Month: November 2023

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WHY ORGANIZATIONS SHOULD OUTSOURCE THEIR SALARY SCALE DESIGN

Written by Kai Donesa on . Posted in Resources.

Organizations are beginning to recognize that the key to attracting and retaining top talent hinges heavily on a strategic, fair, and competitive salary scale. Yet, tailoring this structure to your unique needs can be complex.

Do you have the tools to properly analyze labor market data? Can your human resources (HR) team maintain the salary scale annually, in addition to addressing other responsibilities? Is there a way to design and update your salary scale more efficiently? This is where outsourcing is necessary.

Outsourcing the design and maintenance of your salary scale unburdens you and your HR team from this intricate task, allowing you to focus on your core business operations. Handing this responsibility over to more experienced professionals does not only save time; it ensures that your salary scale aligns with your strategic goals, global policies, market trends, and industry standards.

This article discusses why organizations should consider outsourcing the design and maintenance of their salary scale. We will explore how this pragmatic move can help you, from gaining expert advice to ensuring market alignment. If you’ve been second-guessing whether you need to outsource your salary scale design, our insights might be what you need to make an informed decision.

Understanding salary scale design

Your salary scale is the single most important document in HR. The structure determines how much an employee will be paid based on their role, their value for experience at each grade level, and the difference between one grade level to the next. It tells your stakeholders everything they need to know about your organization, including:

  • How you position yourself in the market
  • What value you place on your jobs
  • How you manage relationships across jobs
  • What are the possible career progressions
  • Where you stand on equity and transparency

A well-balanced salary scale is crucial for your people to work efficiently and achieve team cohesion. Your salary scale drives all other HR programs, including recruitment, staff retention, promotion, and career development.

Designing the scale is not only about deciding how much to pay an employee or listing pay grades. It is driven by building a fair and equitable compensation structure that shows how you attract and retain talent, as well as motivate staff. It involves balancing internal considerations and team dynamics with the external market.

However, designing and updating your salary scale requires a deep understanding of your business strategy, a thorough knowledge of the labor market, and keen insight into the motivations and expectations of staff. These tasks demand a high level of skill, expertise, and experience.

Why it’s essential to have a well-designed salary scale

A well-designed salary scale establishes a framework for determining staff compensation and sets the standard for pay equity within your organization. It also helps ensure employees are rewarded fairly, boosting morale and motivation.

Your salary scale also serves as a roadmap for career progression, giving staff a clear idea of what they can expect as they advance. This transparency can help foster trust and loyalty among staff, leading to increased job satisfaction and lower turnover rates.

Further, a well-designed and updated salary scale can help your organization attract and retain top talent. By offering competitive salaries in line with market rates, you can position your organization as an employer of choice.

Common challenges in designing a salary scale

Designing a salary scale is not without its challenges, though. One of the fundamental issues is determining the appropriate pay range for each grade level within your organization. This requires a thorough understanding of the job market and the ability to assess the value of each level accurately, carefully balancing your organization’s workforce needs and overall budget.

Another challenge is ensuring pay equity. This involves making sure employees are paid fairly for their work. Achieving pay equity can be complicated, especially in large organizations with a diverse workforce across labor markets.

Keeping the salary scale up to date is also a concern. The job market constantly evolves, and the value of specific roles can change rapidly. The salary scale must be updated every year to reflect market trends.

The benefits of outsourcing salary scale design

Outsourcing the design of your salary scale offers several advantages:

  1. First, it frees up valuable time and resources. Designing a salary scale requires a significant amount of time and expertise. By outsourcing this task, your HR team can focus on other vital projects, such as employee engagement and talent development.
  2. Second, outsourcing gives you access to expert knowledge and insights. An HR consultancy firm like Birches Group has a deeper understanding of labor markets across continents. Additionally, firms such as ours can share accurate and timely information about salary trends and benchmarks.
  3. Finally, outsourcing ensures fairness and objectivity. An external firm can design a salary scale free of internal biases or conflicts of interest.

Case study: Elizabeth Glaser Pediatric AIDS Foundation

To illustrate the benefits of outsourcing your salary scale design and maintenance, let’s consider the case of the Elizabeth Glaser Pediatric AIDS Foundation (EGPAF), a nonprofit organization supporting activities in 19 countries. EGPAF had a centralized salary system but needed to ensure its salary scales kept up with the market, especially in Africa.

EGPAF tapped us to design its salary scale over several years. Doing so refined the nonprofit’s salary scales with a view closer to the local setting. We then looked at each African location, improving EGPAF’s pay structures and systems based on our NGO Surveys. Based on their budget, we developed three different salary scale options for each country.

As a result, EGPAF can now:

  • Name which comparators are relevant to them based on consistent comparator criteria developed for their salary scale review, and which scale design approach best addressed its internal compensation issues, all while staying within budget.
  • Get a more precise snapshot of the labor market through our salary survey data.
  • Anticipate and be better equipped when sudden changes in the market occur.

