Not Localizing
Same pay range per level/function. Typically either SF/Bay Area or NYC. More common for startups with less than 100 employees (early to mid-stage companies).
Highly competitive.
Highly costly. High cash burn.
Potentially incentives employees to move away from company HQ to lower cost areas. Not ideal if you want to build an in-office culture. This has become a common comp philosophy for companies that are fully distributed or have the majority of their employees located in a high cost of living city.
Geographic Tiers
Create tiers and map similarly paid locations together (e.g. cities such as Boston, LA, DC are paid similarly and at a % discount to SF/Bay Area). More common for mid to late stage/ public companies.
Differentiation between high cost and low cost labor markets. Lower administrative cost than locally competitive.
Potentially not as competitive because top talent are demanding to be paid same rate to SF/Bay Area regardless of location;
Another alternative is a flat discount across any non-metro location.
The most balanced approach. Acknowledging there is some differentiation. Pays more than if you would be doing the pure localized compensation model.
Locally Competitive
Compensation for the same role differs by location.
Lower cash burn.
Talent feels it is unfair since they are in the same role and delivering the same results.
Not competitive in this tight labor market for early to mid stage startups. For larger companies with more mentorship and offer benefits, this is doable.