Location pay, but not as we know it

Right now, the big question we are asked by clients is ‘how should location-based pay work in a hybrid world’?

Although the government work from home guidance has come to end, some degree of home-working is now a viable long-term approach for many employees.  

For most organisations, this is either completely agile ‘work where you can do your best work’, or a hybrid blend of X number of days in the office each week. 

But if you’ve been taking account of market data to set pay, as most organisations do, chances are you’re paying employees different rates in different locations. How can this approach be right going forward when employees are not working from those locations for some, or all, of the week?

Perhaps it’s time to adopt a different approach to location pay? Something more sophisticated rather than a formulaic decision.   

I’m really not a ‘Trekkie’ (or Trekker for the most avid fans), but I do know that Spock is an interesting mix of a Vulcan father and a human mother. He blends Vulcan traits of ‘adherence to logic and a rejection of emotional reasoning’ with a human side. 

Given the increasing complexity in our world of work, the only viable way to approach many people management decisions is to move away from a ‘formula’ towards more human decisions.  

It’s time to accept that answers can’t be generated by the ‘HR machine’ using pseudo-scientific calculations. Managers are going to have to weigh up multiple changing factors, sometimes with no precedent, and take decisions ‘in the round’.

We’ve argued before when it comes to market data that the market median is not the answer. The best approaches will take account of market data as just one of many factors that go into the mix to create a pay decision.

The location is the same. It’s one of the factors that go into the pay mix. But it’s not a formulaic answer.    

How about challenging your inner Vulcan to consider ‘location’ not as a place, but as two questions:

1. Is the employee required to come into the workplace or are they simply doing so for their own benefit? For example:

  • The role requires physical presence
  • Your hybrid working policy dictates this
  • A degree of workplace presence is necessary for the employee to do the role to the best level possible, and for the organisation to gain the most value from them 

2. What is the nature of that requirement?  For example:

  • How often is workplace presence necessary?
  • Does the employee have discretion over when?
  • Are there different locations and, if so, how geographically dispersed are they?  
  • Are employees required to come in at short notice or at unsociable times?    

By considering ‘location’ in this more human way, it can be taken into account in pay decisions rather than dictating pay rates.

This approach requires broad pay ranges. And how much impact ‘location’ has on pay will depend on how many other factors are in your reward strategy (such as contribution or performance).  

I’m not proposing the laid-back chaotic approach of Shaggy from Scooby Doo. But I am suggesting that we take a ‘Spock’ approach that balances clear pay principles and ranges, with a more human judgement based on what is actually happening in reality.

Seeing location as a multi-faceted decision, rather than a place name on a contract, will help many organisations achieve a fairer approach to pay in a hybrid world.  


Do get in touch if you’d like help with reward strategy.

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Photo: Mirror Spock vs Shaggy by JD Hancock