week is likely outsized and over-exaggerated, as 87% of the surveyed companies who had some kind of mandate to work from the office, only required their employees to be in the office for an average of 2.54 days.
Remote work is particularly popular in smaller companies but holds mostly steady across all metro areas and major economies.
Despite the study suggesting that all companies may benefit from this type of offering, the data shared in the analysis did also support the assumption that small companies have overwhelmingly adopted flexible work location policies over their larger, more mature peers. In fact, nearly 74% of companies with less than 500 employees offer full work from home flexibility – likely due to it lowering their employer costs and the offering being attractive to candidates, thus making it easier to hire employees from companies that are able to offer larger compensation packages.
More interesting still, the access to remote-work has caused a redistribution of the job geography. e.g., more workers in small, lesser populated towns can access roles and opportunities that would have previously required relocating or commuting. This then manifests in how cash compensation trends have been changing in smaller US metro areas. Specifically, several southern and eastern US cities are now showing modest wage growth in non-agriculture and non-service industry jobs while traditional hubs like the SF or New York are seeing wage growth stall. [3]
The data suggests the metro areas where work-in-office was previously the norm but have since adopted work-flexibility see the most stagnation in wage growth - this seems logical, but the relationship in the data doesn’t indicate causality, rather work-flexibility can be seen as one of the contributing factors. There is supporting anecdotal evidence cited by the Federal Reserve of Minneapolis that, in some cases, workers are willing to swap wage increases for more flexibility.
Also interestingly, though it might be assumed that work-location flexibility would be a more prominent trend in certain areas of the world, based on cultural or even governmental systems, the data suggest that every major economy has seen a rise in remote work across the board, regardless of industry.
That said, work-from-home is not offered for every single type of role, and the divide can be seen by earning potential. As is logical, most work-from-home roles are available for roles that do not require an in-office presence – e.g., a lab technician likely still has to come into the office, as would a factory worker and a farmer. A trend that is logical but backed by this data is that work-from-home is more often preferred and available for white-collar roles. In the data, Pequity specifically found that work from home is more frequent and common among higher-paying, roles with > 60% of workers earning over $100K/year having some form of remote flexibility. This has broader implications for pay equity and workplace equality over time.
To summarize, here are Pequity’s findings:
- Work location flexibility is being quickly adopted as an important compensation plan component across location and industry, but especially by cost-sensitive smaller companies.
- Companies that offer flexibility are outperforming the revenue growth of peers by an average of 16% based on an industry-adjusted basis.
- Employees want more access to work flexibility, and even those who have work flexibility desire an average of 0.5 more days of work flexibility.
- Female employees desire an average of 0.75 days more than what is offered.
- Despite overwhelming media coverage of the large 5-day return to office initiatives, the average structured hybrid is 2.54 days.
- Every industry, major US cities, and major developed economies have reported a flat trend or a modest rise in the number of remote work positions on a YoY basis.
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