As an employer – especially one that might have a number of fully remote employees living in different states – it is important to keep up with the differences in cost of living in the area(s) your employees reside in, and adjust salaries accordingly. Failure to do so can result in employees feeling undervalued and becoming disengaged or seeking employment elsewhere.
For employers that want to be sure they are doing everything they can to stay on top of cost of living considerations, here are a few key things to keep in mind when adjusting salaries for cost of living:
- Research the Cost of Living in the Specific Area(s): Yes, this may seem obvious, but it is the very first step you should take to ensure the accuracy of your adjustments. Websites such as Payscale or the Bureau of Labor Statistics can provide valuable information regarding the average cost of living for specific locations, industries, and/or professions.
- Take a Data-Driven Approach: Use other available data and industry benchmarks to inform your decision-making. This helps ensure your salary ranges remain competitive and in line with industry standards.
- Consider Employee Feedback: Ask employees for their thoughts and feedback on their current cost of living and consider that in relation to their salary levels. This will help you understand your employees’ concerns and make an informed decision when adjusting their salaries.
- Assess Your Company’s Financial Health: When adjusting salaries, it is important to consider the resources needed to make these adjustments and how that may impact your company in both the short and long term.
- Communicate the Changes Effectively: Once you have made the decision to adjust salaries for cost of living, communicate the changes clearly to your employees. Be sure to explain the reasoning behind the changes, while also being transparent about how the new salaries were determined.
Adjusting salaries for cost of living is an important step in ensuring your employees feel valued and motivated. By taking a data-driven approach, considering employee feedback, and effectively communicating changes, you can be confident that your salaries are competitive and in line with your employees’ cost of living.