Why your salary is what it is

Posted on March 9, 2011 by Xpatulator
Have you ever wondered why your salary is what it is? At first glance you would probably say it is based on what you signed up for when you joined your company and on the salary increases you received since then. Perhaps this was based on the state of the economy, your company’s profitability or hopefully your performance. But let us dig a little deeper.
Are other potential employers knocking at your door to offer you a better salary? Do you feel well paid for what you know and do? Do you feel you are unlucky and deserve to be paid a lot more, and hope someday you will! Chances are you fall somewhere in between feeling well paid and not. Most people would like to earn more, but accept that they are probably paid close to the salary market for their set of skills, and for the effort you put in. After all, at least you have a job. It could be worse.
In reality your salary is more a result of the supply and demand for your type of skills in your area, rather than a result of your actions. When demand exceeds supply for your skill type, you can demand a high salary, expect higher salary increases and consider better offers from other employers. On the other hand when supply exceeds demand, such as during a recession, or when an industry or skill set is in decline, it becomes tough to negotiate a better salary, in fact you would consider yourself lucky just to have a job.
Factors that pull salaries down through a decrease in demand / increase in supply for specific skills in a geographic area include:
  • New technologies that produce products more cheaply, more efficiently, and with less people.
  • Lower demand for products resulting in lower production volumes and, as a result, less jobs (i.e. economic recession).
  • Skills that have become redundant due to technology changes.
Factors that push salaries up through an increase in demand / decrease in supply of specific skills in a geographic area include:
  • Increased demand for products resulting in higher production volumes and, as a result, more jobs (i.e. economic boom).
  • Skills that have become required due to technology changes but are not available in sufficient numbers
There are of course other factors pulling and pushing salary levels, there are just too many to cover. The world is not a simple model of supply and demand.
The cost of living is often used to motivate salary increases. High inflation drives higher salaries which in turn drives higher inflation. Central Banks focus a great deal on this aspect. On the other hand, deflation and recession, may lead to pressure to decrease salaries, as we have seen in some countries in recent years.
Trade unions aim to look after their member’s interests by negotiating salary and benefits on their behalf. While trade unions have the best intentions in negotiating “rates” with large employers, this can be counter productive to it’s members at times by not only preventing employers from pushing salaries down but also by preventing (or perhaps more accurately “discouraging”) employers from pushing salaries up.
So what is the moral of the story? If you want to earn a high salary:
  • Work in a place where the economy is strong and growing
  • Get skills that will be in demand, now and in the future
  • Work in a place where inflation is low and stable
  • Work in a profession or industry that is free of trade unions and wage regulation
  • Choose an employer who practices performance based pay
  • Choose an employer who offers you developmental and promotion opportunities
Steven is Chief Instigator at http://www.xpatulator.com a website that provides cost of living index information and calculates what you need to earn in a different location to compensate for cost of living, hardship, and exchange rate differences.
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North Africa and the Middle East – Expatriate Viewpoint

Posted on March 8, 2011 by Xpatulator
North Africa and the Middle East have been shaken by what could be described as a youthquake this year. What is driving it? Will it end soon? Should you accept an expatriate job in this region? As an expatriate how has this affected you? What should you do if you land up in a situation like Libya?
What is driving it?
A combination of factors has fueled the protests. Approximately 60% of the region’s population is under the age of 30. A high proportion of graduates are unemployable as they do not have the qualifications and experience employers require. Many of these young people have not seen a change in government since they were born. The impact of the worldwide recession and rising food prices has exacerbated the situation. Aspirations are not being filled, pockets are feeling the pinch and desperation is setting in. These factors are not new. History is full of revolutions driven by a lack of what my history teacher used to call “Yummies in tummies”.
What makes it different now is that this young population is connected through technology – global television, mobile phones, the internet and social networks such as Facebook and Twitter. The days of state controlled media are well and truly over. Technology has exposed the youth to other cultures, global politics, religions, and to concepts such as freedom, democracy, and civil rights. The recent uprisings have been organized via social networks in which everyone is connected but no one stands out as the leader. How does a regime win a faceless leaderless revolt?
This new form of connectedness, allows the world to see what is happening from the ground. The News Channels, reporters and news readers also rely heavily on the man on the ground, these ordinary people have become the worlds’ eyes.  From reports of Gaddafi killing innocent people to the Mubarak supporters and anti-government supporters in Tahrir Square stoning and beating each other.
Will it end soon?
It is difficult to say. Each country is different, each with its own set of challenges. It is possible that the protests may lose energy and in time the status quo reconstituted. However, unless the factors driving the change are addressed it is likely the protests will continue, but either way change is imminent.
Should you accept an expatriate job in this region?
My advice is that you do your homework before accepting an offer. Know what you are entering into. Don’t make the mistake of assuming that the whole of North Africa and the Middle East are in flames. I have spoken to many expatriates in the region who have not been affected. Obviously if you are considering an offer in Egypt, Libya, or Tunisia you should be cautious and perhaps wait or look at alternatives, these are definite hardship locations at the moment and for anyone to be considering moving to these regions, you should be looking at substantial compensation and benefits. These countries have seen mass evacuations of expatriates and civil war now looks probable in Libya.
In the Gulf States the drivers for a youthquake have been largely neutralized by shared oil and gas wealth, a focus on education, and work related skills development for citizens, ensuring lower rates of unemployment amongst the youth. In Bahrain the issues are largely about political representation.
In the Gulf life has continued as it did in the past for expatriates. Expatriate life has not been affected by the turmoil in the region and, in my view, is unlikely to be affected in the foreseeable future. Expatriates are still accepting job offers and generally people are not leaving due to turmoil in the region, staff turnover overall is extremely low.
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Expat Travel – How far have you flown?

