Geographic Pay Differentials: How Location-Based Pay Works for Remote Workers in 2026

If you work remotely and have ever considered moving to a lower-cost city, you have almost certainly encountered the concept of geographic pay differentials. The idea is straightforward on the surface: companies adjust compensation based on where an employee lives. In practice, though, the policies vary wildly from one employer to the next, and the gap between the best and worst approaches can mean tens of thousands of dollars a year in take-home pay.

In 2026, with roughly 35 percent of knowledge workers operating remotely at least part of the week, geographic pay policies have become one of the most consequential and most contested elements of a total compensation package. This guide breaks down how the three dominant models work, what they mean in real dollar terms, and how to protect your earning power if you decide to relocate.

What Geographic Pay Differentials Are and Why They Exist

A geographic pay differential is a structured adjustment to base salary that reflects the cost of labor or cost of living in a particular location. Companies have used them for decades in the context of office-based work. An engineering manager in San Francisco has historically earned more than one in Omaha, partly because Bay Area salaries must compete with other Bay Area employers, and partly because housing and day-to-day expenses are dramatically higher.

When remote work went mainstream, a tension emerged. If someone does the exact same job from Boise that they previously did from San Francisco, should the company continue paying a San Francisco salary? Proponents of location-based adjustments argue that compensation should reflect the local market and that paying a uniform rate inflates costs and creates inequity with office-based peers. Opponents argue that paying for the value of work, not the worker's zip code, is more fair and that geographic cuts penalize people for making financially prudent decisions.

There is no single right answer, and the market has responded by splitting into three clearly defined approaches.

The Three Main Approaches to Geographic Pay

1. Location-Based Pay (Exact Metro Adjustments)

Under this model, a company calculates a base salary for each role benchmarked to a specific reference city, usually San Francisco or New York, and then applies a multiplier for the employee's actual metro area. The multiplier is derived from cost-of-labor data, cost-of-living indices, or a blend of both.

This is the most common approach among large tech companies. Google, Meta, and Microsoft have all used versions of it. An engineer hired at $180,000 in San Francisco might see that figure adjusted to $153,000 in Seattle (0.85x), $144,000 in Austin (0.80x), or $126,000 in Raleigh (0.70x). The adjustments are typically recalculated when an employee moves and are sometimes revised annually as market data shifts.

Pros: Employers maintain competitive local rates while managing costs. Employees in high-cost metros see no reduction. Data-driven approach feels defensible.

Cons: Discourages relocation. Can feel punitive to workers who move to lower-cost areas but continue delivering the same output. Creates administrative complexity across dozens of metro zones.

2. Tiered Geographic Bands

Rather than calculating exact metro-level adjustments, some companies group locations into a handful of tiers, typically three to five. Each tier has a fixed pay band. GitLab is the most transparent example. Their compensation calculator divides the world into regions, and each region receives a location factor that modifies the San Francisco benchmark.

A common tier structure looks like this:

• Tier 1 (San Francisco, New York, Seattle): 1.00x of benchmark
• Tier 2 (Los Angeles, Boston, Washington DC, Denver): 0.90x of benchmark
• Tier 3 (Austin, Portland, Chicago, Atlanta, Nashville): 0.82x of benchmark
• Tier 4 (Boise, Salt Lake City, Tampa, Raleigh, Charlotte): 0.72x of benchmark
• Tier 5 (Rural areas, lower-cost international locations): 0.60x of benchmark

Under this system, moving from Denver to Portland would not change your pay because both fall in the same tier. Moving from New York to Austin would.

Pros: Simpler to administer than exact-metro calculations. Reduces the penalty for moves within a tier. Still captures broad cost differences.

Cons: Tier boundaries can feel arbitrary. Someone in a high-cost pocket of a lower tier may be underpaid relative to local market conditions. Still creates a disincentive against relocating to a cheaper area.

3. Location-Agnostic Pay

A smaller but growing group of companies pays the same salary regardless of where the employee lives. Basecamp has been the most vocal advocate of this philosophy, setting salaries at the 90th percentile of San Francisco market rates for all employees, regardless of location. Other companies that have adopted this model include Automattic (the company behind WordPress), Help Scout, and several well-funded startups competing aggressively for remote talent.

