Differential Change Analysis

The Differential Change Analysis (DCA) is a unique "pay statement" that provides expatriates with an easy-to-understand explanation of changes to their goods and services differential.

  • The DCA clearly describes changes to each expatriate's pay, and provides a thorough explanation of the factors behind any fluctuations in the differential.
  • The exact amount of each factor is shown, along with the impact on the overall differential amount.
  • The DCA can be combined with a broad range of communication materials to cover every aspect of international assignment compensation, in terms that will be easily understood by both new and experienced expatriates.

How Can DCA Help You?

The DCA educates expatriates and helps eliminate confusion by providing a clear and concise analysis of changes to company-provided goods and services differential; this in turn, reduces the amount of time needed to explain the changes to your globally dispersed team.

Communicating about Pay in Changing Times

Discussing pay with employees is difficult enough in steady times-but when you need to explain pay programs to expatriates, change your pay policy, or reassess and alter your pay practices in the face of a declining economy, your challenge grows larger. Mercer is experienced in all of these sensitive issues and our communication practice can help you develop a unique strategy and plan for communicating in these situations.

Changes are made up of four key components, each of which is clearly explained:

  • Exchange rate fluctuation
  • Price movement
  • Change in expenditure pattern
  • Changes in salary and family size

Differential Change Analysis Example Image

The elements that determine the differential are clearly set out for the current period and up to four previous updates:

  • Host spendable income in the host currency
  • Host spendable income in the home currency
  • Home spendable income in the home currency
  • Final differential in the home currency

The Equalization Methodology page provides a detailed explanation of how the differential is calculated.

Differential Change Analysis Equalization Methodology explanation example

The Explanation of Factors page describes each factor that affects the differential.

Diffential Change Analysis explanation of pay factors

For more information, contact us.

Currency Exchange Protection Mercer's Currency Protection Calculator can help you ensure your international assignees do not lose compensation due to currency exchange movements over time.

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