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Looking for guidelines for fair increases to international employees?
We have 60 employees in 23 countries. As a start up most of the team members had independent contracts and were paid in U$. We were correctly told by that the team members, depending on in-country regulations, can only have independent contracts for min period, for 3 years for example. Hence, we contracted an EOR and they assisted us with employment contracts in country. Now we must do increases. In past all team members received a standard increase. We cannot apply this rule, as some in-country inflation is at 9% for example compared to others at 5%. Hence, we decided to rather yearly update the exchange rate, every year to the previous 3 years average exchange rate. This is only done once a year, as part of increases. In theory this sounds fair, but in some countries the company is making significant exchange gain on the salary in certain months and specifically at first day of employment. My question is what are other companies are doing? I have contract the EOR, we cannot have a decrease in local currency salary unless we sign new a contract, that is going to be a lot of admin, plus not sure if the employees will sign them.
The employee then received the upside of the weaker local currency to U$ for example. When the local currency recovers, we will keep it at the higher exchange rate. Thus, is why we don’t want to use the actual rate but rather an average over the previous 3 years.
We want policy that is fair to the employees and to the company.
Any feedback, recommendations or other forums you can refer me to post my question will be greatly appreciated.
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1 Reply
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I use a market-based approach to compensation. In non-USA markets, I approach it from the perspective of housing costs. Select a level of the housing market where people in that job description tend to live and find the annual costs of housing. Divide that number by .3 and compensation should be close or above the result to be fair or generous. Check also with local labor laws. I believe that the Society for Human Resource Management and IRIS FMP have resources.