Employers revise expat salary calculations

Expat employees are not the only ones feeling the financial repercussions of the recession. Faced with slippery currency values, employers have made fundamental changes to the way they calculate their expat employees’ salaries.

According to Employee Benefits, employers have traditionally paid as much as 60% of expat employees´ salaries in the currency of their host countries. Sudden changes in exchange rates have left many expats short of funds in the past year, however, and only recently have employers begun to compensate with new salary calculation strategies.

Mercer (a major HR consultancy) reports that employers should review exchange trends carefully and set “trigger points” for expat salary increases. These triggers can be related to anything from currency inflation to devaluation. The difficulty has proven to be deciding where exactly to set trigger points. Frequent salary changes can lead to communication backlogs and general confusion, while inadequate salaries leave expat employees unsatisfied and underpaid.

The Mercer report suggests that “expatriate compensation adjustment should occur only after a change to the home base salary, a change in family situation or significant exchange rate and price fluctuations,” and that any recalculations should occur at the end of the fiscal year unless they are absolutely necessary. While international companies would probably do well to head Mercer´s expert advice, this could mean more delays in salary increases for cash-strapped expats.

Nonetheless, the New York Times noted recently that both the French and German economies have shown some some growth, and that the Japanese economy reported its first growth in four quarters in August. Hopefully these bright spots signal positive developments for the world economy, and for expat employers and their employees in particular. For some additional info on expatriate compensation, check out our information on worldwide expat salaries.

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