Effective Compensation Management in HR - Location Series
Location can play a critical role in how a company attracts and retains key employees. If you work in HR or compensation, you will likely be challenged with a location review at some point.
Whether you’re dealing with geo zones, determining regional pay differentials, or evaluating salary ranges for a new company location, understanding how to integrate these factors into your analyses is vital.
In the series below, I’ll go through the basics you need to know when it comes to evaluating ranges with location data and the impact location can play on your compensation strategy.
1. Overview of Comp Management by Location + Salary Surveys Explained!
The foundation of any location-based compensation strategy lies in understanding geo zones, salary surveys, and the nuances of cost of labor vs. cost of living. Geo zones are regional groupings that allow companies to categorize locations by economic factors, making it easier to define pay structures. For instance, a company might establish tiers for urban, suburban, and rural areas or use broader regions such as East Coast, Midwest, and West Coast.
- Salary Surveys: These provide critical insights into market rates for various roles in different locations. By analyzing survey data, compensation professionals can identify trends and ensure their pay scales align with market expectations.
- Cost of Labor vs. Cost of Living: While the cost of living refers to the expenses required to maintain a certain standard of living, cost of labor reflects the market rate for specific jobs in a given area. Understanding this distinction is essential for creating fair and competitive salary ranges. For example, San Francisco might have a high cost of living, but the cost of labor—driven by competition for talent—could be even higher.
Watch the full video for a comprehensive guide on how these factors interact and influence compensation strategies:
2. How to Apply Geo Differentials to Salary Ranges
In this video, I’ll dive into an example of how to group all the geo survey data, into similar zones in order to set standard geo differentials for this particular scenario.
Geo Differentials or geo Index’s are percentage adjustments or ratio’s applied to base salary ranges to reflect variations in market rates between locations. This approach ensures consistency while accounting for regional disparities.
This step-by-step video tutorial walks you through calculating and implementing these adjustments, watch now!
3. Reviewing Salary Ranges for a New Company Location
Expanding to a new location introduces unique challenges, particularly when defining salary ranges. In this third video, I’ll go through an example of a new company location and how to determine which of the existing geo zones it should be added to.
4. Employee Relocation Analysis
When working in HR or compensation, chances are you might get involved in employee relocations. While there is a lot to consider with any relocation, in this video I’m looking at evaluating employee compensation. I’ll show a quick way to compare the employee’s pay in the current locations vs. the new location, using the cost of labor method (vs. cost of living – see 1st video for the difference between the 2).
Looking for more Excel tips on working with location data in your spreadsheet? This series takes a more hands an approach with several excel formulas that are key to your location analysis:
Bringing It All Together
Location and regional data are invaluable for making informed, strategic decisions in compensation management. By leveraging geo zones, salary surveys, and cost-of-labor insights, you can craft salary structures that are both equitable and competitive. Whether you’re adjusting pay for regional differentials or evaluating salary ranges for a new market, these strategies will ensure your approach is data-driven and aligned with your organization’s goals.