Posted on March 7, 2011 by Xpatulator

Expatriate life and regular travel go hand in hand. The world’s most travelled person is a British Expatriate, Fred Finn, who has travelled about 15 million miles, and visited 139 countries in his lifetime. He also made 718 flights on Concorde and had a seat on the very first Concorde flight, as well as on the very last.

To overcome jet lag Fred set his watch to his destination’s time zone as soon as he got on the plane.

Have you ever considered how many flights you have taken in your lifetime? How many miles/kilometers have you flown in your life?

Can you remember the last time you listened to the Steward giving you safety directions??

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Expatriate Newspapers – Have you had your fill of news today!?

Posted on March 6, 2011 by Xpatulator

Something many expatriates enjoy, is reading the newspapers they enjoyed back home. In places that are well populated by expatriates you may be lucky enough to find your favorite newspaper on the news stands. In more remote parts, the news is outdated by the time the newspaper reaches the news stand, if it every gets there at all. When we are away, most of us have to rely on reading home newspapers online. Online newspapers generally don’t include the same amount of information as the print edition, and the layout is somewhat different. Of great benefit is the fact that most online publications are updated several times a day and are free, until now that is.

 

Last month Apple and Rupert Murdoch’s News Corporation launched the Daily, an iPad newspaper that costs 99 cents per week. The Daily is a blend of the new and the old. It has great graphics, video, and twitters. On the other hand it is more like a newspaper in that it is updated daily rather than hourly and is only available in America.

 

Many publications have already started charging for their online content by only making the content available to those who have a print edition subscription. By charging subscribers directly, these publications are in effect bypassing Apple’s payment system.

 

While Apple currently rules the tablet market, the number of competitors is increasing rapidly. Which model will prevail? Time will tell.

 

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The Role of Hypothetical Tax in Expatriate Assignment Pay

Posted on March 1, 2011 by Xpatulator

Tax rates differ throughout the world. When an individual goes on an expatriate assignment they may move to a higher or lower tax regime. In some cases home country tax obligations may remain. If differences in tax are not taken into account by multi-national organizations, it becomes difficult to move individual expatriates to high tax countries, as they will all prefer working in low tax countries.

Hypothetical Tax (Hypotax) is a concept that was developed as part of a tax equalization approach to expatriate pay. The idea is to ensure that individuals effectively pay the same amount of tax they would hypothetically have paid at home.

As it’s name implies, Hypothetical tax is a method of tax calculation in terms of company policy rather than tax legislation. It is an administrative tool used to calculate taxes consistently and equitably between individuals in different countries as part of the calculation of expatriate assignment pay.

The basis of Hypothetical Tax is a set of assumptions (hypothosis) relating to the Basic Salary, Allowances and Benefits typical for individuals in the home country company. The assumptions include the amount of salary, and the type and amount of each allowance and benefit. Benefits that are provided by the host country company such as housing, transport, medical and education, are usually excluded. Additional personal income and spousal income are also typically excluded, as are allowances relating to the assignment such as cost of living and hardship allowances. The selected hypothetical Gross Home Basic Salary, Allowances and Benefits are used to determine the applicable (hypothetical) tax applicable using the home country tax and social security contributions. The Home Net Salary is determined by deducting the Hypothetical Tax from the Gross Home Salary.

