MNCs wary of tweaking expat pay

Singapore - The depreciating US dollar is eating into most expatriates' compensation packages yet multinational companies are still cautious on implementing solutions to ease the impact of currency fluctuations.

According to Mercer's Impact of Weakening US Dollar on Compensation in Multinational Companies SnapShot Survey, 47% of MNC respondents say the declining value of the US dollar has had a moderate to significant impact on their compensation programmes. While MNCs in Singapore are closely re-examining the currency fluctuation issue on US dollar-denominated compensation packages, Cathy Loose, Asia Pacific global mobility leader for Mercer, says there is no sense of urgency to adjust C&B packages. "Most companies are not rushing to make immediate adjustment to the expatriate's compensation package.They tend to take a rather cautious approach to re-evaluate the fluctuation recognising the volatility of the market."

For companies that are considering adjustments, they can institute a margin in terms of percentage of fluctuation, such as +/- 5% or 10%, before modifying the overall compensation package again. Loose suggests another option would be providing split payment particularly on Cost of Living Allowance (COLA) to minimise the impact. However, she says, "Split payment on the total package is not a market prevalence."

Significantly, 70% of respondents do not use US pay levels and dollar parity as a reference when determining pay rates for non-US based jobs. Loose says, "The overall practice in terms of dealing with currency fluctuations is consistent within the Asia Pacific region as well as globally among multinational companies."

Areas of compensation most likely affected by currency fluctuations include equity-based long-term incentive plans, base salary and global mobility policies. Nonetheless, global mobility policies are much well taken care of by MNCs as 70% of these organisations have mechanisms in place to address the currency fluctuations. In addition, 50% of these organisations review their mobility programmes annually, while the other half reviews them semi-annually, quarterly or on an as-needed basis.