Intro

One of the biggest challenges global-first businesses face is salary benchmarking. In other words: how do you pay a globally distributed team fairly and cost-effectively?

For local-first teams (i.e., those based in just one location), this process is fairly straightforward. You simply gather market rate data for the local area by role type and decide how competitive your compensation packages should be.

In contrast, the process is much more complicated for global-first teams because you have to consider location as a variable. After all, what’s considered a good salary in one country or city isn’t in another.

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There are 4️⃣ options when paying a global team

Learn more about each option, why choose one over the other and finally how to implement it.

If you’re working on a project with me then… ✅ I’ll run you through how each of these options work in your compensation calculator and make recommendations on which option is best for your organisation.

✅ I will pre-load location factors in the calculator for each of your locations based on what I see commonly used with my clients.

How many salary bands will you need to build and maintain?

Before delving into each option, it's important to recognise that they all come with their own advantages and disadvantages. A key consideration is the number of salary bands you'll need to create and manage. This factor significantly impacts the complexity and administrative burden of your compensation strategy.

See here for a spreadsheet you can use to understand these implications.

Option 1️⃣ - Pay individuals at the local market rate using pure market data

Option 2️⃣ - Pay individuals at the local market rate using a location factor

Option 3️⃣ - Pay individuals based on a location band or tier

Option 4️⃣ - Pay individuals one global rate

Currency conversion

The final step in Options 2, 3 & 4 requires converting salaries into the local currency.
Based on numerous projects, most companies use a 1-year average exchange rate, typically set on January 1st, and lock this rate into their compensation calculator.
Using live rates or rolling averages is not recommended since Google Finance updates automatically every 20 minutes. Locking in a fixed rate prevents both system slowdowns and unwanted salary fluctuations due to currency changes.
If exchange rates move drastically during the year (by more than 10%), this warrants an out-of-cycle review to ensure salary package values aren't eroded.

How does this template help you?

The template allows you to carry out a cost of market evaluation compared to your desired reference market in a matter of minutes and quickly create location multipliers for new locations where you may have a blind spot.

✅ Visualise and understand how compensation differentials vary globally from your data sources

✅ Understand the cost implications for adopting one of the 3 pay strategies above so you can make a data informed decision on how to pay in each location, while taking into consideration your organisation's values and philosophical beliefs

✅ Model the salary costs in any currency, and in any location in the world, in order to build salary ranges that align to your organisations philosophical beliefs.

✅ Build out a local salary structure for a new location (city, country or region) in a matter of minutes

Step 1: Collect and normalise data salary data
Step 2: Compare location differentials (table)
Step 3: Compare location differentials (visualisation)
Step 4: Compare pay strategy costs
Step 5: Set your pay strategy for all levels across all your locations
Bonus: Cost of living and rent index analysis