# Location Factors

## Calculating Location Factors

### Where do these numbers come from?

You can find the exact sources used for a location on the location's details page.

In general, the following sources have been used:

### Can I use a different base than Berlin?

You can convert a factor to a different base by dividing the factor with the factor for your desired base: $factor \over factor_{base}$.

It is possible to choose a different base when using the calculator by clicking the ❗️ icon.

### Why does it sometimes use country market rates even though city data is available?

This is a result of the calculation rules.

It happens when the country only has market rates from one source, but the city only has market rates from another. The script cannot decide wether or not these two are equally reliable and if the values the factors are based on are comparable (only compare values of the same type).

Since the script can't judge on which of these factors is more reliable, it will pick the higher one, which might be the country factor (in dubio pro reo).

### On the Market Rates vs Living Costs graph, everything seems to be distributed linearly, except Monaco. What's up with that?

I think it means that you couldn't actually afford living in Monaco on a Monaco salary. And looking at reality, this seems to be true. People living in Monaco are mostly quite rich and have some income or wealth from other sources than a "normal" job there.

People working in Monaco in "normal" jobs mostly commute from France.

### Why does the foreign tax factor go up for low tax countries?

This factor is for the scenario where someone would live abroad but pay taxes in Germany. So if the country is tax free and you would earn as much as everyone else there before taxes, you would have up to 45% less after taxes than anyone else.

This is of course a stark oversimplification, and does not take double taxation into account at all.

### Is the data complete?

No, it is not. Some locations are missing market rates, while others don't have living cost infos. Morever, there are quite a few countries and larger cities missing completely.

## Using Location Factors

### Do you know of anyone using these factors to determine salaries?

No, not that I'm aware of. I'd be interested in hearing about it if you do.

### How would I use this factor?

Here are a few use cases:

• Check if the salary you're getting is fair/competetive.
• Estimate salary changes required for moving to a different city.
• If you're in charge of salaries, you can use if in a salary formula if you want to have location based salary differences.
• If you don't want to have location based differences, use it to make sure your salaries are acceptable for all locations you have people at.
• Just get a better picture of local differences.

### How can I use this in a salary formula?

Here are a few different ways to use this factor:

• As a multiplicator. You can use this factor directly in a salary formula. A simple example would be $salary \times factor$. Of course, you can use whatever other factors you want in this formula as well.
• For salary bands. You could categorize different locations into different salary bands and use the location factor to make sure these bands correspond roughly with the different market rates and living costs.
• Fixed offset. You could use this factor to calculate a fixed offset for each location. For instance, the formula for calculating an offset could be $salary_{base} \times (factor - 1.0)$. This formula would result in no offset for Berlin.
• Mixed multiplicator and fixed offset. You could also split a formula into two parts, one being a multiplicator and the other being a fixed offset. You could imagine the fixed part being based on a value representing a fixed cost, like the rent index, and the multiplicator based on market rates with reduced deviation (see below).
• As a multiplicator with equal pay. Instead of using the factor on a per salary basis, you could use it to determine a common salary for everyone in the company. This might mean that everyone needs to get a raise if you hire someone in a more expensive city, but might make it easier for people to move.
• Not. This is a valid option.

These are just a few suggestions and by no means a complete list of ways to use these factors.

### I want to use this as a multiplicator, but the differences are too extreme, what can I do?

When using the location factor as a multiplier, the outliers might be high income locations (the US, Switzerland and Norway) and low income locations (India, Pakistan, etc).

There are three general approaches at dealing with them:

• Reducing deviation. You can reduce the deviation by reducing the difference between the factor and $1.0$. The formula would be $factor = {factor_{normal} - 1.0 \over factor_{deviation}} + 1.0$. With a deviation factor greater than $1.0$ it would be economically beneficial to move to cheaper locations, living in high income areas would be disadvantageous. With a deviation factor less than $1.0$ it would be economically beneficial to move to more expensive locations, living in low income areas would be disadvantageous.
• Cutting off low values. This approach only deals with the factor for low income areas. Setting this for instance to $1.0$ would allow someone to move from Berlin to India without taking a pay cut, while still being able to pay competitive salaries in San Francisco. Setting this to $2.06$ would mean all employees no matter where they live would earn San Francisco salaries, assuming the location factor is the only value at play.
• Cutting off high values. This approach only deals with high income areas. For instance cutting it off at $2.06$ would mean that you could still pay San Francisco salaries, while not giving people incentive to move to Zurich or Monaco.

These three approaches can be combined.

## Other Questions

### Is the code public somewhere?

No, for license reasons. I could publish the code without the dataset, but right now that's too much of a hassle. Please let me know if you have any questions about the code.

### Why is this website not responsive?

I'm no good at HTML/CSS at all. This is also the reason I do all the calculation server side, you could probably turn this into a static page otherwise. I just don't really know how, I'm not that good a programmer.

### Is there an API?

There is! The /data endpoint will give you a JSON document with all the location data in it.