Compensation Case Study - Cost of Living Ranking

    Feb 28, 2022 @ 06:35 PM / by Andrea Downing

    Comp case-1

    We all like to see a ranking. We like to know the best countries to live in; the most expensive cities; a listing of cities by their cost of living. Sometimes we are just curious and sometimes this information influences our decision-making. Here is a great example of an organization that used a comprehensive cost of living ranking to support their policy of adjusting compensation by location.

    303.Munich.Germany

    Client Challenge #6:

    This organization uses pay scales for their employees in over 40 locations in Germany. For each grade, there is a corresponding salary range and a target salary. They wanted their employees to have similar savings potential after goods and services and housing were taken into account. They adjusted the target salaries to protect the savings potential. For example, they increased target salaries in Berlin because the city was becoming more expensive and they wanted their salaries to remain attractive. They could also adjust the salaries down should the reverse happen. They currently use various sources of information like feedback from recruiters or, more simply, what they hear through the grapevine; however, they needed more robust data as they wanted to make the process more systematic.

    Solution:

    AIRINC consulted with the client to understand their current pay structure and to establish a base location that would act as the reference point for comparison. The calculation took into account the cost of goods and services, accommodation, tax and social security, and savings, determining the comparative purchasing power in each location across the country. We provided the following to the client:

    • Gross index
    • Tax index
    • Goods & services index
    • Housing index

    Based on this information, the client started to adjust target salaries up and down by 2-5%.

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    More from the compensation series:

    Compensation Case Study - Cost of Labor

    Compensation Case Study - Remote Work Allowance

     

    Topics: Cost of Living, Cost of Living Surveys, Global Mobility, Workforce globalization, Employee Compensation, Global Compensation, Calculate cost of living allowance, Germany, Total Reward, Distributed Workforce, Compensation

    Andrea Downing

    Written by Andrea Downing

    Andrea joined AIRINC in 2014 as a Client Solutions Executive with over fifteen years’ experience in global mobility with expatriate data consultancies. Andrea is the first point of contact for clients within the EMEA region that are managing their first international assignments; she also develops relationships with partner companies in EMEA. Andrea’s experience ranges from conducting pricing surveys to managing consulting projects, providing a full understanding of all the issues clients face with cross-border moves. Andrea has a BSc (Hons) Degree in Biological Sciences from Middlesex University.