Global Location Insights outlines pay differentials — represented as a percent of your defined **Base Location** across regions included in your Pave plan. A pay differential is the ratio of the base salaries for employees performing the same job at the same seniority level in two different locations.
Geographic pay differentials are an industry best practice for efficiently managing compensation structures for companies with employees in multiple locations. Pay differentials are useful to compare the cost of labor across multiple locations using one single number — abstracting away levels, families and FX rates / currencies. In Global Location Insights, all salary data used to calculate pay differentials are converted to a shared currency using a trailing 30 day rolling average exchange rate.
In general, the differentials provided by the Global Location Insights tool and the market data in the Employee Compensation product should align. However the calculated benchmarks are derived from either the location aggregation or the location + job family aggregation, depending on which one gives us a more reliable slice. Therefore, a calculated benchmark for a specific location + job family might not necessarily use the same pay differential value as seen in the Global Location Insights tool for that same location + job family.
It's important to note that while manually computing a benchmark for a specific job family might not always yield an exact match to the calculated benchmark, the values should be fairly close and within our accepted margin of error (refer to our Confidence Scale for the specific margin of error ranges for each of our confidence labels).
Custom Tiers
Within Global Location Insights, you can create custom tiers that include locations relevant to your organization be selecting the “Create custom tier” button and adding locations current viewed under “Additional Locations” to your Custom tier.
The average differential for a custom tier is an unweighted average. It represents the true average and isn't influenced by the sample sizes of the included locations or include any weighting factors.
Why Global Location Insights splits by job family, and not by level
Generally, our observations show that variations in job levels have less impact on geographical pay differences compared to the influence of job families. As a result, we focus on providing job family specific insights to give a more accurate understanding of geographical pay differentials.
Job families weighted per location in Global Location Insights when calculating the “Average Pay Differential”
The “average pay differential” is calculated by taking the median salary of employees that are performing the same job at the same level to create a geographic pay differential. This process creates a geographic pay differential, and it doesn't assign a specific weight to each job family. Instead, we control for both job family and job level to ensure that we are looking at comparable roles across locations since job mix or candidate seniority differences between locations can have significant impacts on salary differences.