What is a pay differential?
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.
What is included in Pave’s pay differentials?
Our pay differentials focus on differences in base salary. They currently do not include non-salary compensation like bonuses, equity, and benefits or costs like payroll taxes.
How is a pay differential calculated?
We compare the median salary of employees that are performing the same job at the same level to create a geographic pay differential. Controlling for both job and level to ensure we’re looking at comparable roles across locations is critically important, since job mix or candidate seniority differences between locations can also have significant impacts on salary differences.Once we calculate the differential at a per job and level basis, we compute a differential benchmark using exactly the same statistical methods we use to calculate our employee and executive compensation benchmarks.
How should I use Location Insights pay differentials?
Pay differentials make it easy to maintain a single coherent and competitive compensation philosophy for cities and countries around the world. If you know what you already pay for a role in your home location, you can calculate suggested pay scales for additional offices. Easily explore custom pay zones directly in the UI and export your result.Want to see actual salary numbers? You can convert a pay differential back into a raw salary number by looking up a benchmark for your base location using our benchmarking search and multiplying it by the differential.
Pay differentials vs. average salary and cost of living?
Cost of labor based pay differentials between high cost of living areas and low cost of living areas are often smaller than corresponding differences in average salary or cost of living.Average salary is often impacted more by what job someone works than where they do it. Differences in average salary between locations are often driven more strongly by the balance of jobs represented in each market than they are by the pay differential between the markets.Cost of living also tends to vary more than pay differentials because cost of living is driven by average salary and cost of housing. But the labor market is much more mobile than the housing market and thus tends to have smaller geographic differences.Geographic pay differential policies based on cost of labor data are better reflective of the labor market, which is why they're the industry standard.
Do pay differentials account for currency differences?
Yes. We convert all of the salary data we use to calculate pay differential to a shared basis using a trailing 30 day rolling average exchange rate.
What if I don't see a location I need?
We are constantly working to add new locations as soon as possible. If there are specific locations you're interested in seeing in Pave, reach out to email@example.com for help.
What do the confidence labels mean?
The Pave Confidence Scale is designed to be an easily understood summary of how reliable a given differential is. The labels let you know at a glance which numbers are exactly correct and which ones might be off by two or three percentage points. We want you to know exactly how much to trust each number. The Pave Confidence Scale labels and their meanings:
How are the confidence labels calculated?
For determining confidence labels, we start with the well-established statistical basics of sample size and margin of error. We refine this basic understanding using machine learning models that look across our entire dataset to quantify the influence of bias, outliers, and incomplete data on our benchmarks.