Is location-agnostic pay an anecdote or a trend?

October 24, 2023

With the rise of remote work, many companies have come up with different ways to deal with it, such as location-agnostic pay.

Location-based pay has been the norm in the tech industry for a long time. Many companies use the market rates in each city, country, or region as a benchmark. As more jobs can be done from home, though, people are starting to question whether location-based pay is fair.

For instance, Spotify announced that it would pay its employees San Francisco or New York rates no matter where they worked. Since then, the habit of paying employees the same no matter where they live has only grown. Now, the location-agnostic pay practice has its pros and cons, and it should be clear that not every company has the resources to do it.

In this article, we’ll talk about what location-agnostic pay is, how it works, and its pros and cons.

Table of Contents

1 How does location-agnostic pay work?

2 Advantages of location-agnostic pay in a remote world

3 Is location-agnostic pay possible for most companies?

4 Is location-agnostic pay an anecdote or a trend?

How does location-agnostic pay work?

Location-agnostic pay means that where you work doesn’t affect how much you get paid. In other words, people with the same job are paid the same no matter where they work. There are two kinds of pay models that don’t care about location:

People everywhere in the world who do the same job get paid the same, no matter where they live.
People with the same job and living in the same country are paid the same no matter where they live. For example, everyone with the same job in Germany gets paid the same, but people with the same job in a different country might get paid differently.

Location-agnostic pay doesn’t change the pay scale based on a cost of living calculator like location-based pay does.

Advantages of location-agnostic pay in a remote world

Organizations that use a pay model that doesn’t depend on location can find it much easier to hire highly skilled people anywhere. If companies paid their employees the same amount no matter where they worked, these companies could get high-quality job applications from candidates all over the world who want to maximize their economic benefit.

Why should you get less money for doing the same job? Because you now live somewhere else? Without a doubt, this model seems to be more fair because the worker gets paid for their work, not for where they do it.

Pay equity might be the biggest problem with a location-based pay model that bases pay on where a person works. If employees find out that other employees are getting paid more for doing the same work, they may lose interest and look for work somewhere else.

But it can be hard to choose a fair and equal pay scale that doesn’t depend on where the job is. Companies that do business in more than one country will need to choose a pay scale that works for workers all over the world.

Is location-agnostic pay possible for most companies?

Location-agnostic pay is not the way to go for all companies. If companies started paying workers in San Francisco wages for their jobs, the cost of compensation would go up drastically. This could easily lead to fewer jobs being filled, less work getting done, and less certainty.

Moreover, another problematic question is how to choose a pay scale that works for employees all over the world, including the more salary-tense areas. Another issue is what will happen when the salaries you are offering in these high-risk areas become obsolete. Companies should adjust all of their salaries. This kind of adjustment could multiply the cost of compensation.