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Geographic pay policies, also referred to as localized compensation, are in flux. Of the 62% of organizations with existing geographic pay policies, 44% are considering modifying or have recently modified their policies due to the increase of full-time remote work.
This was a main finding in WorldatWork’s “Geographic Pay Policies Study,” which also found that 67% of the 503 full-time United States workers surveyed expect their compensation to reflect their location.
Geographic pay is a critical issue for employers that are striving to improve their workforce experience as well as their talent attraction and retention efforts. Expanding (38%) or consolidating (20%) the pay differential application by geographic area were found to be the top two considerations for the 1,063 organizations surveyed in regard to addressing localized compensation.
“Work is no longer a place. With remote working requests continuing to emerge and surprise leaders, companies are reevaluating how to create cohesive, consistent, and fair geographic pay policies as employees push to straddle multiple geographies,” said Scott Cawood, CEO of WorldatWork. “What used to only be an occasional issue is now a frequent request and savvy employers will need to respond with fair, transparent and attractive geographic pay policies for distributed workforces if they wish to remain competitive.”
WorldatWork’s survey revealed that the more locations an organization has, the more likely they are to consider creating a U.S. geographic pay policy. Currently, 41% of organizations apply pay differentials as a premium/discount to either structure or individual pay, and 33% create separate base pay structures for each/different geographic location.
Employee geographic pay locations are most often determined by their reporting location and 55% of organizations use city/metro area as the indicator in which geographical pay differentials are based, and cost of labor is overwhelmingly a greater influence than cost of living for determining the pay policy approach.
Other key findings:
- Almost all organizations are somewhat or moderately flexible regarding voluntary relocations for full-time remote workers. However, only 29% are willing to establish a legal entity anywhere in the U.S.
- Of the organizations that do not allow relocations outside of pre-existing geographic or legal entities, the biggest challenges for these organizations are legal, regulatory and tax implications, followed by cost.
- 50% of employees said that a pay adjustment would be very or extremely influential in their decision to voluntarily relocate.
About the Author
Brett Christie is the managing editor of Workspan Daily.