Hello friends,
At my place of work, we would want to 'peg' all salaries to the US Dollar. Does anyone have any write-up on how to go about this please? We want to denominate all the local salaries the same currency as that of expatriates.
Thank you.
From Netherlands, Oude-tonge
At my place of work, we would want to 'peg' all salaries to the US Dollar. Does anyone have any write-up on how to go about this please? We want to denominate all the local salaries the same currency as that of expatriates.
Thank you.
From Netherlands, Oude-tonge
604
It is just confusing my tiny brain. If you pay in INR converting the Dollar value of INR, how are you taking care of inflation? Is dollar is not influenced by inflation?? First explain, what is inflation and how it is affecting your salary structure? I am not an economist but curious to know from you.
Pon
From India, Lucknow
Pon
From India, Lucknow
Hi!
If your company is operating or doing business in countries outside the US, the general mode of compensation payment is the local currency. However, there is no obstacle in making the US DOLLAR as a reference point for an organization's compensation scheme, esp. if the intent is to establish a certain sense of "parity" or equity.
In our international consulting business and practice, we always use the US $ as our international pricing rate. However, whenever we are paid, we do not object receiving the local currency equivalent of the agreed US $ fee for the project.
But, HR practitioners must not forget that in designing the compensation system of an organization,it must always take into consideration the basic compensation principles. In this instance, the principle of external equity (or parity with the local labor market) which is usually expressed in terms of the local currency value, must always be considered. Hence, the US $ equivalent of the local labor market median rate is the appropriate reference point. To use the US $ mainland labor market rate or even the US Head Office $ market rate is disadvantageous to the company. Only international organizations (like the UN, WB, ADB, and similar international organizations) pegged all staff salaries strictly to one international currency, like the US $, regardless of their branch/ office/ staff location around the world.
Best regards from the rainy city of Metro !
Ed Llarena, Jr.
Managing Partner
Emilla International Consulting Services
(helps improve corporate governance worldwide)
From Philippines, Parañaque
If your company is operating or doing business in countries outside the US, the general mode of compensation payment is the local currency. However, there is no obstacle in making the US DOLLAR as a reference point for an organization's compensation scheme, esp. if the intent is to establish a certain sense of "parity" or equity.
In our international consulting business and practice, we always use the US $ as our international pricing rate. However, whenever we are paid, we do not object receiving the local currency equivalent of the agreed US $ fee for the project.
But, HR practitioners must not forget that in designing the compensation system of an organization,it must always take into consideration the basic compensation principles. In this instance, the principle of external equity (or parity with the local labor market) which is usually expressed in terms of the local currency value, must always be considered. Hence, the US $ equivalent of the local labor market median rate is the appropriate reference point. To use the US $ mainland labor market rate or even the US Head Office $ market rate is disadvantageous to the company. Only international organizations (like the UN, WB, ADB, and similar international organizations) pegged all staff salaries strictly to one international currency, like the US $, regardless of their branch/ office/ staff location around the world.
Best regards from the rainy city of Metro !
Ed Llarena, Jr.
Managing Partner
Emilla International Consulting Services
(helps improve corporate governance worldwide)
From Philippines, Parañaque
Many thanks for this very insightful comment. What I have done is to suggest a bank rate (exchange spot rate) at the beginning of each month when salaries are being computed, at which locally recruited staff will have their salaries pegged. There will be a bit of variation in the exchange rate but this will be taken care of.
Thank you all for your comments.
From Netherlands, Oude-tonge
Thank you all for your comments.
From Netherlands, Oude-tonge
You can work out backwards. Fix first salry in INR. Every month, convert INR into Dollar and accordingly prepare the salary statement. Every month INR will not change and the Dollar will be changes according to the Rs.Value.
Over and above, if you do otherwise, then based on the dollar rate if you fix, then some times you may have to pay less salary compare with the last month which is not allowed as per the statutory norms
From India, Madras
Over and above, if you do otherwise, then based on the dollar rate if you fix, then some times you may have to pay less salary compare with the last month which is not allowed as per the statutory norms
From India, Madras
Hi!
Using the monthly exchange rate as basis for salary computation would be a very tedious process. This will be easy for very small organizations, but would be difficult for big ones. Morever, currency exchange rates are very volatile and the fluctuations are unpredictable. Hence, if there is a sharp decline in the rate, there is indeed a danger that in a certain pay period, the employees pay would be less than the previous amount. This can become a legal issue if your country has a "non-diminution" provision in your labor law.
What is being done by many companies (who want to make sure that the purchasing value of their employees salary are not eroded by inflation) is to make an adjustment on a year to year basis ---- using the country's annual average inflation rate as the adjustment factor. This is usually done simultaneous with the merit and/ or seniority increments given to employees. To be meaningful and/ or get the actual intent, the annual merit increase rate (e.g. 3%) should be added to the average inflation rate (e.g. 6.3%) of the past year.
But, then again, this decision must always consider the 3rd and 4th compensation principles of affordability and sustainability --- because an increase of 9.3% in the total monthly payroll cost (given as an example above) can impact the company's bottom line, and create problems esp. if it will bite on the organization's expected profitability and lessen the shareholders expected returns. It can even cost the HR Director and the CEO their jobs.
Best regards.
Ed Llarena, Jr.
Managing Partner
Emilla International Consulting Services
(helps improve corporate governance worldwide)
From Philippines, Parañaque
Using the monthly exchange rate as basis for salary computation would be a very tedious process. This will be easy for very small organizations, but would be difficult for big ones. Morever, currency exchange rates are very volatile and the fluctuations are unpredictable. Hence, if there is a sharp decline in the rate, there is indeed a danger that in a certain pay period, the employees pay would be less than the previous amount. This can become a legal issue if your country has a "non-diminution" provision in your labor law.
What is being done by many companies (who want to make sure that the purchasing value of their employees salary are not eroded by inflation) is to make an adjustment on a year to year basis ---- using the country's annual average inflation rate as the adjustment factor. This is usually done simultaneous with the merit and/ or seniority increments given to employees. To be meaningful and/ or get the actual intent, the annual merit increase rate (e.g. 3%) should be added to the average inflation rate (e.g. 6.3%) of the past year.
But, then again, this decision must always consider the 3rd and 4th compensation principles of affordability and sustainability --- because an increase of 9.3% in the total monthly payroll cost (given as an example above) can impact the company's bottom line, and create problems esp. if it will bite on the organization's expected profitability and lessen the shareholders expected returns. It can even cost the HR Director and the CEO their jobs.
Best regards.
Ed Llarena, Jr.
Managing Partner
Emilla International Consulting Services
(helps improve corporate governance worldwide)
From Philippines, Parañaque
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