For example Hypothetical Tax could be used to calculate the Home Net Salary as follows:

1) Calculate the Gross Home Salary

e.g. Basic Salary (100,000) + Allowances (12,000) + Benefits (6,000) = Gross Home Salary (118,000)

2) Using the home tax regulations, calculate the amount of Hypothetical Tax payable on the Gross Home Salary

e.g. Basic Salary Tax (20,000) + Allowances Tax (1,200) + Benefits Tax (60) = Hypothetical Tax (21,260)

Hypothetical tax is used to calculate the individuals Home Net Salary (i.e. after tax salary.

3) Calculate the Home Net Salary

e.g. Gross Home Salary (118,000) less Hypothetical Tax (21,260) = Home Net Salary (96,740)

The Home Net Salary is the basis for the calculation of the Net Assignment Salary.
Assignment allowances such as cost of living and hardship are added to the Home Net Salary. These amounts differ depending on the cost of living and hardship differences between the home and host country. The Net Assignment Salary is amount the expatriate assignee will receive after host country tax and social security contributions have been deducted. The host country company will typically add the amount of tax and social security payable to arrive at the Host Gross Salary. This guarantees the individual will be paid an Assignment Salary net of their home country Hypothetical Tax i.e. regardless of the actual tax rate in the host country.

Hypothetical Tax is therefore a powerful tool in ensuring consistent and equitable treatment of all employees. It also facilitates mobility of individuals between high and low tax countries because individual’s neither gain nor loose due to differing tax regimes.

Steven is Chief Instigator at http://www.xpatulator.com a website that provides cost of living index information and calculates what you need to earn in a different location to compensate for cost of living, hardship, and exchange rate differences. The complete cost of living rank for all 300 locations for all 13 baskets is available <a href=”http://www.xpatulator.com/outside.cfm?aid=240″>here</a&gt;

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Returning expats

Posted on February 24, 2011 by Xpatulator

Former expat Robert Leveson has left Singapore to start again in Britain. The only problem is, they do things differently there.

http://www.telegraph.co.uk/expat/expatlife/8257275/Returning-expats-and-the-curse-of-adjustmentitus.html

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An Islamic Perspective on Child-Rearing and Discipline By Umm Salihah

Posted on February 21, 2011 by Xpatulator

Thanks to a small number of Muslims and large chunks of the mainstream media, Islam has gained a reputation for severity and harshness. When it comes to the way we raise our children this can often be true – but usually due to our cultural backgrounds more than our faith. When we need to discipline our children, we could hit them, but how would it make us feel to make a mistake or disagree with our employers or spouse and be smacked for it? How do we prefer to be told? Discreetly, gently and with patience surely. Perhaps we could stop and do the same for our children, thinking of it as our daily worship.

 

http://www.incultureparent.com/2011/01/an-islamic-perspective-on-child-rearing-and-discipline/

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Educated Unemployables: China, Twitter and 20-Year-Olds vs. the Pyramids

Posted on February 9, 2011 by Xpatulator

Egypt, Jordan, Yemen, Tunisia today are overflowing with the most frustrated cohort in the world — “the educated unemployables.” They have college degrees on paper but really don’t have the skills to make them globally competitive. I was just in Singapore. Its government is obsessed with things as small as how to better teach fractions to third graders. That has not been Hosni Mubarak’s obsession.
The Arab world has 100 million young people today between the ages of 15 and 29, many of them males who do not have the education to get a good job, buy an apartment and get married. That is trouble. Add in rising food prices, and the diffusion of Twitter, Facebook and texting, which finally gives them a voice to talk back to their leaders and directly to each other, and you have a very powerful change engine.

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Take Control of Your Currency Exchange Needs

