--- title: Compensation Geo Differential Calculation Guide description: Geo differentials allow you to adjust compensation ranges based on labor market cost and competitiveness across different locations. This guide walks you through what geo differentials are, how to calculate them, and how to apply them consistently in your compensation program. --- [Skip to content](https://helpcenter.pequity.com/support/compensation-geo-differential-calculation-guide#main-content) English Show submenu for translations [More support](https://helpcenter.pequity.com/support/kb-tickets/new?hsLang=en) ![Logo (1)](https://helpcenter.pequity.com/hs-fs/hubfs/Logo%20(1).png?width=202&height=50&name=Logo%20(1).png) - [Pequity](https://pequity.com/) - [Platform](https://pequity.com/solutions) - [Blog](https://blog.pequity.com/) - [Login](https://pequity.app/login) - [Get a demo](https://pequity.com/contact) Open main navigation Close main navigation - [Pequity](https://pequity.com/) - [Platform](https://pequity.com/solutions) - [Blog](https://blog.pequity.com/) - [Login](https://pequity.app/login) - [Get a demo](https://pequity.com/contact) - English Show submenu for translations - [More support](https://helpcenter.pequity.com/support/kb-tickets/new) - Contact us Contact us How can we help you? - There are no suggestions because the search field is empty. 1. [Support Center](https://helpcenter.pequity.com/support?hsLang=en) 2. [Pequity Best Practices](https://helpcenter.pequity.com/support/pequity-best-practices?hsLang=en) # Compensation Geo Differential Calculation Guide ## Geo differentials allow you to adjust compensation ranges based on labor market cost and competitiveness across different locations. This guide walks you through what geo differentials are, how to calculate them, and how to apply them consistently in your compensation program. **1. What Are Geo Differentials?** Geo differentials express how pay in one market differs from a baseline or “anchor” market or data set. They are typically expressed as a **percentage adjustment** to salary or total target cash (TTC) ranges. Examples: - NYC might be **+15%** above the national US market. - Austin might be **–5%** below San Francisco. - India might be **–40%** relative to U.S. national median. **2. Choose Your Anchor Market** Before calculating geo differentials, define your **anchor market**, which serves as the reference point for all comparisons. Common anchors include: - **Corporate headquarters location** (e.g., San Francisco) - **U.S. National market** - **Average of your largest employee population** Your anchor determines how all other markets are indexed.   **3. Gather Data** For each geography you plan to use, collect: - **Market pay data** for relevant jobs or job families - **Percentiles** you plan to benchmark against (typically 50th, 60th, or 75th) - **Comparable leveling** across markets (same job level = same benchmark) - Cost of Living or Cost of Labor statistics in regions or grouped Geos Data sources may include: - Pequity - Numbeo - Culpepper - Mercer - Radford **4. Calculate the Geo Differential between Anchor & Target Locations** Calculate either a % change or Index between your Anchor and Target locations to apply to the Anchor ranges. If calculating off of market data we suggest using the Median % Change across all benchmarked roles to determine the differential rounded to the nearest tenth.   **5. Apply Geo Differentials to Your Pay Ranges** Take your **anchor pay range** and multiply by the differential.   **Example:**Anchor range (National): $100,000 NYC differential: +12%100,000 \\times (1 + 0.12) = 112,000 **NYC adjusted range: $112,000**Apply this to min, midpoint, max for aligned consistency and consider whether to apply an FX rate for international ranges.   **7. Document and Communicate Your Geo Strategy** Communicate clearly to stakeholders: - Anchor location - Data sources used - Calculation method - Refresh frequency (typically **annually**) - How employees move between geo levels when relocating Consistency + transparency → trust & easier governance.   **8. 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