Are you relocating talent, hiring new talent from abroad, or seeking to establish distributed workforce salary plans?
Making the right compensation decisions
Employer and employee initiated requests for transfers across borders or within countries has increased the need for companies to understand how salary structures relate between countries or even within a country. On the one hand companies are transferring talent into locations where it is needed, and on the other, employees are requesting to work in a location of their choosing.
The challenge is that salary structures are meant to address the cost of labor within a local market and have not been traditionally designed to equate between markets or to attract talent from another market. When transitioning from one structure to another the employee may face significant changes in:
AIRINC Salary Evaluation Tool
In some cases the changes will:
- Leave the employee better off post transfer
- Result in about the same standard of living
- Result in a decrease in standard of living
Knowing which case you are facing can help you make good compensation decisions.
- In positive cases, you can showcase the benefit of the transfer to the employee’s salary
- Adverse cases allows you to proactively address any deficit if desired
This information can also be used to holistically review your global salary structures and how they relate to each other from a net income and living standard perspective.
In this new environment, companies are focused on bringing talent to work, and bringing work to the employee. Therefore, a strategically aligned rewards philosophy is important so that your pay methodology is clear for all the reasons you have mobile talent. It is imperative to establish a process for setting pay, as it will enable your mobile workforce strategy.
Employee attraction and retention
Assessing the local salary structure before making an offer can improve your rate of retention and attraction. For example:
- Domestic transfer: A move from Charlotte to New York City with a $100,000 salary, what salary level would you require to maintain a similar purchasing power after cost of living, housing, taxes, etc. are taken into account in a select location?
- International transfer: In addition to gross salary differences what are the income tax and cost of living considerations? Do you use home, host or other type of salary?
Managers can benefit from this information to assess any opportunities to proactively address any compensation challenges and increase the success of the employee accepting a transfer.
In this new environment, employees work where they live not live where they work. Therefore, a strategically aligned rewards philosophy is important so that your pay methodology is clear for in-office and Work From Anywhere workers. It is imperative to establish a process for setting pay, as it will assist in ensuring pay equity and fairness relative to others.
How can you easily assess the economic impact of a transfer?
AIRINC’s Salary Evaluation Tool allows you to generate instant reports in order to:
- Compare after tax income: Provide a net-to-net comparison comparing net income of the offered to current compensation
- Cost of living: Highlight housing, goods and services cost differences between two locations
- Base salary
- Variable pay
- Country A
- Country B
See how the Salary Evaluation Tool works
Additional Allowances: Cost adjusting salary elements or work from home Allowances
In addition to salary, many companies offer ancillary compensation allowances and want these allowances to equate globally. Increasingly companies want to establish globally equitable work from home allowances, cash fitness allowances, small performance awards, or other cash allowances.
AIRINC offers a cost of living index to adjust your global values and can translate these into an easy to use global reference for quick, simple and transparent calculations.
For example, in your HQ location you decide to offer a USD 1,000 a year work from home allowance, or a USD 250 spot bonus for high achievers. How do you know how much to offer in another country to deliver the same benefit?
You can use a COLA index to determine the correct rates for multiple locations (intra- and inter-country). AIRINC’s COLA indices are based on in-depth cost of living research. (Learn more about COLA.)
AIRINC offers a cost of living index to adjust the value.
Geographic Differential Index (GDI)
The GDI provides you with a carefully researched database of intra-national cost of living indexes by city. The database is available for over 50 countries and includes:
- Robust goods and services price assessment based upon spending patterns and proprietary research for market basket of 350+ items
- Differences in income taxes
- Current housing market evaluation derived from rental and ownership costs
With access to a global dataset, you can use the GDI to deliver a more comprehensive annual salary review, adapt salary strategies to reflect local cost of living and plan for remote workforce needs.
- Only change is consistent- Navigating remote work for compensation professionals
- The new reality of adjusting pay for geographic differences
- What is Permanent Establishment and why does it impact global mobility?
- Reevaluating Total Rewards Strategies for the Growing Remote Workforce
- Remote Work: Tax and other considerations [Download]