This case illustrates the significant benefits that can be gained from outsourcing your salary scale design.

How Birches Group can help you design and update your salary scale

Creating and maintaining a salary scale is a technical and creative process best left to specialists. If you’re considering developing or updating your organization’s salary scale, we at Birches Group are here to help. With our team of experienced professionals, we can provide salary scale options tailored to your needs.

We have extensive expertise in adapting or creating salary structures through our work with many clients from the public and private sectors. We believe proper salary scale design must be tailored to your needs and culture, as well as your compensation philosophy, market position, and budget. A well-designed salary scale must also align with the local market and adhere to corporate policy and compensation goals.

If you’re ready to learn more about how we can design and maintain your salary scale, contact us today.

Carla is a part-time copywriter in our marketing team in Manila. Before shifting to freelance writing in 2020, she worked as a marketing and communications specialist at the offices of EY and Grant Thornton. She has written about HR and career development for Kalibrr. 

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Argentina's Peso Crisis

Navigating Volatility: A Closer Look at Argentina’s Peso Crisis

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor market trends making headlines worldwide, ensuring you are updated on the latest developments.

On 14 August 2023, the Argentine government took the bold step of hiking interest rates and decreasing the value of its currency. This intervention came a day after the country’s primary elections, adding a layer of uncertainty and volatility to Argentina’s economic landscape.

Unexpected timing

After far-right and anti-establishment candidate Javier Milei obtained the most votes, the results sparked a sell-off of the Argentine peso, shares, and bonds. Anticipating a market backlash, the Banco Central de la Republica Argentina (BCRA) devalued its currency by 20% (to AR$350 per dollar) to reassure jittery investors. The Buenos Aires Timesreports that the devaluation was the largest in a single day since December 2015. The BCRA said the move would help cushion “exchange rate expectations and minimize the repercussion on prices.”

The BCRA added that the peso would be held at AR$350 per dollar until the general elections in October. But many news outlets and think tanks say the devaluation leaves the official exchange rate far from the parallel market rate, which is AR$690 per dollar.

Reuters cites that the financial markets had been betting on a solid performance by a more moderate political candidate. Bloomberg reports that Milei, a representative and economist, supports dollarizing the economy. Riding on a wave of popular discontent, Milei has also called to liberalize the economy, vowed to abolish the central bank, and advocated for sharp spending cuts.

“Investors like Milei’s economic message but fear the execution and institutional risk, considering his lack of power and aggressive style,” a chief Argentina strategist at a financial services company told Bloomberg. “Milei represents uncertainty,” a fixed-income strategist at an investment management firm shared.

With negative international reserves, inflation at over 120%, poverty at 40%, and tight capital controls among its many economic woes, Argentina faces fresh uncertainty ahead of the October elections.

Argentines feel the impact

The recent drop in the peso’s value has affected ordinary Argentines, worsening already high inflation and making everyday life more challenging. The prices of essentials have skyrocketed, putting a strain on household budgets. In fact, consumer goods companies have increased their prices by nearly 10%, further stretching purchasing power.

To make matters worse, supermarkets have confirmed that the supply of goods has been disrupted, making it harder for people to find and afford the necessities they rely on.

Additionally, the devaluation of the peso is expected to have a ripple effect on gas prices, as oil companies expect their costs to rise. This means that Argentines will also face higher prices for transportation and utilities.

Due to economic hardship, the savings of many Argentines have further eroded. The cost of living has reached crisis levels, making it increasingly difficult for people to meet their basic needs. There are concerns that, if the situation worsens, the country could face hyperinflation.

What our Market Monitor says

Our Market Monitor report offers a sobering analysis:

1 January to 1 June 2023. During the first half of the year, Argentina alternated between Levels Two and Three (out of six levels of volatility), with an average exchange rate movement of 39.9%. Level Two shows dynamic market conditions and an exchange rate movement of over 20% in the past six months. On the other hand, Level Three shows rapidly evolving market conditions and an exchange rate movement of over 40% in the past six months.

15 June to 15 August 2023. From 15 June to 15 August, Argentina climbed to Level Three with an average exchange rate movement of 44.8%.

1 September onwards. Beginning on 1 September, Argentina’s level of volatility rose to Level Four. This level of volatility reflects a sudden, unexpected social or economic event (i.e., the peso devaluation, among other factors) or a currency devaluation of at least 50% in six months. In the case of Argentina, the exchange rate moved by 74.4%.

Our latest salary surveys report that many organizations still denominate salaries in Argentine pesos, keeping the South American country at Level Four.

How Birches Group can help

Argentina’s peso crisis underlines the importance of developing a Special Measures Policy in response to economic instability. Such policies can help protect your organization and employees from economic shocks.

If your organization grapples with the effects of market volatility and needs help formulating a clear Special Measures Policy, our consultants are here to assist you. With their extensive experience and in-depth understanding of emerging labor markets like Argentina, they can provide you with the tools and advice you need to navigate these uncertain times.

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