After more than a year of flexible working, a growing number of white-collar workers are leaving expensive cities for places with a cheaper cost of living. The question of how to pay those workers is still being worked out at many companies, data shows. As board oversight of human capital grows increasingly more detailed, sources say directors should discuss the company’s policies on remote work, flexible work, and geographic pay scaling.
A Pearl Meyer survey of 349 companies including 128 public companies, 159 private companies, and 62 nonprofit organizations shows that only a third of respondents currently apply geographic differentials to their salary structure, either for all employees or in certain situations. The majority of respondents said they would not reduce an employee’s cash compensation if they moved to a lower-cost location, while just 4% said they would reduce pay in that situation. However, a quarter reported that it depends on the individual situation, and 14% remain unsure.
Most of the companies that scale pay had these structures in place before the pandemic, and have carried them over to the present, says Bill Dixon, a managing director at Pearl Meyer. Most companies are rethinking the pay-scaling approach, he adds. Another reason for a reevaluation of geographic differentials is the potential complications surrounding pay equity, says Dixon.