Designing a Geographic Salary Structure

DEVELOPING A GEOGRAPHIC SALARY STRUCTURE

DLC Course 82, Creating a Market Competitive Salary Structure, showed you how to design a salary structure for your company's headquarters. Let's take a look at how to adjust this structure for a branch office.

Rates of pay aren't the same in all locations. So, basing employee pay on the headquarters salary structure(s) can lead to:

• overpayment
  
  
• OR
  
  
• underpayment

Both of which can be costly…

Ideally, the headquarters’ salary structure can be used or adjusted to meet the needs of other facilities or remote employees. There are a few important considerations though.

Headquarters' Salary Structure?

When setting geographic pay, consider using the headquarters' salary structure if:

• the jobs at other facilities, or those held by remote workers, are the same or similar to the jobs at the headquarters office
  
  
• AND
  
  
• there is an interdependence between these jobs and the headquarters' jobs
  
  
• AND
  
  
• the labor market for these locations is similar to that of the headquarters

This would ease employee movement between geographic locations.

Separate Salary Structures

What if the geographic operations are truely separate operations? A separate salary structure may be a better answer if the location or operation:

• performs different functions or is in a different industry than the headquarters
  
  
• AND
  
  
• rarely interacts with headquarters
  
  
• OR
  
  
• the labor market for the geographic operation is significantly different than the one for headquarters

Geographic Salary Structure

What if the non-headquarters operation has similar jobs, is in the same industry, but has different market values for pay? To determine if you need a separate salary structure, compare the pay rates between headquarters and the other facility.

A separate salary structure may be called for if the pay differential is 10% or more.

Many businesses have facilities throughout the United States, so creating geographic salary structures that are simple to maintain, yet competitive for each local marketplace to effectively support staffing, is an important goal.

Be mindful that the use of geographic structures will increase the complexity of the organization's compensation program.