COMPENSATION TIPS IN WAR-TORN COUNTRIES
Geopolitical tensions in the Middle East have taken a severe toll in the region’s economic stability. Countries currently confronting waves of unprecedented civil wars such as Yemen, Syria, Iraq, and Turkey, along with an unprecedented flow of refugees, have achieved very minimal GDP growth in the recent years. And there is spillover to neighboring countries such as Lebanon and Jordan as well.
The economy of Yemen, for instance, contracted by 28.1% after a year of ravaging conflicts since March of 2015, indicating an imminent hyperinflation. On a broader scale, inflation in the MENA region surged from 3.9% to 4.1% in May – the highest rate since October of 2015.
Living in war-torn areas is grueling and difficult for employees. Volatile prices result from high inflation rates, coupled with periodic shortages of goods. These uncontrollable events are disruptive, and quite often, employers are compelled to rethink compensation packages to help address the pain and difficulty of living amid civil unrest, especially where the turnover of staff is uncomfortably high.
In countries experiencing a crisis, monitoring GDP, inflation rates, and other economic indicators along with survey data may be insufficient for you to determine proper salary actions. As employers, you need to ask: with fluctuating inflation and limited availability of reliable data, what is the best way to manage compensation packages?
A Way Forward
Reviewing your compensation policies requires looking at how other organizations adapt and react in conflict-stricken economies. Instead of just increasing base salaries, which permanently increases fixed costs, employers sometimes provide special benefits such as cash allowances instead, which are usually implemented on a temporary basis. This approach allows employers to respond conservatively and manage costs effectively until the political turmoil in the region gets resolved. In Iraq and Syria, for example, some employers have reported providing a Risk Allowance to their staff during times of conflict. Such steps go a long way towards ensuring loyalty and reducing undesirable turnover.
Employers can also take steps to assist staff with commuting to the office safely, and other security measures. Work from home options are also helpful when it is too dangerous to travel to the office.
Even though declining oil prices are impacting the region’s economy, the World Bank reports that the private sector is hoped to become the backbone of a new growth model in the Middle East, especially when effective policies are able to address security conditions and long-standing conflicts that currently upset business sentiment. As the economy recovers, the market will soon catch up, and salaries will increase more rapidly.
Birches Group provides updated, concise, and easy-to-digest labor market data reflective of the actual market conditions on which you can base your decisions. Using a cost-of-labor approach, our data allows you to monitor market movement over short- and long-term periods. Our surveys are updated three times a year, in April, July and October, providing a current window to market practice on a continuous basis.
To find out more about the conditions in countries mentioned in this article, or to learn more about Birches Group surveys throughout the developing world, please contact us.
Warren joined Birches Group in New York as a partner in 2007, following a long career in Compensation and Benefits at Colgate-Palmolive. He held the position of Director, International Compensation for 10 years immediately prior to joining Birches Group. Warren has broad experience working across the globe with clients on local national and expatriate compensation projects. He leads our Business Development and Client Services teams and manages our strategic partnerships around the world. Warren previously held leadership positions for the Expatriate Management Committee of the National Foreign Trade Council and was president of the Latin America Compensation and Benefits Forum.