A diverse group of four people gathers around a laptop in an office setting, smiling and engaged. One woman uses a wheelchair. Plants and office supplies are visible in the background. Workplace Equity

EQUITY IN ACTION: ENSURE FAIRNESS ACROSS HR

Written by Noel Madolid on . Posted in Resources.

We’ve all heard the buzzwords: diversity, equity, inclusion. But how many organizations walk the walk when it comes to equity in managing their organization? It’s time to move beyond theoretical discussions and translate those well-intentioned conversations into concrete actions. 

Our “Equity in Action” series explored the building blocks of a truly equitable workplace, from establishing the equivalent worth of jobs and developing a grading structure to utilizing salary surveys and implementing a salary scale and fair pay management mechanisms. In this final installment, we’ll share how your organization can embed equity into every facet of its HR program, whether it’s recruiting new talent or planning for your successors.  

The key is a unified and objective approach to assessing employee skills and capabilities throughout the entire employee lifecycle. Think of standardized processes, clear metrics, and tools that evaluate employees based on their work. This blog post will share how you can integrate equity into your HR functions, ensuring fairness in every stage of a staff member’s journey. 

The challenge of subjectivity and flexibility 

For far too long, HR processes have been marred by subjective assessments. This approach not only hampers the quest for equality but also exacerbates inequality when each HR function is handled on a case-by-case basis. 

Are performance evaluations based on objective criteria, or are some staff members given more leeway than others? Is career advancement based solely on merit and potential, or do personal relationships and “gut feelings” come into play? Are all employees given equal access to training and development programs, or are specific individuals favored? 

These subjective and flexible approaches can create an uneven playing field, where some staff members are inadvertently given an advantage while others are held back. 

To counteract this, organizations need to shift toward a standardized, objective, and consistent approach to evaluating skills and competencies. This involves: 

  • Establishing clear criteria and metrics. Define what success looks like for each grade level and use these objective measures to assess their contributions and performance. 
  • Implementing standardized evaluation processes. Use the same tools and framework for all staff members in similar roles to ensure consistency and fairness. 
  • Providing regular and transparent feedback. Give staff members clear, actionable feedback based on objective data to help them understand their strengths and areas for development. 

By removing subjectivity and flexibility and, more importantly, embracing a more standardized approach, organizations can create a more equitable workplace where all employees are judged on their skills and work output and have a fair chance of succeeding. 

Birches Group’s five-step approach to achieving equity 

In our first post in this “Equity in Action” series, we introduced Birches Group’s five-step approach to achieving equity in compensation management. We highlighted the urgent need for organizations to move beyond discussions and take concrete action to address inequities in their compensation structures.  

Building on this framework, we examine how this integrated approach can be applied across all HR functions, creating an equitable workplace where every process— from recruitment to succession planning—is grounded in the principle of establishing the equivalent worth of each job within your organization. By minimizing the influence of personal biases at every HR function, we can ensure a level playing field for all staff. 

This integrated approach, as we discussed in the first post, offers a multitude of benefits that can transform your organization: 

  • It reduces bias and increases fairness by relying on objective criteria, thus minimizing the impact of unconscious bias and ensuring all employees are treated equitably.  
  • This approach also enhances transparency and trust. Clear, consistent processes foster transparency and build trust between employees and the organization. 
  • Furthermore, standardized processes streamline HR operations and free up resources for strategic initiatives, improving efficiency and effectiveness.  
  • Finally, objective data offers valuable insights into workforce trends and enables informed, data-driven decision-making. 

However, we understand that bridging the gap between the theoretical ideals of equity and real-world implementation can be challenging. Organizations often encounter obstacles like bias creeping into decision-making despite best intentions, vague criteria making it difficult to assess staff members objectively and consistently, and inconsistent processes leading to unfair treatment. 

