Is regional weighting feasible?

It’s up to companies, governmental bodies and employees in Auckland to determine whether or not a regional weighting system is necessary, or feasible, in New Zealand, writes John McGill.

 

As the cost of living in Auckland skyrockets, is it time to consider whether or not pay in New Zealand’s largest city should be higher than elsewhere?

If you’ve ever lived in the UK, you’ll know how expensive London is. You might also have heard of London weighting, an extra allowance given to around one third of London-based employees (mostly in the public sector) to compensate for the high cost of living in the British capital.

This is a perfect example of what is called ‘regional weighting’, or adjusting wages to fit the cost of living in a particularly expensive area.

We currently do not have such a system officially in place in New Zealand, but as prices in Auckland, for example, continue to rise, we might be seeing a movement towards regional weighting and remuneration restructuring in the future.

 

Cost of living in Auckland

Many of the problems that led to the implementation of the London weighting can also be seen in New Zealand’s commercial hub, Auckland. 

Housing and transportation, in particular, have become overly expensive; we all might have our ideas as to how this happened but for those living in Auckland the issue is around resolving it.

It’s surprising that there hasn’t been more of a discussion within some sectors around developing an Auckland weighting. Certainly, our data shows that pay has crept up a bit more relative to the rest of the country, but not dramatically so. 

We see evidence of premiums from time to time, but there’s always been a reluctance to formalise any sort of weighting in Auckland.

There are some companies that do offer geographically differentiated remuneration strategies, but they are few and far between. 

Now it’s up to companies, governmental bodies and employees in Auckland to determine whether or not a regional weighting system is necessary or feasible in New Zealand.

 

Do we need a regional weighting?

It is unlikely that Aucklanders, particularly in the public sector, would be opposed to the idea of special payments that would help them cope with the city’s high living costs. 

If developed it is likely, as in London, it would be groups in the public sector that would be affected. Generally the London weighting is not such an issue in the private sector. 

Public sector organisations pay at lower levels than the private sector and consequently are most affected. As to making it an official system, well most regulatory bodies and employers would shy away from this as it becomes so ingrained that it is virtually impossible to review or amend. 
 

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John McGill is the CEO at Strategic Pay. 

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