When It Comes to Pay, It's Still Location, Location…

May 9, 2005 (PLANSPONSOR.com)-Your paycheck continues to be linked to your address.

class=”NormalIndent2″> Mercer Human Resource Consulting’s 2005 Geographic Salary Differentials study shows that pay variations exist across all pay levels, although they are less pronounced at higher incomes based on an analysis of incomes for more than 200 cities across the country.

class=”NormalIndent2″> For example, a job that demands a salary of $30,000 nationally can pay as much as $37,050 in San Francisco, California, $36,900 in San Jose, CA, and $35,670 in New York, New York or as little as $27,210 in Birmingham, Alabama, $27,300 in Baton Rouge, Louisiana, and $27,300 in Mobile, Alabama, according to the report. A $60,000 median salary job might command a high of $72,000 in San Jose, California or a low of $54,840 in Baton Rouge, Louisiana .

class=”NormalIndent2″> A $90,000 job also shows differences, although less significant; cities like New York, New York, and San Francisco, California hold the top spots at $104,130 and $103,590, respectively, while Little Rock, Arkansas, and Buffalo, New York, represent the lower end of the pay range at $85,410 and $86,130, respectively.

class=”NormalIndent2″> Vary Well?

class=”NormalIndent2″> The pay variation among the $30,000 national salary figures was 32 percentage points, while at the $60,000 national pay level, the variation was 29 percentage points, and at $90,000, the variation is down to 21 percentage points. To calculate the differentials Mercer compares local pay rates for each city to national medians at different pay levels.

class=”NormalIndent2″> Employers should be aware of the difference between cost of living and cost of labor and should apply geographic salary differentials correctly, according to Darrell Cira, a senior compensation consultant in Mercer’s Philadelphia office. Cost of living considers the cost of goods, such as housing, groceries, transportation, and entertainment, while the cost of labor considers the difference between localities in terms of cash compensation for the same work.

class=”NormalIndent2″> “Every year we encounter employers that adjust pay for the cost of living differences between locations and this is the wrong approach,” says Cira, in a press release. “While cost of living and geographic pay differentials correlate, cost of living differentials between locations tend to be far greater.”

Additionally, having to consider this information when transferring employees from a high-paying locale to a lower-paying locale, or vice versa, organizations need to be concerned about pay levels for employees in the same location. “Organizations moving individuals from one location to another should pay a locally competitive salary and offset expenses such as higher rents and home prices in the relocation package,” Mr. Cira explains.

The study can be purchased for a cost of $595 by contacting Mercer at www.imercer.com or 800-333-3070.