AIRINC EUROPE

[Article] Compensation is not aligned with Cost of Living, 02/09/2024

We often hear that the cost of labour is aligned with cost of living. Salaries are higher in higher-cost countries and cost are lower in lower-wage countries. While this may be true in general, there is no direct relationship between the salaries — traditionally based on the cost of labour — and the cost of living. If that was the case, the same job would attract the same standard of living anywhere around the world (and we know this is not true!). In today's global economy, businesses are facing the challenges of total rewards and constantly seeking more information to supplement cost of labor surveys.

AIRINC provides essential research and data on cost-of-living differences across countries. This information is crucial for companies to effectively manage employee compensation, especially as workforces become more dispersed.
Understanding Allowances and Compensation

Compensation specialists traditionally rely on salary surveys to determine appropriate salaries. These surveys are based on the cost of labour, which does not always align with the cost of living. Companies have started incorporating cost-of-living data into their compensation plans to better align salaries to employees' actual living costs. This shift is particularly important for permanent transfers and new hires from abroad.

Read more on the Key Differences: Cost of Living vs. Cost of Labour from AIRINCs' Bruno Lagasse, Deputy Region Leader for EMEA. Compensation is not aligned with Cost of Living (air-inc.com)

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