Comparable Worth: Equal Pay for Equal Work – Expatriate Salary Purchasing Power Parity

Posted on March 22, 2011 by Xpatulator

Comparable worth is a principle that states that people who perform work of equal value should receive similar levels of compensation regardless of gender, ethnicity, nationality etc, but with the exception of legally allowable differences such as level of performance, seniority, location based allowances etc.

Jobs have an organization value that can be measured and compared across jobs of widely differentiated content. Tools such as job evaluation can be used to explain these differences in terms of levels of work, skills, competencies, length of training and the amount of responsibility etc.

In the USA, despite the Equal Pay Act of 1963, it is legal to discriminate in pay if the job of one is not precisely identical to the work of another. Critics of equal pay for equal work argue that comparable pay for comparable work (comparable worth) would be far more effective in addressing gender pay differences in the USA. Comparable worth implies “comparing” rather than a precise measure of equality. Employers constantly “compare” jobs internally through job evaluation and externally through compensation and benefit surveys.

In the USA this principle applies largely to gender based pay discrimination. However what about expatriate pay? Expatriate compensation typically uses home salary as the basis of an assignee’s pay. For example, examine two equally skilled, experienced and performing expatriates doing work of equal value, side by side, in a third country. The expatriate from a higher paying / higher cost of living country earns more than their colleague from a lower paying / lower cost of living country. Does it mean that the two expatriates should be paid the same amount to achieve the principle of comparable worth?

Comparable worth seeks to ensure comparable pay for comparable work. The reality is that each dollar earned by the expatriate from the lower cost of living country will go further in their home country than it will for their colleague. To ensure that the principle of comparable worth is applied it is necessary to ensure that salary purchasing power parity (SPPP) is achieved.

SPPP calculates how much you need to earn in another location to compensate for cost of living, hardship, and exchange rate differences, in order to have the same relative spending power and as a result have a similar standard of living as you have in your current location.

No company pays the “market rate”, because there is no single universally accepted, appropriate rate for any job. Actual pay is influenced by market related targets, competition, perception, retention fears, circumstance and legacy. Expatriate pay is further influenced by cost of living, hardship and exchange rate differences. Whether we have comparable pay for comparable work or equal pay for equal work or even equal pay for equivalent work the principle is the same. People who perform work of equal value should be rewarded equally without discrimination. In the case of expatriates this implies salary purchasing power parity.

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Retire to a low cost of living country

Posted on March 20, 2011 by Xpatulator

Picture this. It’s 2024, and you have been retired for several years now. You are up early for a light breakfast and head out on your way to the golf course while your significant other heads for the mall. But the reality is that you work at the local pro shop, and your partner works in a bookshop in an effort to supplement your retirement funds and make the money last another 30 years.

If you are a Boomer (born between the end of WW2 and 1960) your challenge is to stretch a lifetime of savings and convert it to a stream of income. Poor investment returns in recent years, increasing life expectancies as well as rising medical costs mean those savings have to stretch further than ever before.

The bottom line is that if you’re a Boomer you would be wise to figure out how to retire overseas to a lower cost of living country or you are likely to be doomed to work for the rest of your life.

Where could you retire, and live comfortably in a safe, lower cost of living country?

We have come up with what we view as the top 5 most suitable for retirement, exotic, overseas places (i.e. outside the USA, UK, and Europe), based on having a low cost of living and a reasonable quality of life (i.e. excluding high and extreme hardship locations):

Location Quality of Life Cost of Living Rank Cost of Living (%) Compared to New York City
Paraguay, Asuncion Some Hardship 276 -36.5
Argentina, Buenos Aires Some Hardship 227 -36.1
Saint Lucia, Castries Some Hardship 277 -35.8
Antigua and Barbuda, Saint John’s Some Hardship 243 -30.4
Seychelles, Victoria Some Hardship 237 -30.2

Asuncion in Paraguay, Central South America, is a place of contrast between wealthy and poor. Asuncion boasts upmarket suburbs, modern shopping malls and dazzling nightclubs contrasted with shanties, fever–carrying mosquitoes, polluting buses, heat and humidity.  Asuncion’s overall cost of living is 36.5% lower than New York City. Spanish and Guarani are the prominent languages spoken, while the major religion is Christianity.

Buenos Aires in Argentina, Southern South America, is a cosmopolitan metropolis with designer boutiques, stunning neighborhoods and parks and its share of downtrodden areas and tatty streets.  Buenos Aires cost of living is 36.1% lower than New York City. Spanish is the prominent language spoken, while the major religion is Christianity.

Castries in Saint Lucia, an island between the Caribbean Sea and North Atlantic Ocean, is extremely small and relies on tourism, banana production, and light manufacturing. There are approximately 40 hotels and many shops selling goods to tourists.  Castries cost of living is 35.8% lower than New York City. English (official) and French Patois are the prominent languages spoken, while the major religion is Christianity.

St John’s on the island of Antigua, between the Caribbean Sea and the North Atlantic Ocean, is green. Two-thirds of it is parkland and sublime beaches, excellent for hiking and snorkeling. The environment is beautifully preserved, with limited development.  St John’s cost of living is 30.4% lower than New York City. English is the prominent language spoken, while the major religion is Christianity.

Victoria in the Seychelles, an archipelago in the Indian Ocean, northeast of Madagascar, has the feel of a small provincial town set against a backdrop of majestic hills that seem to fall into the blue sea.  Victoria’s cost of  living is 30.2% lower than New York City. English, French and Creole are the prominent languages spoken, while the major religion is Christianity.

These are just five possible locations that we identified. There are so many more places you could consider retiring to, with a much lower cost of living. For a detailed cost of living rank for all 300 locations click here.

Steven is Chief Instigator at 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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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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