3 Important Rates Every OFW Should Know


BY RAYMOND CALBAY

Your pay rate just doubled on the job offer you received to work abroad. You've asked yourself the hard questions and made initial preparations. But forget about your promised pay for a minute and focus on these other rates before you sign your contract and fly out to your new destination. What looks like a bigger paycheck might actually buy you less lifestyle, investments, and cost savings if you ignore these important rates.

#1 Exchange rate


Of course you'll quickly check how much a Euro or Dinar converts - but also do some research on the historical value of your host country's currency against the Philippine peso. A drop of "10" or ".01" may impact your earning power, especially if you periodically remit large sums of money back home or plan big-ticket purchases. If for example you're eyeing to buy a 4 million peso condo unit, it will cost you U.S.$95,000 now against U.S.$85,000 from four years ago - more expensive by around U.S.$10,000.

#2 Inflation rate


There's a reason why salaries vary across countries and the inflation rate is an important indicator. Basically, the inflation rate dictates how much your money can command in the market following price fluctuations. For example, if you find yourself headed to Macau earning 100,000 patacas and where last year's inflation rate is 5%, make sure that you can negotiate an annual increase of at least that same figure. Otherwise you lose a bit of your salary's local value, which impacts your rent, consumption, and utility costs while abroad.

#3 Taxation rate


In Manila, your former boss complains about the high 32% tax rate eating up her earnings. Compare that for example in some parts of Europe where the maximum tax rate can exceed 50%. At the other end, Saudi Arabia (a popular destination among OFWs) has 0%,  yes, zero tax rate for foreigners. Where you find yourself relocating should be part of your projected income. Then comes the other taxes such as sales, value-added, or entertainment taxes, which may or may not apply in some territories. Imagine the total cost when you eat out for dinner!

Bear in mind that the money question complicates a bit more because these rates are inter-related. For one, some OFWs mistakenly hope for the Philippine peso to weaken come remittance period so they'll have more to send home. But if consumer goods in the Philippines spike to higher levels, gains in the exchange rate are lost in inflation. Since economics is not necessarily an exact science, you'd better invest your earnings to cushion you from swinging rates.

As an OFW, what other rates have you considered when negotiating for a salary package? Share your thoughts in the comments below.

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