Pave’s Guide to International Compensation Tiers

An increase in global hiring is one of the most significant second-order effects of the COVID-19 pandemic. Whereas once upon a time a business may have only sought out candidates in the city or country where it’s headquartered, the proliferation of remote work has made it possible for talent teams to dip into labor markets in all corners of the globe.

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Global hiring can help businesses overcome staffing shortages in a cost-effective way, given the lower cost of foreign talent. For this reason, research from Deel found that international hiring was up 145% in the first half of 2022. Businesses that don’t hire globally now risk falling behind in the race for top talent, or needlessly overpaying for talent in expensive locations.

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However, a frequent barrier to global hiring has been difficulty managing international employee compensation. After all, there are dramatic variations in cost of living, taxes, labor laws, employee benefits, and other regulations based on the country where the employee resides. Without accurate benchmarks, organizations defer to using cost of living data, unverified sources, or guesswork, resulting in costly mistakes that mitigate the benefits of hiring globally.

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To tackle this problem, Pave recently launched Global Location Insights. In addition to finding verified, real-time compensation benchmarks for 45+ countries, Global Location Insights enables compensation leaders to create a tiered compensation structure, in which various locales are grouped into compensation tiers, and employees residing in a specific locale are paid according to that locale’s tier. This approach is recommended for companies with employees in multiple countries because:

• It enables companies to hire in competitive markets while remaining cost-conscious: Companies can offer top talent compensation that’s competitive in their market without overspending.
• It attracts top talent: Employees in the most competitive markets expect to be paid top dollar.
• It makes managing compensation bands easier: For large organizations with employees in numerous locales, creating tiers based on where compensation is similar reduces the operational burden of managing dozens of pay bands.  

We dug into Global Location Insights data to determine compensation tiers for various international markets. We hope the following data can help employers better grasp international compensation.

International Compensation Tiers

To create these international compensation tiers, we grouped together countries and cities where average compensation for all jobs is similar. Tier A denotes regions where compensation is higher; Tier B is less expensive, and Tier C is the least expensive (where appropriate). Note that all countries with a large tech talent presence are included. Here’s how our compensation tiers break down for various international labor markets:

To access the data behind each tier, request a demo of Pave’s Global Location Insights. 

Guidance for People Leaders

The above tiers offer a loose framework for how employers can think about compensation tiers when hiring internationally. Here are some additional tips when it comes to setting compensation for global hiring:

• Most companies tier by country when they hire internationally. A company often tiers by city in the country where it’s headquartered, but tiers by country when it hires international talent. This is typically a function of convenience, as creating city-based tiers in every country in which the business has employees requires too much work to maintain. However, if a company has employees in many countries / locations, it should consider creating city-based tiers in those countries.  
• Avoid creating too many compensation tiers. We recommend having fewer than six total compensation tiers, even if you have employees in hundreds of cities. Having too many tiers becomes unwieldy to manage, and the differences between the tiers become increasingly arbitrary.
• Tiers can future proof your compensation bands. Building compensation tiers that include the countries you may recruit from in the future lays the compensation groundwork for hiring in that region. When the company eventually looks to expand, you’ll already have a plan in place, reducing some of the friction associated with hiring in a new locale (per our research, the most common labor markets for U.S.- based businesses to hire from outside the U.S. are Australia, Ireland, and England).
• Build compensation bands you’d be comfortable sharing with your employees. This means having sound reasoning behind what you pay and why. You should assume your employees talk to each other about compensation, and will eventually gather a sense of compensation for various roles within the organization.

Use Global Location Insights to Create Your Compensation Tiers

Using Global Location Insights, People leaders can confidently set compensation in line with market rates in 45+ countries to make offers that are both competitive and cost effective. To learn more about Global Location Insights, visit our website.