What is location agnostic pay?
Location-agnostic pay refers to a payment model in which companies compensate workers at the same rate for the same job, regardless of where those workers are located. It is different from location-based pay, in which salary and benefits are adjusted according to each worker's geographic location.
What is a location-agnostic pay model?
Adopting a location-agnostic pay model means that companies pay workers the same salary for the same job, whether those workers live in New York or New Delhi. These pay models can be location-agnostic countrywide or worldwide.
For example, a company with a location-agnostic pay model across the United States will compensate employees the same in all 50 states, regardless of which one they call home. In a worldwide model, the same principle applies—but employees can live in any country in the world and be remunerated equally for doing the same job.
This is a fairly new concept and a departure from typical location-based pay models. For example, the salary for a software development job may be higher in a major city like San Francisco or New York than in a more rural area.
The thought process behind this is that the cost of living in hubs like New York and San Francisco is higher, so companies need to pay more to attract and retain top talent. As a result, they may adjust pay rates according to the cost of living.
Why location-agnostic pay is gaining ground
Location-agnostic pay models are gaining ground as more and more companies embrace remote work—a trend that doesn't seem to be slowing down in 2023. However, this hasn’t always been the case.
In the past, some companies used geographic differences to justify pay disparities. As remote work became the norm, particularly during the COVID-19 pandemic, many companies first planned to adjust salaries according to workers’ locations.
Back in 2021, big tech firms—including Apple, Meta, Microsoft, Alphabet, and Amazon—announced that employees who relocated outside of pricy Silicon Valley would face pay cuts. The logic was that the cost of living in Silicon Valley was higher than in other areas workers were relocating to. However, many companies still offer location-agnostic pay.
But location-agnostic pay models do raise some concerns. Is it fair to pay the same amount of money to an employee who lives in a much more expensive city or country as an employee who lives somewhere much cheaper? Theoretically, this can mean major disparities in the quality of life between workers.
Companies offering location-agnostic pay
Some companies are already using location-agnostic pay models, at least partially. Businesses that have jumped on board include Airteam, Basecamp, Expensify, Harvest, Know Your Team, and Toggl.
But compensation strategies aren't one-size-fits-all. Even though more companies are choosing location-agnostic pay, it might not be right for you. If you're considering it, you should consider factors like:
- Where your workforce is located
- If your leadership team would be on board
- Whether you have the infrastructure to equitably implement location-agnostic pay in all areas where you hire
Legal considerations of location-agnostic pay models
However, location-agnostic pay requires careful consideration. For one thing, companies that hire internationally need to make sure they remain compliant with national labor laws.
These rules can govern everything from minimum wages to the number of paid vacation days an employee gets every year. There are also legalities like social security, pension contributions, and health insurance coverage to keep in mind.
Every country has its own regulations when it comes to employer obligations on these points. Run afoul of the local laws, and your business could face legal repercussions. Learn more about compliance so you have a better understanding of what to expect.
Don't stress: Oyster is here to help. Oyster is a global employment platform that helps companies hire globally, ensuring that employees are taken care of wherever they may be.
We help companies fairly hire and manage employees in more than 180 countries around the world. You can recruit globally with confidence, knowing you have us at your back.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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