What Are You Doing with Your Dollar-Paid Expats?

Several years ago, when I was with a a big consulting firm, I had a job in Europe. I was based in Amsterdam and spent my time flying all over Western Europe doing work. Things were good. Then the idea of a long-term assignment came up.

Expat assignments are messy no matter how you slice it. They can be good, but the odds are not on the side of the expat. It’s easy to bargain when you’re getting a job in your home country. You know the place and you know the risk. Plus, you don’t have to know currency arbitrage.

In my situation, the firm wanted to fix my pay in U.S. dollars. At the time, the exchange rate was 1 euro to $0.85. The euro was at a discount and life seemed pretty good. But I asked around to many people I knew who were expats. They all told me the same thing: Get a currency exchange guarantee. Without it, they told me, you’ll regret it.

Well, for any number of reasons I turned down the long-term assignment. One of them was the unwillingness to offer a currency correction. And when I saw the news this past week that the dollar was at its all time weakest against the euro — trading at 1 euro for $1.40 — I breathed a sign of relief. Can you imagine the price of goods increasing 65% and your play staying flat? Now that’s some kind of inflation!

Note to companies offering expat assignments: Your expats aren’t currency arbitragers, but they can read the newspapers. Do it right, and provide currency fluctuation protection. Your expats are working hard for your company and you would never ask your local employees to take a 65% percent haircut and expect them to stay, would you?

Posted on September 24, 2007 by Frank Roche 
Filed Under Pay, Policies

Comments

Viewing 8 Comments

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    Good post, Frank. I faced a similar situation before signing on for a stint in London several years ago. What saved me was getting the company's agreement to a fixed amount in Sterling that I would receive, after taxes.
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    I wonder if this is why more Americans are actually formally emigrating to Eurozone countries, becoming citizens there (as opposed to doing temporary expat assignments). France, Holland/Belgium, Germany and Austria seem to be draws especially, UK not so much-- but maybe relocating to these places helps to provide a hedge to demand a salary paid in Euros. Probably language-learning is only real hassle, and seems like most folks I know absorb their French or German or whatever w/o too much trouble when they get set up and there.

    I dunno, but I have to think I'd be on the brink of rioting if I was basically living in a European country while being paid in an increasingly worthless currency somewhere else. Also a particularly moronic move for any country that pulls something like that-- basically a formula to drive your best talent away to your competitors.
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    "Also a particularly moronic move for any country that pulls something like that"
    Read: "Also a particularly moronic move for any *company* that pulls something like that"
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    Capybear, it's amazing that companies still think that way. It's not that hard to figure out how to do it right.

    From what John says, there is a way -- agree to a fixed amount in local currency after taxes. I do know that the acounting firm I talked to about this told me that it was unusual for a company to not give some kind of protection...but it's one of those easy things to overlook until it's too late.
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    I've been involved in the relocation business in the United States for many years. My experience suggests that the big companies make sure that their expatriates remain "whole" - they don't want them to gain, or lose, from the compensation perspective. There is strong infrastructure to help keep companies fair and up-to-date in their practices. They know that expatriates share their salary stories! Maybe your experience relates to a company that doesn't really value the expatriate experience and the role that expatriates could - and should - play in their global strategy?
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    Jack, I had that sense that most companies do it right. The really funny part was that I was working for a firm that consulted on that very topic. The accounting firm I was dealing with told me I was one of the cobbler's children. Glad to hear it works right...in my circumstance I still am happy that I didn't take that job..I would be broke now.
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    The "cobbler's children" is probably a great topic for a blog! I too worked for a (very) big relocation company... I can relate to your experience! In the past, expatriates made a lot of money- that is changing fast. The growing phenomenon is "localization" and increasing difficulty in getting people to accept assignments.
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    Please give me some advise. I am working in Japan. I did fixed my salary at the rate of 1USD=112yen in 2006. I knew that was NOT a very ideal rate, but for less risk on my side, i did take the offer. However, the dollar gained quite a bit against the yen in 2007, the average rate is 1USD=117yen. Then i started to feel bitter about my decision.

    I will extend another year contract. Should i change my contract condition from fixed X-rate to monthly market rate?

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