To overcome these challenges, we encourage you to conduct an equity assessment and evaluate your current HR policies and practices critically. Ask yourself these questions: 

  • Does the candidate’s skill level determine your starting salaries, or are they influenced by factors like negotiation skills or salary history?  
  • Are your performance reviews based on clear, measurable metrics based on the expectations of the job, or are they prone to subjectivity and bias?  
  • Are your promotion criteria transparent and consistently applied, or are they open to interpretation?  
  • Does your compensation structure reflect the value of each grade level, or are there unexplained pay gaps?  

These are areas where most of the inequities and inconsistencies begin. 

An integrated framework and tool, like Birches Group’s CommunityTM platform, can be especially invaluable.  

It provides standardized processes to ensure consistency and fairness across all HR functions. Additionally, CommunityTM presents clear metrics to deliver objective measures of skills, competencies, and performance.  

By reducing reliance on subjective judgment, your organization can minimize the impact of bias and promote data-driven decision-making. This creates a truly equitable workplace where all employees are empowered to reach their full potential. 

Applying the approach across HR 

Let’s explore how our integrated approach to achieving equity can be applied across various HR functions: 

Recruitment 

Imagine a recruitment process where every decision is rooted in the defined skills profile of the job. This means targeting your recruitment efforts to attract candidates with the specific skills and competencies needed for the role, ensuring a diverse pool of qualified applicants. It also means using standardized assessments to evaluate each candidate’s skills and abilities, eliminating bias and ensuring that hiring decisions are based solely on knowledge and experience.  

Finally, it involves determining starting salaries based on demonstrated skill level within the respective pay range of the job, eliminating the need for salary negotiations and ensuring pay equity from day one. 

Pay movement 

With an integrated approach, pay increases become a transparent and objective process. Salary adjustments are tied to clearly defined skills growth and contributions, ensuring all staff members are rewarded fairly for their development. Clear criteria are established for salary adjustments, such as acquiring new skills, taking on increased responsibilities leading to bigger contributions, reducing the potential for pay gaps, and ensuring that pay decisions are data-driven. 

Learning & development 

Our approach transforms learning & development from a generic offering to a targeted investment in employee growth. It starts with using objective skills assessments to identify individual skill gaps and development needs, enabling personalized learning journeys.  

Then, staff members work on their personal learning & development assignments specifically tailored to address those identified needs either deeper into the role or work toward the next higher grade level, maximizing employee growth and engagement. This fosters a culture of continuous learning & development, where staff are encouraged to acquire new skills and advance their careers.  

Furthermore, our approach promotes shared responsibility between managers and employees for development, with managers actively supporting their team members’ growth by providing/identifying opportunities and staff taking ownership of their learning journey. 

Succession planning 

Organizations can build a strong leadership pipeline by applying an objective lens to succession planning. Standardized criteria assess employees’ readiness for promotion, ensuring that advancement decisions are based on merit and potential, not favoritism.  

Clear succession pathways and policies are established based on skills and competencies, providing staff members with a roadmap for career progression. This cultivates a talented pool of future leaders, ensuring the long-term sustainability of your organization.  

How CommunityTM can support your equity journey   

Putting these principles into practice may seem daunting, but Birches Group’s CommunityTM framework and tool can seamlessly guide your organization through the five-step approach from start to finish. This integrated platform provides the structure and resources you need to operationalize equity across all your HR processes. 

CommunityTM offers a range of solutions designed to support your equity journey: 

  • Centralized skills data. CommunityTM presents a central hub for managing all your skills data, enabling you to create a comprehensive skills inventory for your workforce and track staff skills development over time. This centralized system ensures that everyone is assessed against the same objective criteria. 
  • Objective assessment tools. With built-in assessment tools that utilize the same consistent framework, CommunityTM helps you evaluate skills and competencies objectively, minimizing bias and ensuring fair treatment.  
  • Data-driven insights. CommunityTM generates powerful data-driven insights that inform your decision-making across all HR functions. Identify skill gaps, track pay equity progress, and analyze workforce trends to make informed decisions that promote fairness and transparency. 
  • Support for key HR functions. CommunityTM offers the tools and resources to embed equity into every stage of the employee lifecycle, from recruitment and pay movement to learning & development and succession planning. 

