Insights from Pave’s Geographic Pay Differential Guide

Pave Data Lab
April 18, 2023
min read
Katie Rovelstad

Over the last 2 years Pave has aggregated over 520,000 compensation data points from more than 5,000 companies. You can use that data in Pave Benchmarking to find the median (or 25th, or 75th percentile) compensation for over 50 different job families across 12+ levels for the US, Canada, and the United Kingdom. 

But many of the companies we serve have employees outside of the US, Canada, and the United Kingdom – which means:

  1. They want access to data for more locations
  2. We have some data for additional locations

While we don’t have enough data to release a global benchmarking data set, we can share summary statistics on how compensation changes for locations around the world.

Pave’s Geographic Pay Differential Guide – which is available to Pave’s paying customers – is that summary. Below are the highlights from the guide.

Cost of labor is not the same as the cost of living

Pave’s Geographic Pay Differential Guide shows how salaries compare across locations: it is a  reflection of the cost of labor – not the cost of living. 

While the cost of living and the cost of labor often are conflated, they are not the same thing: 

  • Cost of Living: Reflects the amount of money required by an individual to live in a certain location and cover necessities. Inflation typically impacts the cost of living. 
  • Cost of Labor: Reflects the amount of money required by an employer to hire and retain employees in a certain location. Labor shortages typically increase the cost of labor. 

One simple metric often used to compare cost of living is the “Big Mac Index”, a term coined by the Economist, which tracks the cost of a McDonald's Big Mac across different locations. You can see how salary differentials (an indicator of the cost of labor) vary dramatically to the Big Mac Index differential (an indicator of the cost of living and local purchasing power).

Source: The Economist Big Mac Index (April 10, 2023); converted to USD using exchange rates as of April 10, 2023

Since cost of labor is not the same as cost of living, it’s not advised to use cost of living differentials to calculate compensation across locations. Similarly, it’s also not recommended to use cost of living changes to calculate baseline raise amounts as part of a compensation review cycle.

US software engineers command a premium

For non-US locations, the differential for Software Engineering roles is often larger than for other job families. This might seem counterintuitive. Aren’t European engineers typically paid MORE than their marketing, CS or Finance counterparts? Even with larger differentials for engineers, the answer still is “Yes”. 

Even though the pay differential ratio is lower for Software Engineers in Ireland than for Irish Content Marketers, their base pay is still higher. European engineers still make more, just not quite as much more as their US counterparts do.

Base pay for Sales doesn’t vary as much (relative to other roles)

On the other side of the coin from the Engineering differential, we have the Sales differential. Sales salaries typically have less geographic variance than other job families. 

Sales team members in the Dallas/Fort Worth area, Baltimore, Philadelphia and Washington DC have no base pay differential relative to Sales teammates in Tier 1 locations – they get paid the same salary as Sales folks in the Bay Area, New York City, Seattle or LA. (Note: that this is salary differentials, not total cash differentials)

The most expensive and inexpensive locations to hire

Thinking of opening a new office? Here are some of the least expensive locations to hire teammates:

Accessing the Geographic Pay Differential Guide

Full access to the Geographic Pay Differential Guide is available to paying Pave customers and includes 32 countries across North & South America, Europe & APAC and 33 individual metropolitan areas within the United States. 

It compares salaries for these locations to Pave’s “Tier 1” (SF Bay Area, NYC, LA and Seattle) and Pave’s “All US” locations, aggregated across all job families and broken down into differentials across key job families (Engineering, Sales, Product, Marketing, Customer Success, Finance and HR). 

If you’re already a Pave customer, reach out to your Customer Success teammate for access. 

If you’re interested in learning more about Pave’s product suite click here.

Learn more about Pave’s end-to-end compensation platform
Katie Rovelstad
Operations Leader
Katie is an operations leader at Pave. Prior to joining Pave, Katie held various roles at Segment.

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