Following on from last week’s introduction to remote work considerations here we look into the numbers behind the romantic notion of packing up to work from another location.
What are top cities for remote work in Europe?
If we take Europe as a first case we often see Madrid, Lisbon and Istanbul appear on the list. All beautiful cities in their own right from a lifestyle, cultural and quality of life perspective. And if you decide to live here or are a native of one of these cities living elsewhere now, but looking to return home and perhaps be closer to family, these factors may be a huge pull.
What are the criteria for evaluating how attractive a city is for remote work?
If we go a step further than the lifestyle aspects, the question around compensation often depends on where you are coming from. Based on the company policy, individuals that are allowed to work from another location may be placed on the host location salary structure which could result in a lower salary than currently enjoyed. The employee may of course be able to negotiate this based on their value to the organisation and the talent pool for their role. It’s important to look beyond the salary figure though and consider the purchasing power of the offered compensation.
How can we calculate remote work calculations for Istanbul?
Istanbul is the only city in the world that is found on two different continents (Asia and Europe). The city is multicultural with a lively atmosphere. The climate is described as transitional Mediterranean. Crime is low and education and job opportunities are plentiful.
Let’s consider someone earning GBP 50,000 in London wishing to work remote from Istanbul and viewing a basic currency conversion for Turkey may think they need around TRY 1,000,000 on a like for like basis. But it’s dangerous to focus on exchange rates when comparing pay as this can fluctuate at any point in time.
Using AIRINC’s Remote Work Calculator we can do a deeper analysis and see that taxes in Istanbul are lower than the UK, goods and services are around 55% cheaper and housing 31% cheaper. So, they would only need around TRY 600,000 as a gross salary to achieve the same purchasing power. Would they be willing to take a reduction in gross salary to work remotely from Istanbul, if the purchase power stayed the same? Is the laid-back lifestyle and pull of the Ottoman landmarks enough?
|London Home Salary||Estimated Turkish Host Salary||Taxes||Goods & Services||Housing||Calculated Host Salary|
|50,000 GBP||TRY 1,000,000||Lower||= 55% cheaper||= 31% cheaper||TRY 600,000|
And what if the person is currently sitting in Warsaw, Poland today rather than London? If they have a salary of around PLN 280,000 again on a currency conversion basis an equivalent would be around TRY 1,000,000, but as we said earlier, we should not rely on an exchange rate conversion.
In this example using AIRINC’s remote work calculator we can see that the taxes are slightly lower, cost of living is around 30% cheaper, but housing is around 25% more expensive in Istanbul. They are going to require around TRY 850,000 to achieve purchase power parity. How does this fit with their own expectations and what is the company position from a market rate of pay angle and equity with host country peers?
Warsaw Home Salary
|Estimated Turkish Host Salary||Taxes||Goods & Services||Housing||Calculated Host Salary|
|280,000 PLN||TRY 1,000,000||Slightly lower||= 30% cheaper||= 25% more expensive||TRY 850,000|
We also know that Turkey is experiencing extremely high inflation and exchange rate volatility, which will create uncertainty around compensation. This can cause issues if transferring money into other currencies. The key point here for employees and employers, is that it’s vitally important to look beyond what the brochure says when considering a location to work remotely from.
More from our Remote Work Series