By leveraging the power of CommunityTM, your organization can move beyond theoretical discussions of equity and take concrete action to build a fair workplace. With its integrated approach, objective assessment tools, and data-driven insights, Community™ empowers you to create an organization where every employee can thrive. 

What about performance? 

At this point, you might be wondering: “This all sounds great, but where does performance fit into this approach?” 

While our focus has been on building a foundation of equity through skills and competencies, we understand that performance is still a critical factor in employee development and motivation. Assessing skills and rewarding performance are separate but related pieces of the puzzle in retaining and motivating your workforce.  

Think of it this way: skills represent an individual’s growth in knowledge and experience, while performance reflects how effectively they use those skills to achieve results. Both are essential for a thriving organization. 

CommunityTM addresses this with a robust performance management system that offers a simple but comprehensive view of staff performance. This platform allows you to provide 360° feedback from various internal and external stakeholders. In addition, CommunityTM enables your organization to acknowledge and reward staff for their contributions, celebrating both those who meet expectations and those who exceed them, fostering a culture of appreciation and broad staff motivation.  

It’s important to emphasize that performance should be assessed solely for rewarding achievement. It should not be a factor in determining a staff member’s pay increase or promotion eligibility, as those decisions should be grounded in skills assessment. 

By keeping this distinction, you can ensure that your performance management system serves its purpose: to motivate employees and reward their contributions.  

Get in touch with Birches Group 

Achieving true equity across your HR processes requires a commitment to objectivity, transparency, and a unified approach. It demands a shift from ad-hoc arrangements to standardized processes, from subjective judgments to data-driven decisions. 

Birches Group is your trusted partner in navigating this journey. Our proven five-step approach and the CommunityTM platform provide the framework and tools you need to operationalize equity across your organization. 

Ready to create a workplace where every employee has a fair chance to thrive? Contact Birches Group today. Our team of experts is prepared to offer the guidance and support you need to make equity a reality. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

A woman in a polka dot shirt is sitting at a desk, using a laptop, with a cup nearby.

WHY GETTING PAY AND BENEFITS RIGHT IS CRUCIAL FOR NGOs

Written by Bianca Valencia on . Posted in Resources.

Managing a workforce, especially compensation, presents significant challenges for many non-governmental organizations (NGOs). Unlike the private sector, many NGOs trail behind in having an established compensation philosophy and program. This gap hinders the ability of organizations to attract and retain the skilled staff necessary to achieve their mission, particularly in competitive labor markets like the United Kingdom (UK). 

Despite the desire to offer competitive pay and benefits, NGOs—particularly those reliant on government or donor funding—are under scrutiny to demonstrate good value. This kind of scrutiny requires responsible compensation management, not only for core jobs working in head offices but also for program staff operating in the field. Salaries must be set objectively based on the cost of labor rather than ad hoc or solely on the cost of living. 

To overcome this, NGOs must prioritize an integrated compensation approach. Competitive salaries and benefits packages help NGOs attract and retain skilled individuals passionate about their cause. 

This blog post explores the importance of equitable pay and benefits strategies that attract and retain talent, drive success, and maximize your NGO’s impact. 

The competitive NGO landscape

The UK’s NGO sector is highly competitive for talent. Skilled professionals, from program managers to fundraisers, have many organizations to choose from. NGOs must remain competitive, as these professionals are naturally drawn to organizations offering competitive compensation and benefits and demonstrating a strong alignment with their values. 

In this environment, NGOs can’t afford to lag. Pay equity and transparency are not just buzzwords but essential for recruitment and retention. Today’s workforce is increasingly aware of pay disparities and seeks employers who prioritize fair treatment and equal opportunities. Salary benchmarking plays a critical role in demonstrating this commitment. 

To attract and retain skilled talent, NGOs need to base compensation on the cost of labor in the market and benchmark against jobs of equivalent value. This approach ensures competitive salaries that reflect the true value employees bring to the organization. airness but motivates staff to develop their skills and contribute meaningfully. 

