Net to Net calculations are typically completed for employees moving internationally onto a local package consisting of host country compensation and benefits (vs. an expatriate package), but may also be used for a reduced expatriate package type assignment of limited duration (such as for developmental type assignments).
It can be used as a means of determining a fair local salary in the host country based on employee’s current home country earnings. The calculation factors in compensation, taxes, housing
costs, goods & services differences, and exchange rate differences. Should be coupled with host country fair market compensation data so that a comparison can be done on the needed compensation to maintain employee’s current home country standard of living compared with the competitive host country salary package.
There are two types of calculations
Net to Net
A net to gross (often called “net to net”) calculation which takes the home country net salary and grosses this amount up to arrive at the needed host country equivalent compensation
Gross to Net
A gross to net calculation where one compares a net salary in the home country to what the net salary in the host country would be at a given salary in the host country to determine shortfall/windfall.
Why Use Mercer
Mercer has the data in-house to do these types of calculation and the experience to understand the complexities of these types of calculations. Many companies simply try to convert current salary into host currency at a given exchange rate, which does not account for often huge differences in taxes, housing, cost of living. It is necessary to look at the complete picture.
Mercer can complete either of these calculations for you, or if you are ready to complete a net to net calculation on your own, you can use Compensation Localizer to get started right now!