Posted on February 8, 2011 by Xpatulator

One of the benefits of using a specialist foreign exchange broker is that you have a lot more control over your ability to manage currency fluctuations which, whether you are making regular pension transfers or buying property, can help to give you a bigger bang for your buck.
When using a specialised foreign exchange broker there are numerous tools available to help you manage the damaging affect of currency fluctuations. For example, if you think the pound is set to strengthen against the euro you can arrange your transaction to take place when the rate hits a better level. So if the pound/euro exchange rate is currently 1.10 euros and you think it will rise, you could arrange your currency exchange transaction for when the price hits, say, 1.18 euros. This is called a limit order. Similarly if you feel the currency is set to fall you can agree with your currency exchange provider to exchange your currency before it falls below a level which you are uncomfortable with. For example, if you cannot afford to exchange your pounds into euros when the rate falls below, say, 1.10 euros then you can set this as the minimum rate you want to exchange at. This is called a stop loss order. Of course, this sort of manageability works much better if you are transferring fairly large sums over a period of time. But even for regular pension payment transfers there may be some benefit in using these tools during periods when the exchange rate is fluctuating a lot. In addition, when you do need to transfer money quickly and the exchange rate is moving against you then using a spot contract allows you to take advantage of an immediate price.
So there are plenty of tools in the foreign exchange broker’s box you can take advantage of, but it takes a bit of practise and getting used to the terminology. Here’s our top tips for making the best use of a foreign exchange broker:
1. Think about why you are transacting. Is it regular small payments for, say, pensions or is it large sums for, say, a property transaction over a defined period?
2. Once you have assessed your needs you can then research the tools on offer that can best help you manage these requirements.
3. Get comfortable with the terminology and the meaning of phrases such as stop loss orders, limit orders and spot contracts before any transaction takes place. Don’t be embarrassed to ask your foreign exchange broker for help on the advantages and disadvantages of using these facilities. If they are worth their salt they will be only too happy to help.
4. Don’t be seduced by a ‘no fee’ sales pitch. There may be no commission on buying the currency, but ask whether there are any costs involved in, say, using a limit order and whether there are any transfer fees.
5. While you may enjoy no or limited fees by using a specialised foreign exchange broker, don’t forget that your receiving bank may well impose fees for accepting the transaction. Don’t over look these costs as these will add up, particularly if the transactions are regular and small.
6. If you are committed to regular long term currency transactions then try and negotiate a reduction in transfer costs with your receiving bank. Alternatively, look at ways of reducing the amount of times you make a transfer.

Author : Deborah Benn
Managing Editor
www.ExpatMoneyChannel.com

Also see:
Points to Consider when choosing a foreign exchange broker
Currency Consumer protection survey

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Expats Warned on Compensation Complacency

