Global Mobility and The Cost of Living Crisis: A Survival Guide for Businesses

The global cost of living crisis caused by the recent pandemic, political struggles, and rising inflation is a growing concern, potentially pushing an additional 71 million people into poverty due to the escalating cost of food and energy. 

This crisis is not only affecting individuals but is also posing new challenges to businesses and workers. Businesses face reduced demand, increased costs, and labor shortages, while workers face reduced real wages, difficulty finding affordable housing, and increased financial stress. These circumstances strain mental health and impact employees’ and employers’ performance, attendance, and overall success.

To mitigate these problems, organizations can implement a global mobility program. Such a program ensures a business can support a global workforce with travel and relocation wants and needs while widening talent pools, diversifying markets, and empowering employees to work in different, more affordable locations as needed, boosting employee engagement and talent retention. In addition, the company can hire from lower-cost labor markets to optimize workforce costs.

However, implementing a global mobility strategy has its challenges. Businesses must navigate jurisdictional labor laws, tax implications, localized contracts, work authorizations, visa sponsorship, global payroll, and more. 

This article will discuss three ways global mobility could be crucial in mitigating the cost of living crisis and how Deel, an industry leader in global compliance, mobility, and payroll solutions, can help businesses overcome these challenges.

1. Hire employees from lower-cost countries

In recent years, the cost of living crisis has become a global issue, affecting people from all walks of life. However, those living in lower-income countries are often hit the hardest by the rising cost of living. Despite this, these countries are home to many talented job candidates who are eager to work and contribute to the growth of companies across the world. 

One way to tap into this talent pool is by hiring workers from low-cost countries. Doing so gives them access to a competitive, livable salary and benefits while giving companies access to more affordable talent. This arrangement is a win-win situation for both parties. 

Companies can offer remote work opportunities to candidates in low-cost countries. This approach empowers them to access higher-paid positions without having to relocate. The decision promotes economic equality, enriches the workforce, and helps build robust, globally distributed teams. 

Moreover, companies that embrace remote work can enjoy reduced operational costs, greater flexibility, and a competitive edge in the market.

2. Support employee relocation

Employee relocation is becoming increasingly common, particularly during times of economic uncertainty. Many employees relocate to seek better job opportunities, a higher quality of life, or a desire to be closer to loved ones, according to a 2021 Global Movement Report. Companies must be willing to accommodate employee-led relocation requests to attract and retain top talent.

Providing relocation assistance and remote work opportunities can effectively support employee relocation. This can help employees move to more affordable destinations, leading to improved financial well-being and an overall better quality of life. As a result, employee satisfaction and retention can be enhanced, ultimately benefiting the company’s bottom line. 

Another option for companies is to relocate talent from developing economies such as India or Africa to their headquarters or another third country with a more robust economy, such as the Canada, China or Australia. By doing so, companies can gain access to a broader, cost-effective pool of talent with diverse skills and perspectives while also giving workers access to better pay and benefits, improving their overall quality of life.

Moreover, transferring knowledge and skills from one location to another promotes learning and growth while improving global collaboration and communication among employees from different backgrounds. 

To learn how to effectively streamline win-win employee relocations, we recommend checking out this free guide.

3. Embrace location flexibility

Location flexibility allows employees to change their location on a more temporary basis, providing them with the freedom to adapt their living situations to align with their circumstances. This arrangement is particularly beneficial during economic hardship, as it allows employees to tailor their lifestyles to meet their personal needs.

For example, employees may choose to live in a more affordable location for six months of the year, visit family and friends when they require more support, or return to the company’s headquarters for work-related events or during busier times. This flexibility provides employees with greater job satisfaction and work-life balance. Also, it gives them access to support networks to get the help they need during times of crisis or financial hardship.

Compared to permanent or fixed-term relocations that require more complex relocation support, location flexibility is a simpler and more cost-effective solution that benefits both companies and employees. It allows companies to retain top talent by accommodating their changing needs and supporting their overall well-being.

Crafting a fair global compensation strategy

An essential aspect of implementing a global mobility program that can help counter the cost of living crisis is developing a fair global compensation strategy. Fair and competitive pay is a cornerstone of an equitable, ethical, and effective program.

Here are four top tips for implementing an effective global compensation strategy. 

Localize pay—don’t pay one rate globally

The cost of labor varies significantly from one country to another, depending on the respective cost of living. While paying one standard rate globally may seem like a straightforward solution, it often results in underpaying or overpaying employees in certain locations.

For instance, using the average pay of New York City as a standard may lead to overpaying contractors in South Africa. It’s essential to localize the wages of employees to ensure that they are justly compensated.

Use the cost of labor to localize global compensation— not the cost of living

Some global compensation strategies fail by using the cost of living metric as the sole factor for localization. For example, comparing San Francisco and Zurich, where the cost of living in Zurich is 13% higher, might lead you to think Zurich employees should be paid 113% of what San Francisco employees earn. However, this approach overlooks the fact that the cost of labor in Zurich is actually lower. 

Relying solely on the cost of living can lead to both overpaying and underpaying employees, jeopardizing talent retention and recruitment. It’s important to base global compensation strategies on the cost of labor rather than the cost of living.

Use a rolling average to update salaries in line with currency fluctuations

Another compensation mistake is relying on a single, outdated exchange rate to determine international salaries. Rather than monitor rates daily, which can be too volatile, the best practice is to choose a reasonable time frame and calculate a rolling average to mitigate daily currency rate fluctuations. 

It’s crucial to keep this average regularly updated to reflect current currency changes. For example, if a company uses a 30-day rolling average, it can better adapt to shifting exchange rates, avoiding the extremes of both infrequent and overly frequent rate updates.

Update compensation bands to reflect global market movements and remain competitive  

Staying competitive in the global market requires regularly updating compensation bands to reflect market movements. According to expert insights from our global hiring summit, emerging markets can experience growth rates of 7 to 10%, while mature markets see growth rates of 2 to 4%. Neglecting to monitor and adjust compensation regularly in emerging markets can lead to recruitment challenges and talent loss.

In addition, market movements can significantly impact your bottom line. Even a 1% overpayment in global compensation can result in substantial additional costs. Therefore, accurate compensation adjustments are vital to avoid financial and talent-related consequences.

See also: The Remote Team’s Guide to Employee Compensation Strategies.

Support your global workforce with Deel

Rising expenses and global happenings have triggered a cost of living crisis, impacting both organizations and workers. A global mobility strategy can offer financial relief to workers, reduce labor costs for employers, and optimize workforce flexibility. 

Deel’s global HR platform offers everything you need to support a global workforce and execute your global mobility strategy with ease and efficiency.

Learn more about Deel’s global mobility features, or book 30 minutes with a product expert to get your questions answered.