Is the Weakening Dollar Costing Your Assignees?

In today’s volatile global economy, the U.S. dollar is weakening against many major currencies. This shift poses a direct challenge for companies managing U.S. outbound assignees, especially when it comes to maintaining accurate and fair cost-of-living allowances (COLA).

If COLA policies aren’t updated to reflect currency fluctuations and inflation changes, assignees may experience a significant loss in purchasing power, leading to dissatisfaction or even assignment failure.

Why the Weakening Dollar Matters

When the US dollar weakens compared to the host country’s currency, the assignee’s goods and services (G&S) spendable income—the portion of their base salary meant for everyday living—loses value when converted to local currency.

This means that their standard of living in the host location suffers unless COLA is adjusted.

How Exchange Rates Affect Expatriate Compensation

Assignees with frozen or outdated allowances may face:

• Shortfalls in daily expenses
• Reduced purchasing power
• Frustration with unresponsive compensation policies

While COLA is designed to protect the assignee from cost-of-living differences between home and host, it must be regularly updated to reflect:

• Currency exchange rate movements
• Inflation in home and host countries
• Home-country salary changes

How the Balance Sheet Protects Assignees

Most companies use the balance sheet approach to structure expatriate compensation. This method ensures the assignee maintains equivalent purchasing power abroad by:

• Keeping them “whole” compared to their home-country peers
• Reimbursing for increased costs of goods, housing, and taxes in the host country
• Including allowances like COLA, housing differentials, and hardship premiums

The balance sheet calculates what the assignee would spend on core categories at home (e.g., housing, goods & services, taxes) and adjusts each component based on host location cost and tax differentials.

When the U.S. dollar weakens, this model flags a discrepancy between the assignee’s intended purchasing power and actual spendable income abroad. If the COLA portion is not updated, the balance sheet no longer works as intended — leaving the assignee potentially out of pocket.

By updating the COLA, companies realign the balance sheet, ensuring fair treatment and consistent compensation, regardless of currency shifts.

What Mobility Teams Should Be Doing

Most assignment letters include provisions for COLA reviews during the assignment. These are often overlooked during stable times but become critical when currency volatility spikes.

Key actions:

• Audit COLA policies for all US outbound assignees
• Ensure that exchange rate triggers are built into the update cycle
• Collaborate with your global mobility provider to maintain up-to-date allowance accuracy

Why You May Hear from Your Assignees Soon

When the USD weakens, it's not unusual for the first alert to come from assignees themselves, who notice the impact on their wallets. Many of them will request COLA adjustments, especially if the discrepancy becomes noticeable in day-to-day spending.

Being proactive rather than reactive builds trust and shows your company’s commitment to supporting employees abroad.

AIRINC’s Recommendation

At AIRINC, we recommend immediate review and update of cost-of-living allowances for US outbound assignees to reflect:

• The weakening U.S. dollar
• Host and home inflation rates
• Any recent salary changes

Ignoring these factors puts assignees at risk and may jeopardize the success of their international assignments.

How AIRINC’s COLA Change Report Can Help

To simplify and streamline the update process, AIRINC offers the COLA Change Report. This easy-to-use tool provides:

• A quick snapshot of which locations need updates
• Insight into currency, inflation, and salary-driven changes
• Monthly data updates for proactive decision-making

With the COLA Change Report, global mobility teams can quickly spot where adjustments are needed and ensure that assignees remain fairly compensated — even in rapidly shifting economies.

Additional Resources for Global Mobility Teams

Want to dig deeper into how to support your assignees through economic shifts? AIRINC offers several helpful resources:

Download: The Balance Sheet for Expatriates
Understand how the balance sheet method works, what each component includes, and how to apply it effectively to protect assignee purchasing power.

Watch: Our Latest Webinar on COLA and FX Rates
Explore expert insights on how fluctuating exchange rates are impacting global mobility compensation — and what you can do about it.

Explore: AIRINC's COLA Change Report
A fast, visual tool that highlights which assignments may require COLA updates based on the latest FX, inflation, and salary trends.

These tools are designed to help HR professionals and mobility teams make informed, confident decisions — keeping your programs competitive and your employees supported.

Final Thoughts

Global mobility teams play a critical role in ensuring assignees are fairly compensated despite economic shifts. By staying ahead of exchange rate changes and inflation trends, you can maintain assignment success and employee satisfaction.

Stay current. Stay competitive. Support your assignees.

Need help updating COLA? Contact AIRINC or explore our tools for managing cost-of-living allowances.