Posted on February 7, 2011 by Xpatulator

Expats need to remain on their toes over compensation rights, despite the higher €100,000 deposit compensation limit now in force in all European Economic Area (EEA) member states as from 1st January 2011. While the raised limit is a welcome simplification for those banking in EU countries, research by ExpatMoneyChannel highlights that with the global economic outlook still fragile, there are still compensation pitfalls expats need to watch out for.
In the UK, for example, the compensation limit for those British expats lucky enough to have an account in the UK has increased from £50,000 to £85,000, which is the sterling equivalent of the €100,000 EU limit. However, at the same time separate compensation cover for customers with deposits in two merging building societies no longer applies. “This new pan-European requirement replaces the existing UK arrangement which has been in place since 2009, and which allowed for separate compensation cover for customers with deposits in two merging building societies,” confirms the FSA. While only ever a temporary measure, the rules were introduced following concerns that customers with savings in two merging societies could find their combined investment exceeded the £50,000 maximum deposit protection limit. The FSA says that raising the limit to £85,000 means it is less likely that depositors in two societies merging will now exceed the limit. However, ExpatMoneyChannel notes this change equates to a £15,000 compensation reduction for depositors in merging societies in the future.
Not everywhere is being generous
As expats are likely to have offshore accounts as well as onshore accounts, keeping an eye on changing compensation limits elsewhere is vitally important. Popular offshore jurisdictions such as the Isle of Man, Jersey and Guernsey’s deposit protection schemes all have a £50,000 limit, despite their links with the UK and have indicated no plans to follow the EU’s lead and increase compensation, although the Isle of Man is believed to be considering its options.
Indeed, jurisdictions that have a connection with the UK have been the cause of some confusion recently. In particular, expats reacting against the recent takeover of Bank of Scotland accounts in the Isle of Man and Jersey by Lloyds TSB Offshore, were under the impression that Bank of Scotland accounts in both jurisdictions were covered by the UK’s compensation scheme, rather than the local schemes. According to Mark Ashbey, an activist on offshore banking, this belief was perpetuated by information on the back of Bank of Scotland bank statements that made reference to the UK’s Financial Services Compensation Scheme (FSCS).
Gibraltar stands up with a bigger pot
Also while the UK’s compensation scheme does not extend to the Isle of Man, Jersey or Guernsey, it does extend to Gibraltar. Unlike the Isle of Man, Jersey and Guernsey, Gibraltar is not a Crown Dependency, but a UK overseas territory and so has a limited relationship with the EU via its UK overseas territory status. In short, this means that UK banks and building societies wishing to set up in Gibraltar can do so as a branch under EU passporting rules, which means they are covered by the compensation rules of the country where they are headquartered, rather than the local scheme. So, for example Gibraltar-based Leeds Building Society and Norwich & Peterborough are covered by the UK’s compensation scheme as they are ‘branches’ and not locally ‘incorporated subsidiaries’. Although, as Gibraltar has decided to match EU deposit compensation limits of €100,000, there is no financial difference to consumers on whether accounts are covered by the local compensation scheme or the home regulator. Indeed, all financial institutions that are not locally incorporated are generally covered by their home regulator, i.e. the country or jurisdiction where they are headquartered. So, for example, as HSBC International in Dubai is only a representative office, it is regulated by the Jersey Financial Services Commission and any compensation would be via the Jersey scheme should the situation arise. Although it is possible for institutions to ‘top-up’ into the compensation scheme offered locally, if it is deemed better than the home country’s scheme.
Much lower limits elsewhere?
Following our research, ExpatMoneyChannel finds that the Isle of Man, Jersey or Guernsey are not the only jurisdictions with a lower compensation limit than EU countries. The Hong Kong Deposit Protection Scheme covers up to HK$500,000 which is £40,100 currency equivalent. In Jordan the deposit protection scheme covers up to 50,000 Jordanian Dinar (£44,100) and in Bahrain eligible depositors are protected up to an amount which is the smaller of either 75% of the combined total of eligible deposits held by a depositor or BD15,000 (£25,000). In Singapore the deposit protection limit is just S$20,000 (£9,750).
Of course, the daddy of all deposit protection schemes is the United States where depositors in insured banks are covered up to £156,000. It is even possible to use an online tool called EDIE (Electronic Deposit Insurance Estimator) to help make sure that all of your money in US bank deposit accounts is 100% FDIC-insured.
Based on our research, ExpatMoneyChannel has compiled our top tips to ensure you ask the right questions when it comes to making sure your deposits are covered.
1. Ask your bank directly whether you are covered by a deposit compensation scheme and, if so, ask for the name of the scheme and contact details. Don’t rely solely on letters or websites as information may have been copied from corporate headquarters which may not be specific to your situation?
2. Check specifically with the scheme operator as to whether the bank or society you have deposits with is a member and that you are covered. For example, in Gibraltar it is the Gibraltar Deposit Guarantee Board where you will find a list of scheme members. See link below for other jurisdictions.
3. What is the scope of protection? Most deposit protection schemes will include retail deposits but companies or monies held in trust or bonds may not be protected, or will have lower protection limits. In addition, some types of deposits such as structured deposits may not be covered at all.
4. Ask whether compensation is paid gross or net. For example, will loans with the failed deposit taker be netted off against any deposits you have with the same deposit taker society? The UK’s FSCS now has a ‘gross payout’ feature that ring-fences bank customers’ deposits so that outstanding loans or debts are not deducted from any compensation they are entitled to if they have savings and loans with the same institution, although you obviously still have to pay back your loan.
5. What are the exact terms under which compensation is paid? For example, is it per depositor and what is the situation with joint depositors? Will any separate insurance you have be taken into account? Will any potential legal costs be taken out of the compensation pot?
6. Do you have more than one account with the same overall bank? Most compensation schemes are per saver, per institution. If you are saving with two different banks or societies who ultimately have the same owner, then it will generally be classed as one institution. However, if the banks holding your accounts are authorised with the regulators as separate entities, despite being within the same group, then you will be able to claim compensation per bank. Ask your bank or building society whether they are part of an umbrella authorisation or separately authorised.
7. Is there a limit on total compensation? For example, both the Jersey and Guernsey banking deposit compensation schemes cap the maximum total amount of compensation at £100 million in any five year period. If claims exceed this cap, compensation will be reduced pro rata. The cap also means that compensation in respect of any one bank cannot exceed £100 million.
8. How is the scheme funded? Is there an annual levy on banks or are funds collected after the scheme has been triggered? Some schemes operate a mixture of the two. It is important to know, as it may affect the length of time you have to wait for any compensation you are due.
9. How long will it take for compensation to be paid? Some schemes do not put a timeframe on compensation payments. Without a specified timeframe, corporate and legal wranglings may prolong compensation payments leaving depositors in financial difficulties. The UK’s FSCS has introduced new fast payout rules, whereby the majority of claimants will be compensated within seven days and the remainder within 20 days.
For a full list of compensation schemes per country go to The International Association of Deposit Insurers
Author : Deborah Benn
Managing Editor
http://www.ExpatMoneyChannel.com

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