Why our Salary Calculator considers multiple factors, not all Monetary
The CrunchMySalary calculator will be adjusting your salary expectation in your destination country on the basis of 4 key considerations:
(1) Personal Tax Rate
(2) Lending Rates
(3) Purchase Power Parity (PPP)
(4) Quality of Life – Human Development Index (HDI)
Each of these are further explained and elaborated on below:
(1) Personal Tax Rate ;
Differentials in personal income tax rate can have a very significant impact on take-home salary. It is critical that consideration is given first to this impact, before continuing with the rest of the CrunchMySalary calculation – partly because this is just logical and is what transpires in real life, but also because any differential in personal income tax rates are excluded from more complex factors and indexes, such as those that are published by the World Bank.
(2) Lending Rates;
Differentials in lending rates are also very big drivers of personal cash flow and hence will have a very large impact on salary considerations. Once the impact of personal income tax rates have been considered in the CrunchMySalary calculation, the very next logical consideration is for the differential in lending rates (interest rates charged by banks). Again, this is logical as most people will pay for their “big ticket” items such as their home and car loans before they consider the reality of cash that is then left over and hence available for living and general expenses.
(3) Purchase Power Parity (PPP);
Once we have considered and factored in the impacts of differentials in both personal income tax and lending rates between the home and destination country, we are essentially left with cash that is available for spending consideration. This is where Purchase Power Parity (PPP) comes in. PPP is often considered in relation to country GDP, but in the CrunchMySalary calculator we have specifically targeted the Purchasing Power Parity that is applicable to private consumption and is determined and published annually by the World Bank, with the determination being made by The International Comparison Programme (ICP) as a collaboration involving 199 countries. PPP is an effective reflection of the “buying power”of local currency expressed in international currency units (ICU) where 1 x ICU is equivalent to $1.0 USD. It is important to realise that PPP is rarely equivalent to currency exchange rates and in fact the divergence between these 2 rates can be very large, with such divergence sustained for very long periods of time. It is also important to understand that PPP can only be expressed against a typical “basket of goods”that are specifically selected to be representative of living expenses at the global level – this basket expressly excludes items such as a car and house, which is why we have separated these considerations deliberately within the logic of the CrunchMySalary calculator. PPP does however, consider differentials in VAT (sales taxes) as the PPP objective is to be reflective of actual sales prices that people encounter in day-to-day living.
A commonly understood reflection of PPP is the “Big Mac Index”which is essentially the principle diluted down and applied to just one consumer item that is applicable in the global sense, but whilst useful and easily understood, we find this too basic a consideration to have any real merit.
(4) Quality of Life – Human Development Index.
A final consideration of the CrunchMySalary calculator is one that is completely non-monetary in its derivation. It is for this reason that we have applied it in an OPTIONAL fashion within the calculator. That said, we feel that this consideration is actually very important and should always be considered in your final deliberations on applicable salary and as such, we have actually turned this non-monetary indicator into once that is actually monetary in its consideration. The reason for this is actually quite fundamental and goes to the heart of why we work in the first place! We do, after all, work to sustain a certain aspiration of living standard and this has a very big bearing on things like the safety of the environment that we live in, along with education and health and many other factors, not least of which include the overall satisfaction in life that we attain, both as individuals and as family units.
We have chosen to deploy this adjustment for “Quality of Life”through an index that is published annually by the United Nations – the Human Development Index (HDI) which we feel is he best reflection of this consideration that is available.
Try the Salary Calculator Now! →
GIVE IT A TRY | LEAVE YOUR COMMENTS | TELL YOUR FRIENDS