Monday, December 14, 2009

How to analyse countries side by side?

Question: I am the CFO for a company who has staff working on projects in around 20 countries. How can I use your product to put these countries side by side in one analysis.

Answer: The best solution would be to run a report for each location using your HQ as the from location in each case. You will then have detailed cost of living reports for each country and can analyze the data across all 20 in a spreadsheet. for more information

Sunday, December 13, 2009

cost of living per diem rate question

Question: How can I run a report of what a per diem rate should be for a Canadian employee who is traveling on business to the UK. I want the information to cover the cost of food and miscellaneous expenses but not the cost for hotel or transportation.

Answer: We suggest you use the SPPP (Salary Purchasing Power Parity) Calculator. For food use “Groceries” and for miscellaneous expenses use all or some of the following, “Miscellaneous”, “Personal Care”, and “Recreation and Culture”. Please note that restaurants and Meals out are covered in the same category as hotels. Public transport is included in transportation. The way to use the calculator for a per diem rate is to select only the above as “Paid from Salary”. The way to exclude the other basket items is to select them as “Provided”. In the salary field use the local per diem rate in Canada and select the appropriate UK city as the “to” location. The calculator will calculate the amount of per diem needed in the UK to have the same purchasing power as in Canada. for more information

Saturday, December 12, 2009

Cost of living questions

Question: I wonder in what way tax pressure and cost regarding social security are taken into account. As far as I can see the gross salary is calculated and not the net salary. Because of great differences in tax pressure, using the gross salary might give a somewhat less correct outcome.

Answer: The calculator does not take tax into account. Most users use their net/after tax salary as the basis for the calculation. This will calculate the equivalent net salary in the other location. You would then gross up the net salary by the amount of tax to arrive at a gross salary in the other location. for more information

Friday, December 11, 2009

Learn more about cost of living

Internationally comparable cost of living data is crucial to forming sustainable expatriate pay policies and monitoring progress. Market exchange rates give misleading comparisons because they do not reflect salary purchasing power differences. Purchasing Power Parity (PPP) accounts for price differences between countries and so measures real quantities.

The purpose of an expatriate pay program is to maintain employee spending power and standard of living irrespective of global location. Salary Purchasing Power Parity (SPPP) is the amount of salary that equalizes the purchasing power of different currencies given the relative cost of the same basket of goods (cost of living) at the exchange rate versus one US Dollar. This means that a given salary, when converted into different currencies at the SPPP rates, will buy the same basket of goods and services in all countries.

Currency exchange rates are highly volatile as they are based on short-term factors and are subject to substantial distortions from speculative movements, economic outlook and government interventions. Currency exchange rates, on their own, do not in our view reflect cost of living changes in the short-term. Exchange rates, even when averaged over a period of time such as a year, are not a good measure of the comparative value of a salary in relation to its comparative international purchasing power. In the short to medium term at least, apparent changes in the comparative level of remuneration between one country and another may be principally a function of changes in the exchange rate as opposed to cost of living.

The basket of goods and services used in SPPP calculations is derived on an International basis and includes certain items often excluded from expatriate cost of living data (most notably housing costs), however any or all of the 13 basket groups can be included or excluded from a calculation. SPPP's provide a reasonably good picture of the differences in standards of living for individual’s resident and paid in different countries. for more information