The significance of salary surveys

Salary surveys are invaluable for NGOs, ensuring they offer competitive and fair compensation. Such surveys provide objective, comprehensive data on market rates for comparable roles, enabling informed decisions about pay and benefits. Here is why they’re a helpful addition to your HR toolkit: 

  • Objective benchmarking. Salary surveys enable NGOs to compare their compensation packages against jobs of equivalent value in the market, ensuring competitive salaries that attract and retain talent. 
  • Defensible compensation. Data from salary surveys allows NGOs to justify salary decisions to staff, management, and donors, promoting transparency and accountability. 
  • Market insights. Salary surveys provide a broader market view than internal data, offering insights into emerging trends, regional variations, and sector-specific compensation. 
  • Gap analysis. Participating in salary surveys reveals areas where compensation may fall behind, including hiring rates, competitive salaries for specific grade levels, benefits, and more. 
  • Benefits competitiveness. Surveys like those from Birches Group often include data on benefits, allowing NGOs to assess their offerings and make necessary adjustments. 
  • Compliance with market practices. Using salary surveys helps NGOs align with sectoral standards and legal requirements. 
  • Proactive budgeting. Salary surveys help NGOs anticipate salary expenses and plan budgets effectively, ensuring financial sustainability. 
  • Trend analysis. Tracking salary data over time allows NGOs to stay ahead of changing market trends and adjust compensation strategies accordingly. 

Salary surveys provide a comprehensive and objective market view that your organization couldn’t easily obtain independently. They offer insights into gaps between your target position and the market, the competitiveness of your benefits, and adherence to best market practices. Salary surveys help you stay ahead of trends and assist with budgeting for your organization’s biggest expense—salaries. 

Final thoughts

In the NGO sector, getting pay and benefits right is paramount for attracting and retaining individuals who drive meaningful change. Prioritizing compensation allows teams to maximize their impact.

Take the first step: Assess your current compensation program, benchmark against sectoral standards using reliable salary surveys, and seek expert guidance. Birches Group provides NGOs with the most comprehensive compensation and benefits surveys dedicated to the development sector, including accurate and consistent job matching, salary data captured by grade level, and extensive benefits information.

We offer tailored compensation and benefits solutions to help your organization attract, retain, and empower talent worldwide. Contact your representative at Bond to learn how you can participate and access our surveys. Investing in your people is an investment in your mission, ensuring long-term sustainability and effectiveness in addressing critical social challenges.

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

EQUITY IN ACTION: IMPLEMENT FAIR PAY MANAGEMENT MECHANISMS

Written by Noel Madolid on . Posted in Resources.

In pursuing workplace equity, we’ve examined the critical steps: establishing equivalent worth, developing a job grading structure, utilizing comprehensive salary surveys, and implementing a well-defined salary scale. These foundational elements create the framework for fair pay. 

But the journey continues. Transitioning from establishing the framework to actively managing pay is where equity flourishes. 

It’s time to take the final step: implementing fair pay management mechanisms. This ongoing process ensures that your meticulously crafted pay structure remains relevant and equitable long-term. Without equitable management, even the most robust compensation program can falter, leading to pay disparities and inequities. 

This post examines the essential mechanisms for ongoing pay management, empowering your organization to cultivate a genuinely equitable and fair workplace. 

Why traditional pay progression fails to achieve equity 

Pay management mechanisms are the processes and policies that govern how your people move through your established salary ranges. They drive your compensation program, ensuring ongoing equity within your organization. 

However, traditional approaches to pay progression often miss the mark when it comes to fairness. Why? Let’s examine two common methods: 

  • Time-based steps. While clear, predictable, and easy to administer, this approach suffers from a critical flaw: everyone receives an increase regardless of performance. Someone exceeding expectations gets the same raise as someone barely meeting minimum standards. This can be incredibly demotivating for high performers and fails to recognize individual growth. 
  • Pay-for-performance or merit increases. This method aims to reward top performers with higher raises, but it, too, often falls short. Pay increases are frequently too small to truly differentiate meaningfully between performance levels. Additionally, basing salary adjustments solely on annual performance reviews is problematic. Performance can fluctuate year to year, meaning a one-time “good” year can lead to a permanent salary increase, even if performance later declines. 

