In countries with unstable currencies it is common for employees to save and spend some of their salary in hard currency. However, since employees are paid in local currency, they experience an erosion in saving and spending power when the local currency depreciates.
Case Study:
A company with a large employee population in Turkey wanted to help their employees weather the depreciation of the Turkish lira.
Many of their employees had obligations in hard currency –
- whether a car loan,
- an international university payment,
- or savings
– and they wanted to help their employees cover these obligations. We recommended using a portion of salary to protect against fluctuations and calculated the impact. We then recommended a one-time payment to offset this loss. This recommendation helped the company with current challenges but also set up a repeatable process for any future currency considerations.
Most traditional salary surveys only capture changes in salary structures on a lag basis, so knowing how to help your employees when there is a rapid depreciation in local currency is critical to protecting your talent.
AIRINC can help you determine how to protect salaries when a currency depreciates. Using our proprietary methodologies we identify the portion of salary typically spent and saved in hard currency, calculate the loss, and help recommend a solution for protecting the employee.
