Almost half of UK employers are unsure about whether to offer location-based pay in the future, according to XpertHR.
Although location pay is offered by more than half (55%) of the organisations XpertHR surveyed, 44% are uncertain whether this will continue thanks to the shifts in working practices brought about by the pandemic.
The most common form of location-based pay is a London allowance on top of basic pay to account for the higher cost of living in the capital. This is offered by 40% of organisations. Just over a third (36.1%) work on national location-based pay scales depending on where employees are.
The median London weighting payment for inner London employees is £3,775, and £3,250 for outer London. Other common locations for standalone allowances tend to be located in south-east England, such as Reading and Guildford.
Two-thirds of organisations offer location pay in high salary areas because they believe it keeps salaries competitive and helps to recruit staff. One in 10 said they used it to “push down pay bill costs in areas where salaries are lower”.
Despite the move to more remote and hybrid working over the past two years, 79% of companies have made no changes to their location pay. Almost nine in 10 (86%) believe it to be effective in meeting organisational need.
The other 14% are considering how to adapt arrangements to reflect new workplace practices now restrictions are being eased.
Other options include changing allowances so they’re not based on location, reviewing payments for employees who work remotely, and looking at how to support people who have relocated during the pandemic.
Sheila Attwood, pay and reward editor at XpertHR, said: “Remote working is here to stay, and because of its role in recruitment and retention of staff, so too is location pay.
“With some employees no longer operating from the high-cost areas that originally qualified them for a location allowance, employers need to choose how to best adapt their offerings to reflect the current pandemic-influenced labour market.
“Transparency and consistency of any location pay changes is key, including clarity on why it is or is no longer being paid. Employers would benefit from benchmarking their location pay against the market so that it remains cost-effective and they avoid falling behind competitors.”