Will geographic pay policies help reduce turnover?

Number of employers making base pay dependent on location falls

Will geographic pay policies help reduce turnover?

The migration to the remote work setup is giving employers a headache. With many workers opting to continue working out of the office, 28 per cent of organizations in the U.S. plan to modify their policies through consolidation of pay differentials, according to a report from WorldatWork.

Another 13 per cent are considering eliminating differentials by geographic area.

"Geographic pay policies have existed for many years but in the past were more about an organization's multiple physical work locations rather than where the work was being performed, including employees' homes like with remote work," says Alicia Scott-Wears, WorldatWork director for total rewards content.

"With the increase in remote work over the past two years, these philosophies and policies have required more attention and communication."

Currently, 24 per cent of U.S. employers say their base pay is dependent on location, down from 33 per cent in 2021. Meanwhile, 25 per cent say pay is not dependent on location, up from 19 per cent from last year.

Forty-five per cent of employers apply pay differentials as a premium or discount to either a baseline/single pay structure or individual pay, and 24 per cent create separate base pay structures for each/different geographic location.

For in-office or hybrid employees, the geographic pay locations are most often determined by their nearest work location (45 per cent) or reporting location (31 pe cent). Meanwhile, over half of full-time remote workers are tied to location of residence, says WorldatWork.

Is dependency beneficial?

But is eliminating base pay dependency on location a wise move? Only seven per cent of organizations report geographic pay policies as ineffective for reducing turnover, according to the survey of 858 U.S. employers and 312 full-time business professionals.

And 73 per cent of employees expect their pay to differ based on a geographic location.

Since 2020, about 2.4 per cent of Americans, or 4.9 million people, say they’ve moved because of remote work. And almost 1 in 10 Americans plan to move to work remotely, report Bloomberg, citing studies from Upwork.

Almost three-quarters (72 per cent) of HR leaders and 61 per cent of employees say that the stress resulting from cost-of-living increases is negatively impacting employees’ work. Now, 72 per cent of senior executives plan to leave their employer within the next two years, according to another study.

A boost in pay is the best way to address staff turnover, say 42 per cent of employees, according to another survey. Pay transparency also appears to be more important now than ever, according to another report.

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