A Productivity Commission report suggested workers could accept pay cuts to keep working from home. One expert says the opposite is more likely.

A Productivity Commission report suggested workers could accept pay cuts to keep working from home. One expert says the opposite is more likely.
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  • A Productivity Commission report which investigated how the move to working from home may impact Australia’s economy and wages suggests employees could accept wage cuts to continue to work from home.
  • But experts say Australia’s skills shortage is more likely to see pay increases with remote work, particularly in sectors like tech.
  • A recent survey from LinkedIn shows almost 40% of Australians now expect flexibility from their employer.
  • Visit Business Insider Australia’s homepage for more stories.

A Productivity Commission report released last week suggested that as workplaces transition toward flexibility, some employees might accept a drop in wages to continue to work from home. 

But experts say in Australia the reverse is more likely to be true. 

The commission’s report, which investigated “how the move to working from home may impact Australia’s economy generally and individuals’ income, employment opportunities and health and wellbeing” said the inadvertent experiment of widespread remote work had revealed it could “unlock significant gains”. 

In a media release accompanying the report, commission chair Michael Brennan flagged that moving forward, the option to work remotely would become a key factor for prospective employees.

“For many employees, working from home arrangements will be a factor in deciding which job to take,” Brennan said, adding that “some employees have even indicated they would be prepared to take less pay in return for the ability to work from home.”

However recruitment experts say while such practices have kicked off overseas, it’s unlikely Australian companies would implement such policies. 

In August, reports emerged that US-based employees at tech giant Google would see changes in pay if they switched to working from home permanently. 

In recent months Facebook and Twitter also cut pay for remote employees in the US who had moved to less expensive areas since the start of the pandemic.

“Our compensation packages have always been determined by location, and we always pay at the top of the local market based on where an employee works from,” a Google spokesperson said at the  time, adding that pay will differ from city to city and state to state.

Research from LinkedIn shows the long-term impact of the pandemic will be increased demand for flexible work from Australian workers.

It found that almost two in five Australians (39%) who have been asked to return to the office have asked their employer for flexibility. 

The findings also suggest workers are no longer willing to work for employers who don’t provide flexibility, with 45% of Australian workers who have an office will continue to work from home in a part or full-time capacity to avoid commuting. 

LinkedIn also found that 13% of employees who were asked to return to the office after working from home during the pandemic considered quitting their job, while 7% chose to resign instead of returning to the office.

Skills shortage could impact remote work pay

Jonathan Jeffries, director at startup growth and talent firm Think and Grow, which works with Australian VC firm Blackbird and start-up art marketplace Redbubble, told Business Insider Australia that trends suggested that it was more likely prospective employers would use flexibility as a bargaining tool, particularly in the tech and startup space.

“From our world in technology and specifically fast growth tech, we are not seeing this at all,” Jeffries said. 

He said that, combined with globally-focused hiring strategies and the pinch of Australia’s skills shortage — the result of 18 months of closed borders — more companies would be pushed to use increased pay as a means of attracting remote talent. 

In June Business Insider Australia reported that closed international borders were leading companies to resort to adding additional incentives on job offers to try to fill vacancies, with in-demand Australian developers negotiating as much as six-figure raises on job offers. 

Jeffries said this was likely to continue, and extend beyond just tech. 

“Talent is asking for more money and a flexible location, particularly in Australia where the loss of international talent has created a skills shortage,” he said. 

The report itself also hedged on how flexibility changes were likely to impact compensation.

“In practice, there are some reasons to doubt whether a negotiated pay reduction would be a realistic outcome,” the report said. 

“First, the valuations expressed in surveys do not always translate into real world behaviour. Second, nominal wage reductions are uncommon.

“In any event, there is also some doubt as to whether such a reduction in labour income would persist – as firms and workers gain individual and collective experience with working from home, the productivity of home-based work is likely to increase, putting upward pressure on wages.”

Jeffries said the future of work in Australia was likely to show changes that moved flexibility culture to be more in-line with countries like the UK where flexible work was the norm rather than the exception.

“I don’t believe there is a strong argument that exists for employees to accept less for flexibility,” he said.

“We live in a world where we can in fact achieve both and use this to drive productivity rather than hinder it.”