Managing Salaries Across Geographies in a Rotational Program
Any employer who doesn’t pay enough risks losing good workers.
Any employer who pays too much risks keeping bad workers and inflating operating costs.
The same is true for rotational programs. Offering a competitive compensation package means remembering the market factors that attract—or lure away—good candidates.
If you’re managing a multinational rotational program, this means figuring out how to manage salaries for participants spread across different economic regions.
Should you think about location when structuring compensation? If the answer is “yes,” a few more questions are raised:
- Will salary adjustments be automatic (and immediate) when a trainee relocates?
- Will moving to a lower-cost region trigger an automatic pay decrease?
- Will a participant’s negotiated, non-standard salary change if they are relocated to a higher-cost (or lower-cost) area?
John Sweney has spent a lot of time thinking about these questions. He directs the rotational programs that develop GlaxoSmithKline’s future leaders. With operations in more than 115 countries, many GSK program participants can expect to be rotated through different regional headquarters. Most of them move within their home country; others (where their development track calls for it) can expect a 6-12 month international rotation.
“A commercial graduate, for example, will probably have at least one significant relocation, because they’re going have to take a field-based role,” John says. “They might be from Philadelphia, but they might end up in Raleigh, Wichita or San Diego. But a tech graduate might be able to join in Philadelphia and do all three of those rotations without even leaving the building.”
Can program participants expect to be paid differently based on where they live?
“Geography has to play into what you pay,” John says. “I’ll give the most obvious example: Cost of living. Look at an established market and compare it to an emerging market, say Switzerland and Thailand. The cost of living in those two places is very different, from what you have to pay for rent to what you have to pay for a gallon of milk. Salary and compensation strategy has to align with that. Obviously you can’t pay a Swiss salary in Thailand and you can’t pay a Thailand salary to someone living in Switzerland.”
According to compensation consultants Culpepper and Associates, location is the dominant factor influencing market pay rates for most jobs. A company with geographic pay differentials must regularly re-validate cost of living and other factors, because huge differences can rapidly disappear or suddenly emerge.
Jim Brennan, former senior associate of the salary analysis group ERI Economic Research Institute, says organizations should base geography-based compensation on their assessment of competitive pay, not personal spending. Put another way: An individual’s cost of labor should be considered—his or her cost of living shouldn’t be a factor.
Is there any perception of inequity among the program participants? If so, how do you address it?
“If I’m in Vietnam getting paid X, and another person is in Singapore getting paid Y and doing the same work, I may not like that.” John says. “That’s when you have to have a conversation about cost of living and the current economy.”
John often has to explain to participants that while GSK is operating in a global economy, each country has its own economy.
“As a philosophy, we try to keep (program participants’) salaries within one region as close as possible, to avoid any equity issues. Once people understand the rationale, they think it makes sense.
“Ultimately, the philosophy has to be: the employee is no better off or no worse off for having taken (or not taken) the assignment. In some cases, somebody might end up with a little extra money in their pocket. And others might feel disadvantaged slightly, but that’s not the intent. It’s the result of following good policies.”
John says participants are more likely to have an issue when they see colleagues getting better compensation or access to projects not because of where they’re working—but because they’re excelling at a faster rate.
How are these pay adjustments structured? Are they automatic when a trainee moves from one region to another?
Temporary “uplifts” in payment compensation take effect as soon as a participant relocates to a region that has been designated as a higher-cost rotation. They don’t continue when the participant moves somewhere with a lower cost of living.
Should these pay differentials take individual’s career and life goals into account?
Some young professionals are eager to accept international rotations; others are more driven to find the right place to settle down long-term. The most important thing is that they’re honest about what they want going into a program. If they prefer to stay in one area, that is usually possible—but in some fields it may negatively impact their opportunities with the company.
Perhaps surprisingly, some LDP participants in higher-cost/higher-pay areas (think the Bay area or New York City) find it harder to save money than their peers in lower-cost/lower pay areas. But for many young professionals in their 20s, the sacrifice is worth it to be in a fast-paced, urban center with all the opportunities it affords.
How does geographic differentiation affect onboarding into permanent roles?
Simply put, it doesn’t.
Despite keeping incoming trainees on a level playing field at the start of the program, GSK doesn’t have have a standard target salary that all participants reach after three years.
“It’s very differentiated, and program graduates may receive multiple offers (at multiple salary levels ) in various business units within GSK,” John explains. “Where they had done their most recent rotation (whether in a low-cost/low-pay area or a relative high-cost/high-pay area) doesn’t influence those offers at all.”