Under this approach, the $180,000 San Francisco salary stays at $180,000 whether you live in Manhattan or rural Montana.

Pros: Maximum flexibility for employees. No penalty for relocating. Simpler to administer. Strong recruiting advantage in mid-cost and low-cost markets.

Cons: Higher total compensation costs for the company. Can create pay disparities with local office workers in expensive cities. May be unsustainable for companies without strong margins.

Real Dollar Impact: $180K San Francisco Salary Across Cities

To make the differences concrete, here is what a $180,000 San Francisco base salary typically translates to under each model for a senior software engineer:

The spread between the location-based and location-agnostic models for a city like Boise is over $61,000 per year. Even moving from San Francisco to Austin under a location-based policy could cost you $36,000 annually, which is a significant reduction that many workers do not fully anticipate before they relocate.

Pay Transparency Laws Reshaping the Landscape in 2026

The rapid expansion of pay transparency legislation across the United States is forcing companies to be more explicit about how geographic differentials work. As of early 2026, several states have enacted laws requiring salary range disclosures in job postings, and these laws interact with geographic pay policies in important ways.

California (SB 1162, effective 2023): Employers with 15 or more employees must include pay scales in all job postings. For companies using geographic bands, this means posting the range that applies to the specific role and location. California has been the most aggressive in enforcement, with the Civil Rights Department issuing fines for non-compliant postings.

Colorado (Equal Pay for Equal Work Act, amended 2024): Requires salary ranges in postings for positions that could be performed in Colorado. This was the first state-level transparency law and has been strengthened through amendments requiring more granular disclosure of compensation structures, including geographic modifiers.

New York (Pay Transparency Law, effective 2023): Covers New York City and, after statewide expansion, all employers with four or more employees. Postings must include the minimum and maximum salary. Geographic adjustments must be reflected in the posted range if the role is location-dependent.

Washington (Equal Pay and Opportunities Act, amended 2023): Requires disclosure of salary ranges and a general description of benefits for roles that can be performed in Washington. Washington's law is notable because it explicitly requires employers to disclose how location factors into the posted salary range.

The practical effect of these laws is that job seekers can now compare how different companies handle geographic adjustments. A job posting that lists $130,000 to $180,000 with a note about location-based adjustments communicates a very different compensation philosophy than one that lists $170,000 to $195,000 for all locations. This transparency is accelerating the shift toward simpler, more equitable pay structures, because companies that offer steep geographic discounts are now visibly less competitive in the job market.

Geographic Pay Multipliers for 20 Metro Areas

The following table provides representative geographic pay multipliers relative to a San Francisco baseline of 1.00. These figures are composites derived from publicly available compensation data and reflect typical adjustments used by large technology employers in 2026. Individual companies will vary.

Note that these multipliers reflect cost-of-labor adjustments, not pure cost-of-living. The distinction matters. Cost of living measures how much goods and services cost in a given area. Cost of labor measures what other employers are paying for similar roles. Because tech companies compete nationally for remote talent, labor-market multipliers have compressed significantly since 2020. A city like Austin, which might warrant a 0.70x adjustment on a pure cost-of-living basis, commands 0.80x when labor-market competition is factored in.

How to Negotiate When a Company Wants to Cut Your Pay for Relocating

One of the most stressful moments in a remote worker's career is receiving an offer or an internal adjustment memo that cuts their salary by 15 to 30 percent because they moved. Here is a structured approach to negotiating in that situation.

Step 1: Understand the Company's Policy Before You Move

Ask for the geographic adjustment policy in writing before you commit to a relocation. Some companies adjust immediately; others apply changes at the next compensation cycle. Some calculate adjustments based on your home address; others use the metro area of your nearest company hub. Knowing the specifics matters, because the difference between an Austin adjustment and a rural Texas adjustment can be 10 percentage points or more.

