Exchange rates, inflation and hybrid working currently affecting employee mobility
London, 29 June 2022
Mercer’s 2022 Cost of Living Survey, which looks at the world’s costliest cities for expatriates, places Hong Kong top of the global rankings with London leading the UK cities ranked in 15th place and Belfast ranked as the UK’s least expensive city in 121st place.
The rise of remote and flexible working, exchange rate volatility and widespread inflation are all having a material impact on employees’ pay and savings worldwide. Consequently, these factors are having repercussions for employers in the global battle for talent.
The United Kingdom is experiencing inflation levels not seen in decades. Still dealing with the aftermath of exiting the European Union, as well as the global supply chain crisis caused by the pandemic and Ukraine conflict and coupled with record high energy prices, the UK is reporting the highest consumer price inflation levels (CPI) of the five largest European economies, and one of the highest among world economies of its size.
Yvonne Traber, Partner at Mercer and Global Head of Mobility said: “The volatility triggered by COVID-19 and further worsened by the crisis in Ukraine, has fuelled global economic and political uncertainty.
“This uncertainty, coupled with significant rising inflation in most of the countries around the world, has international assignees concerned about their purchasing power and socio-economic stability.”
The rise of remote and flexible working has caused many employees to reconsider their priorities, work-life balance and the choice of location to live in. Both inflation and exchange rate fluctuations are directly influencing the purchasing power of mobile employees at present.
“Inflationary pressures not seen for decades are being felt across the world, but the impact differs significantly from country to country. Expatriates moving into the UK, where inflation is high, from locations where inflation is lower, for example many parts of Asia, may require more support than those moving in the other direction,” said Kate Fitzpatrick, Mercer’s Global Mobility Practice Leader for UK & Ireland.
“Exchange rates also remain a significant factor for expatriate talent. The US dollar has strengthened against sterling over the last 12 months, which means expatriates coming into the UK that remain paid in currencies pegged to the dollar, are better off. Those employees on overseas assignments that are paid in sterling, however, will have seen an impact on their purchasing power due to the combination of inflationary pressures and a softer pound.”
These conditions have consequences for employers, who need to rethink their approach to managing a globally distributed workforce to stand a chance in the global battle for talent.
Mercer’s data demonstrates that changes to the work environment and economic conditions around the world are evolving faster than before. Companies looking to maintain business resilience and sustainable futures for their mobile workforce need to carefully navigate international assignment costs and packages during these times of uncertainty. The change in employee mindset from having a defined place of work to work-from-anywhere, masks the realities companies face when determining compensation and benefit packages for expatriates.
“For organisations, the financial wellbeing of employees is a key driver in their ability to attract and retain top talent. Employers need reliable data and clear strategies and a global point of view to model mobility packages for international employees in unstable times,” said Ms Fitzpatrick.
“Ensuring employees’ financial wellbeing as well as business efficiency, transparency and equity are increasingly important factors and Mercer’s consistent data and transparent methodologies helps employers incorporate these when designing and communicating international employee compensation packages.
“Failing to adapt international compensation strategies to the new world of work undermines organisations’ ability to attract, develop and retain key talent.”
Mercers 2022 Cost of Living Survey placed Copenhagen, Denmark just outside the top ten in 11th place with Vienna (21) and Amsterdam (25) the other leading Western European locations.
The most expensive city in Eastern Europe is Prague, Czech Republic which ranked 60th out 227 cities. It is followed by Riga, Latvia (79), Bratislava, Slovakia (105) and Tallinn, Estonia (140). The least expensive city in Eastern Europe is Sarajevo in Bosnia-Herzegovina ranked 209.
The full rankings may be viewed at https://www.mercer.com/our-thinking/career/cost-of-living.html
Note to Editors
Mercer has revamped its Cost of Living methodology to match international development and international assignees spending patterns. The new methodology includes a Cost of Living new basket and housing costs with specific criteria and weighting allocations.
For example, the new basket includes revisions to utilities costs and new items such as action camera, smartwatch, headphones, tablet computer and smartphones. The survey also excludes items from the basket which are no longer considered relevant, such as the music CD and VHS movie rentals.
About Mercer’s Cost of Living Survey
Mercer's widely recognized ranking is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation strategies for their international assignees. New York City is used as the base city for all comparisons and currency movements are measured against the US dollar. The survey includes over 400+ cities throughout the world; this year’s ranking includes 227 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. The data collected provides all of the key elements employers need to design efficient and transparent compensation packages for international assignees. Learn more here.
The figures for Mercer’s cost of living and rental accommodation cost comparisons are derived from a survey conducted in March 2022. Exchange rates from that time and Mercer’s international basket of goods and services from its Cost of Living Survey have been used as base measurements. Governments and major companies use data from this survey to protect the purchasing power of their employees when transferred abroad; rental accommodation costs data is used to assess local international assignee housing allowances. The choice of cities surveyed is based on demand for data from Mercer’s clients.
About Mercer (as at March 2022)
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 83,000 colleagues and annual revenue of approximately $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.