Managing compensation is already complex. Between finding the right market data, building competitive salary ranges, and running regular review cycles, managing compensation is no small feat. Adding to the complexity, many companies do this for multiple office locations, trying to maintain pay equity while the cost of market varies in each of their office locations.
But with more companies offering permanent remote work—either as fully distributed or hybrid companies—compensation becomes a lot more complicated. While you once had a finite number of locations for which to build salary bands, employees can now work from anywhere. You may need to calculate custom salary ranges for individual employees if you’re planning to use a local-market approach to remote compensation. This can get messy, particularly if you want to ensure pay equity throughout your organization.
You can use spreadsheets… but they’ll only take you so far
Tracking employee compensation can help ensure you’re using your budget strategically, making competitive offers, retaining existing employees, and maintaining pay equity. You can use spreadsheets to do this, but they will require a lot of labor to build and manage, and aren't very expressive for data analysis.
If you go this route, here’s the data you should input and track for each employee:
- Current compensation
- Anchor range (if you’re using location factors or zones)
- Target salary range
- Current Compa-ratio
- Current range penetration
- Previous compensation
- Last raise percentage
- Previous Compa-ratio
- Previous range penetration
- Demographic information (if you plan to run a pay equity analysis)
This will give you an overview of how your budget is being utilized, so you can make more data-driven decisions. For instance, how to adjust compensation for an employee who just relocated to Boise from San Francisco, or how to use your next focal cycle to ensure pay equity.
The right infrastructure can help ensure a smoother transition to remote work
Compensation management software can help you manage where someone’s compensation is, and where it should be—so you can take the appropriate actions. For instance, it can identify when an employee has been red-circled after relocating to an area with a lower cost of market. When your next focal cycle comes around, your entire team will have some visibility around why that employee isn’t receiving a similar increase for the same performance as other employees. While you may have been able to manage this in spreadsheets when you had three zones, it becomes much more complex as you do this for 50 different permutations.
The right infrastructure can also help you better understand the variability of different locations, cuts across the organization, and pay equity explorations. For example, you can see whether men and women have a similar Compa distribution across your organization. And, if not, you can dig in more to learn why.
If you’re going to tackle remote compensation at a reasonably high level, it’s going to be worth the investment to update your HR tech stack to more fully support your transition to remote work. This can be particularly important for larger organizations that need better visibility into compensation data to ensure compliance and adherence to company values.
Final thoughts on managing the complexities of remote compensation
It’s difficult enough to track compensation with finite versions, and it becomes much more complex as employees relocate to areas with vastly different costs of market. The right infrastructure can help you better manage the complexities of remote pay, so you can make more informed, data-driven decisions.