Step 2: Frame the Conversation Around Value, Not Cost of Living

When negotiating, resist the urge to argue that your new city is more expensive than the company's data suggests. Instead, focus on the value you deliver. Your output, your institutional knowledge, and the cost of replacing you are all location-independent. If you are a top performer, your manager has strong incentives to retain you, and a geographic pay cut increases the risk that you leave for a location-agnostic employer.

Step 3: Propose Alternatives

If the company will not budge on base salary, negotiate on other dimensions. Request a one-time relocation bonus that offsets the first year of the adjustment. Ask for accelerated equity vesting. Propose a higher bonus target percentage. Negotiate for a professional development budget. These elements are often outside the geographic pay policy and can meaningfully close the gap.

Step 4: Get Competing Offers

The single most powerful lever in any salary negotiation is a credible alternative. If a location-agnostic company is offering you $180,000 for the same role, that creates a concrete anchor for your current employer to match. Even if they cannot match dollar for dollar, the existence of a competitive offer often leads to a smaller adjustment than the standard policy would dictate.

Step 5: Negotiate the Timeline

If a pay cut is unavoidable, negotiate the schedule. A phased reduction over 12 to 18 months is far more manageable than an immediate 20 percent cut. Some companies will agree to a graduated adjustment, especially for tenured employees, because it reduces attrition risk.

A geographic salary adjustment is not a reflection of your worth. It is a policy decision, and policies are negotiable. Approach the conversation with data, alternatives, and confidence.

Companies Known for Each Approach

Knowing which companies use which model can help you target your job search or benchmark your current employer's policy.

Location-Based Pay (Exact Metro)

• Google: Uses detailed metro-level adjustments. Employees who move see their compensation recalculated based on the new location. Google's internal tool allows workers to preview the pay impact before committing to a move.
• Meta: Adjusts pay based on location. Employees were informed early in the remote-work era that relocating to a lower-cost area would result in salary changes.
• Microsoft: Uses geographic pay zones tied to their office locations. Employees near a Microsoft campus receive pay benchmarked to that campus's zone.

Tiered Geographic Bands

• GitLab: Pioneered public geographic compensation tiers. Their compensation calculator is publicly available and shows exactly how location factors into salary for every role.
• Stripe: Implemented a tiered approach with a notable twist: employees who moved away from expensive hubs received a one-time $20,000 relocation stipend alongside a geographic pay adjustment.
• Spotify: Uses broad geographic bands as part of their Work From Anywhere program. Employees can choose their location within a country, and pay is adjusted at the country or regional level rather than the metro level.

Location-Agnostic Pay

• Basecamp: Pays all employees at the 90th percentile of San Francisco market rates, regardless of location. This has been a core part of their employment philosophy for years.
• Automattic: The company behind WordPress pays based on role and seniority, not location. This approach has enabled them to hire from over 90 countries.
• Help Scout: Committed to location-agnostic pay as a competitive advantage in recruiting. Their public statements emphasize that workers should not be penalized for where they choose to live.
• Reddit: Moved to a location-agnostic model in 2020, tying pay to high-cost-of-labor markets for all remote employees.

What This Means for Your Career Decisions

Geographic pay differentials are not going away, but the trend is moving in a direction that favors workers. Pay transparency laws are exposing the real cost of location-based adjustments, making it harder for companies to quietly dock pay by 25 percent when someone moves. Competition for remote talent is compressing the multipliers, so a move from San Francisco to Austin costs you less in salary terms today than it did in 2021. And a growing cohort of companies is abandoning geographic adjustments altogether, giving workers genuine location-agnostic options.

If you are considering a move, do the math before you commit. Calculate not just the salary adjustment but the net impact: lower housing costs, different state income taxes, changes in commute expenses, and quality of life. A $30,000 pay cut might still leave you financially ahead if you are moving from a $4,500-per-month apartment in San Francisco to a $1,800-per-month apartment in Nashville.

And if you are evaluating job offers, pay attention to the compensation model. Two offers with identical base salaries can diverge by tens of thousands of dollars the moment you move. The offer from a location-agnostic company is worth more in optionality, even if you never relocate, because it preserves your freedom to move without a financial penalty.