As surging inflation and falling rupee value eat into the expatriates' pay packages in India, HR experts are now pitching for making a part of their salary in their home country currency.
Advising a 'split-pay' approach in the remuneration of expat employees, the experts believe that the spendable part of the salary -- which covers day-to-day expenses -- could be paid in rupee, while rest could be in home country currency as a safeguard to savings part from inflation and forex risks.
According to HR consultancy major Manpower, currency fluctuations and exchange rates are key issues that can have a tremendous impact on the cost of living allowance provided by companies to their expat employees.
"If entire salary is paid in host country currency, the spendable income part of the salary is protected by the cost of living adjustment, but the remaining part is exposed to currency fluctuations," a Manpower India official said.
At the same time, if the entire remuneration is paid in the home currency, only the non-spendable part -- such as savings and expenses other than day-to-day living, is safe from inflation and forex fluctuation risks, he added.
Terming the split-pay approach as the most logical option, Manpower India said that the expenses abroad could be paid in the host currency and the non-spendable income part in the currency of the expat's home country.
Leading domestic conglomerate Essar group's Chief Learning Officer Sujaya Banerjee said: "split-pay is a good concept to be adopted by any organisation as it brings in purchasing power parity and employee can save accordingly."
Splitting pay is ideal since the host country currency pay can cover the day-to-day living expenses, or what is known as spendable income. On the other hand, the portion paid in home currency can be allocated for savings, home housing commitments and other expenses," global HR consultancy ECA International's Asia General Manager Lee Quane said.
At a conference of global HR managers and policy makers in Singapore, ECA International advised the companies to promote 'robust currency policies which address inflation' and advocated for 'split-pay' approach in expatriate salaries.
The split-pay salary delivery mode helps maintain the expatriates' purchasing power in the host country, while taking care of the unsteady exchange rate, Quane added.
However, some other experts believe that expatriates' salaries should be kept as simple as possible and split-pay approach could be adopted only for short-term assignments, keeping in mind the tax liabilities.
"The split-salary approach depends on the length of the expatriate's assignment. For less than six months this is possible, but it will be little more complex as the expatriate could remain in the home country for such period and there is no reason why the full salary should not be paid in the home currency," HayGroup Practice Leader Mark Thompson said.
Another hindrance to this approach would be due to the fact that it is impossible to match exactly the requirements of each individual expatriate, Manpower India said, adding that 'a better option might be to leave to the employee the flexibility to decide the percentage of the salary that will be paid in the host country.'
Besides, any such practice would have to be framed after taking into account certain regulations of the country such as currency transfer restrictions, Manpower added.