In March, more than 16 million American workers left the office and shifted to remote work. The professional world was about to undergo a major transformation.
Before virtual work became mandatory for non-essential workers, a Gallup poll reported only 31% of U.S. workers had ever worked remotely.
This digital transformation happened practically overnight – and it appears to be sticking around. In a Gartner survey, 74% of CFOs responders said they plan to transition many previously on-site employees to remote work permanently.
Because their organizations successfully transitioned to remote work, some of the country’s largest companies plan on cutting office space. A Reuters analysis discovered more than 25 large companies plan to reduce their physical footprint over the next year.
Morgan Stanley predicted vacancy rates in New York will reach 10%-12% over the next two to five years, up from 8% now. And San Francisco will reach 7-9% from 5%.
The new dynamic for companies and employees is quickly changing the way people are hired and retained. This massive adjustment is transforming the way companies recruit talent, compensate their people, and conduct business operations.
The virtual office opens an entirely new talent pool. If the physical office is closed, hiring managers no longer need to look for people within their metro area.
Many of Talentfoot’s clients, from brands to agency to tech, have extended candidate searches to the entire United States. For example, a company based in Albany may decide to seek talent in the entire state of New York and beyond so that they can find the best hire, not the best of the local candidates.
Tali Mandelzweig, chief operating officer and co-founder of MeetFox, told SHRM, “I think the biggest misconception that is being challenged right now is the requirement of needing to hire locally. When only hiring someone in your desired area, you are limiting the talent pool dramatically. Many jobs can be done remotely, and hiring someone digitally can allow you to find better-quality candidates.”
Has your organization considered broadening its search? This practice is becoming more common. Glassdoor says remote job postings have increased 28% from last year.
A New Way to Pay
Virtual work is affecting the way businesses compensate employees. One major example comes from Facebook.
Earlier this year, the social network’s CEO Mark Zuckerberg estimated that up to half of the company’s 45,000 employees could be working virtually in the next 10 years. The new remote world means employees would not necessarily have to live in costly Silicon Valley, where the company is headquartered.
However, Zuckerberg warned if employees move to smaller markets with a lower cost of living, their paycheck would change. In a Facebook Live he said salaries may very well be reduced.
Some U.S. cities want to attract these newly virtual employees to assist in the COVID-19 recovery.
In May, Savannah, Georgia, offered up to $2,000 to pay relocation expenses for remote tech workers who live in the area for at least a year.
This is not a new practice. Last year Topeka, Kansas, started offering up to $15,000 to employees of local companies willing to buy or rent a home there. Now Topeka is planning to offer this program to remote workers.
“As population density in large metros began to feel problematic, the space we have in Kansas began to be more appealing to many people around the US,” Bob Ross of the Greater Topeka Partnership told the World Economic Forum.
When virtual employees relocate to another state there are operational consequences.
Tax Attorney Larry Brant wrote, “Having an employee working in another state typically creates physical nexus, subjecting the employer to the tax regimes of that jurisdiction.”
Employers need to apply state income taxes, gross receipts taxes, and sales and use taxes Also, they must be aware of city or county tax requirements.
Each state has its own employment laws. If remote employees come from another state, your organization must understand the rules and regulations that apply to where they live.
Remote Work is Here to Stay
Earlier this year Microsoft CEO Satya Nadella said, “We have seen two years’ worth of digital transformation in two months.”
Do not expect this change to disappear overnight. We conducted an informal survey of our 9,000+ LinkedIn followers. More than sixty percent of the respondents said they would prefer to
A Gallup poll found that employees prefer this new arrangement, “Three in five U.S. workers who have been doing their jobs from home during the coronavirus pandemic would prefer to continue to work remotely as much as possible.”
Embrace this as an opportunity to find the best talent anywhere, not only in your home state.