Paying Filipino workers in USD. What should the inflation rate be? I'm not sure where to ask and, since this is not Personal Finance, I'm gonna ask it here.

Here's my situation: for the past 2 years, I hired and trained a team of Filipino workers. They are paid in USD and receive a 8% raise every year and x% for inflation. The workers then take their pay and exchange it for PHP.

When I came up with the analysis 2 years ago, I used the inflation data for Philippines to figure out the yearly inflation raise.

However, this year's inflation rate was 5.5%, which is ungodly high IMO; which got me thinking. Then, it occurred to me that I should have used the US Inflation rate the whole time!

My logic is that, if the price of goods increase in the Philippines, it wouldn't matter because the USD to PHP exchange rate would change so that US$1 would be worth more Pesos. If I recall correctly, Russian was experiencing a lot of inflation a few years ago. The price of the Ruble dropped; so, if Russian employees were paid USD, they were safe from the inflation, even if they exchanged their money every pay period.

Is this logic correct? Let me know. I gotta fix their pay.
Your employees are at risk of PHP inflation; you are not, so you should be paying in USD, and adjusting for USD inflation if you want to.

Yes your reasoning is correct. If you increase their pay by US inflation, in theory the exchange rate to PHP should increase MORE due to the higher PHP inflation (relative to USD). So when they convert their USD to PHP, their resulting PHP income would reflect PHP inflation.