How to adjust compensation and Employee Value Proposition for location-specific roles.

For employers and employees alike, the past few years since the COVID-19 pandemic have been a rollercoaster when it comes to integrating flexibility into work models. While organizations initially lauded the achievements of employees working entirely remotely, employers soon began requiring some in-office presence, hoping to foster connection and innovation. Before long, many employers who once offered significant flexibility regarding where employees worked were now issuing ultimatums about returning to an on-site, in-person work model. Meanwhile, employees have grown to value flexible work and the benefits it provides for work–life balance.

With remote and hybrid roles in high demand from current and potential employees, your talent strategy likely incorporates some elements of flexibility. But what about those jobs that require employees to be in a specific location? How are you making those roles attractive? As organizations increasingly recognize the importance of location flexibility, it’s important to understand how you can adjust compensation and other aspects of the Employee Value Proposition to reflect this shifting employee need.

What is the work flexibility premium?

The work flexibility premium, defined as the difference in base salaries between high and low flexibility jobs, is one of the results of the shift in expectations regarding in-person presence for work.

Understanding this shift can help you adjust your compensation strategies to better attract and retain talent, especially as location flexibility continues to be a benefit highly valued by employees.

When reviewing these findings, it is important to keep in mind that changes in compensation do not occur in isolation. Instead, when setting compensation levels, employers often consider multiple factors beyond just the work location, including the broader economy and competitive market, cost of employee benefits, and unique requirements of the work environment, among other priorities.

Problem and hypothesis

In evaluating the measurable effects of work flexibility on job compensation, employers will need to identify the premium (if any) associated with jobs that require a consistent on-site presence compared against flexible work models.

The problem

Attracting and retaining on-site workers has become increasingly difficult.

The hypothesis

As the job market shifts toward flexible work arrangements , employers have had to increase compensation and/or make other changes to the Employee Value Proposition, to remain competitive in the labor market.

Our methodology

1. Classify jobs into high and low flexibility categories using data from the Bureau of Labor Statistics (BLS) — a sample is shown below:

2. Collect and sort jobs from the Mercer Benchmark Database (MBD) (referencing pay levels) into these job categories, focusing on jobs that existed in both 2019 (pre-pandemic) and 2024.

3. Summarize the change in salary between 2019 and 2024 for jobs that require an in-person presence versus those that do not.

Average change in salary 2019–2024, aggregate:

• High flexibility occupations: +17%
• Low flexibility occupations: +23%

Flexibility premium: +6%

4. Finally, calculate flexibility premiums for each career level.

Career levels sit within each career stream (Executive, Management, Professional, and Para-professional), and job profiles are sorted based on education and experience. For instance, an employee at the Professional 1 level is an Entry Professional with broad theoretical knowledge, while someone at the Professional 2 level has a few years of experience under their belt.

By determining the difference in average change in base salary between the flexible BLS job categories and the inflexible BLS job categories over the 5-year period (2019–2024), flexibility premiums can be calculated according to each career stream and level.

The table shows the difference in changes between high and low flexibility roles across 2019 and 2024 by career stream and level.

Our findings

Our analysis reveals an average flexibility premium of 6% for roles with low flexibility in comparison to roles with high flexibility across all career levels. Notably, Professional 2 roles — entry-level positions typically held by recent graduates with a Bachelor’s degree — carry the highest flexibility premium, at 12%. One possible explanation is that these employees tend to value flexibility in their work environment more often and face fewer in-person requirements; however, further analysis would be required to fully understand the underlying factors.

The 6% aggregate premium also suggests that larger increases in base salary have occurred for low flexibility roles compared with high flexibility roles over the last 5 years. This change indicates that the shift in views toward workplace flexibility resulting from the pandemic has had a material impact on the labor market.

What does this mean for employers?

Considering different age groups

For younger workers, particularly Gen Z , flexibility is often a top priority. According to a 2025 LinkedIn survey , 40% of Gen Z and Millennials are willing to accept pay cuts in exchange for remote or hybrid work options, valuing work–life balance and autonomy over salary alone. Recognizing these preferences allows you to tailor your offerings and remain attractive to this emerging workforce segment.

Shaping the future of work

As remote and flexible work arrangements become more prevalent, it’s crucial to actively engage in these conversations with your employees. Demonstrating leadership and remaining adaptable to change makes you a trusted partner to your employees and keeps you ahead of talent expectations. By recognizing the greater change in base salary for low flexibility roles in relation to high flexibility roles, you can stay informed and make better decisions regarding your compensation and rewards strategies to attract and retain talent across the varying in-person roles within your organization.

Is your rewards offering aligned with your talent strategy? Mercer has the tools and teams to help ensure you are paying competitively and aligned with your various people strategies. Give us a call today! 855-286-5302

Special thanks to the 2025 Mercer Summer Interns for their work on this project. Key contributors include Andre Rooks, Partner and Tyler Kramer, Associate along with 2025 Interns: Mridula Rajagopal, Zoe Chao & Ved Ghosh.