As the popularity of remote work has mushroomed during the Covid restrictions, the conversation around so-called geographic pay has also shifted.  Recent data from WorldatWork’s Geographic Pay Policies Study highlights this shift.

It highlights that 62% of organizations have compensation that is tailored to local conditions, but of these, 44% of them are considering changing those policies as a result of any increase in remote work, whether full-time or part-time.

The report looked at a wide range of issues associated with geographic pay, including its prevalence, determinants of employees’ geographic pay location, and remote working take up.

Main priorities

The results reveal expanding the pay differential between geographic areas is a key consideration for organizations today.  For instance, the more locations an organization has, the more likely they are to be considering a geographic pay policy, with remote working a key factor driving this decision.

This is also a key factor for employees too, with 50% saying that any pay adjustments will be a major factor in any decision to voluntarily move to remote working on either a part-time or full-time basis.

The majority of employers base such pay differential decisions on the city or metro area with the cost of living typically the greater influence than the cost of living in determining the pay policy approach.

As a result of the pandemic, the majority of organizations are pretty flexible about employees working remotely either full or part-time, however, only 29% are willing to establish a legal entity anywhere in the United States.

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.

“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,” the researchers say. “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.”