You've just landed a remote contract that pays $5,000 a month. Say you live in Poland, so every month you convert those dollars to zloty.
What's easy to forget is that your real income changes every day, even though the contract still says $5,000.
The hidden pay cut (or raise)
A contract in a foreign currency is, in effect, a bet on exchange rates. If your home currency strengthens against the currency you're paid in, you get less in local terms. If it weakens, you get more.
Example: a Polish developer signs a $5,000-a-month contract in January 2023, when USD/PLN is at 4.35. That's 21,750 PLN a month.
By December 2023 USD/PLN has dropped to 3.93. The same $5,000 is now 19,650 PLN, a 9.7% pay cut that nobody negotiated. More than 2,000 PLN a month has gone to the exchange rate alone.
Why the exchange rate isn't enough
USD/PLN tells you part of the story. Suppose the zloty is strengthening against everything, not just the dollar. Then your purchasing power at home is actually improving, because imported goods get cheaper and that offsets part of the pay cut in zloty terms. Freelancers paid in EUR, GBP or CHF are feeling the same squeeze.
If instead only the dollar is weakening and the zloty is flat against everything else, the problem is specific to USD. That's a reason to renegotiate, or to look for clients who pay in other currencies.
Open FX Compass, select PLN and USD, and look at the gap between the two lines. If it's widening, your contract's real value is changing.
Tracking your contract, step by step
1. Note the signing date
The day you agreed on the rate is your baseline.
2. Set the time range on FX Compass
On the dashboard, set the start date to the day you signed and select your home currency and the currency you're paid in.
3. Read the gap
If the line for your payment currency sits above your home currency, your contract is worth more in real terms than when you signed: a quiet raise. If your home currency is on top, the contract is losing value and it's time to pay attention. If the two lines move together, the value is stable.
4. Check the wider picture
Add a few more currencies to see whether the move is specific to your pair or part of a broader trend. That changes how you should respond.
When to renegotiate
There's no universal rule, but it's worth raising when:
- your real income is down 10% or more since you signed, which is a real pay cut;
- the index shows a clear, growing divergence rather than noise;
- the trend has lasted six months or more (a few weeks of movement is noise, several months is a trend);
- your client is in a strong-currency country, so their costs haven't changed and an adjustment is fair.
Don't renegotiate because of one bad week. Currencies are volatile in the short run. Look at the 3M or 6M view on FX Compass to see the real trend before you decide anything.
Practical tips if you're paid in a foreign currency
Convert with some thought
You don't have to convert the whole payment on payday. If your home currency is strengthening, convert sooner rather than later, because each month the foreign money buys less. If it's weakening, holding the foreign currency for a while may pay off.
Spread your clients across currencies
If every client pays in the same currency, your currency risk is as high as it gets. Clients who pay in two or three different currencies hedge part of it naturally.
Keep a buffer
One or two months of expenses in your payment currency let you choose when to convert instead of being forced to.
Use the index as an early warning
Get into the habit of checking FX Compass once a week. If your payment currency starts a steady decline against the basket, start planning before it shows up in your own pair.
An example
Anna is a UX designer in Budapest. A German client pays her €4,000 a month.
In July 2023 she notices on FX Compass that the forint has been climbing steadily against the whole basket, the euro included. In six months it has gained about 12% against the basket and about 8% against the euro.
Her €4,000 buys noticeably fewer forints than when she signed. She also sees that the forint is strong against everything, not only the euro. So the euro isn't the problem; the forint's strength is. Her local purchasing power is actually improving, since imports are cheaper. She still decides to renegotiate, but she frames it differently.
She asks for a 5% increase, citing market conditions, and her client agrees.
Check your contract currencies
These links open the dashboard with common freelancer pairs selected:
- USD against PLN and EUR over one year, for Polish freelancers paid in dollars
- EUR against HUF over six months, for Hungarian contractors with EU clients
- USD against CZK and EUR over one year, for Czech developers
- GBP, EUR, USD and PLN over three months, to compare the main payment currencies
If you earn in a foreign currency, your real income is a moving target. Don't wait for a bank statement to surprise you: watch the trend, understand what's behind it, and decide from there. The number on your contract stays the same. What it buys changes every day.