Both approaches fail to create a truly equitable pay structure, lacking the flexibility and nuance to accurately recognize individual contributions and growth. This can lead to pay gaps, dissatisfaction and, ultimately, a less equitable workplace. 

To create a truly equitable pay system, organizations must move beyond outdated models and explore more objective, transparent, and equitable approaches to pay progression. 

A truly equitable pay management system hinges on transparency and clearly defined criteria for progression. This means establishing a clear and consistent pathway for employees to advance through the salary scale based on objective measures such as skills, competencies, and contributions aligned with their jobs and the organization’s mission. 

Think of it like a roadmap. Every employee should understand the route to progress within their role and have equal opportunity to reach their career goals. This fosters a sense of fairness but motivates staff to develop their skills and contribute meaningfully. 

Developing a system for staff progression through the salary scale 

Creating a transparent and fair system for salary progression is imperative for fostering a culture of equity. Here are key strategies to achieve this: 

Skills-based progression 

Implement a framework that objectively measures staff skills, linking it directly to pay progression. This means clearly defining the skills and competencies required at each level of the salary range and using standardized assessments to measure employee skills against these levels. Be transparent about how acquiring new skills or demonstrating increased expertise translates to salary increases or promotions. This approach ensures that pay progression is tied to tangible growth and development. 

Regular reviews and updates 

The market and your organization are constantly evolving. Regularly review and update your salary structure and progression system to demonstrate a commitment to fair pay. This allows you to maintain market competitiveness, address any internal pay disparities that may arise, and provide opportunities for employees to move through the salary range based on the growth of their skills and the impact of their contributions. 

Benefits of a structured progression system 

But why go to all this effort? Because a well-structured approach to pay movement offers significant benefits for both your staff and your organization. 

  • Increased transparency and trust. Employees understand how pay decisions are made, fostering a sense of fairness and trust in the organization. 
  • Enhanced motivation and engagement. Clear pathways for advancement motivate employees to invest in their development and contribute their best work. 
  • Reduced pay disparities and improved retention. Objective criteria minimize the risk of bias and discrimination in pay decisions, promoting equity and increasing employee satisfaction. 

How Birches Group’s Community™ Skills can help 

Developing and implementing fair pay management mechanisms can be challenging. But your HR team doesn’t have to go on this journey alone. 

At Birches Group, we believe that pay movement should be tied to the development and growth of staff’s skills and experience. As employees gain experience, they develop a deeper understanding of their role and accumulate the skills needed to help them be more effective and produce higher-quality work.  

Birches Group Community™ Skills provides a way to measure this experience. Organizations can use our framework and tool to structure their compensation systems, rewarding employees for growth and development within their roles, rather than solely relying on performance metrics. Organizations can link their compensation administration to the progression of skills in any number of ways, from assessing and setting the appropriate starting salary based purely on candidates’ skill levels during recruitment to managing pay movement within the salary range and tailoring learning and development assignments to guide staff development and career pathing. 

Contact Birches Group today 

Implementing fair pay management mechanisms and a structured progression system is not about ticking boxes. It’s about fostering a workplace where every employee feels valued, recognized, and rewarded fairly. By embracing the five-step approach to workplace equity, your organization can create a culture of transparency, trust, and opportunity. 

We understand that this journey can be complex. That’s why we encourage you to seek guidance from experts who can help you navigate the intricacies of building an equitable compensation program. 

Is your organization ready to achieve workplace equity? Contact Birches Group today. Our team of experienced consultants can provide the expertise and support you need. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

Equity in Action: Implement a Salary Scale

EQUITY IN ACTION: IMPLEMENT A SALARY SCALE

Written by Noel Madolid on . Posted in Resources.

Welcome back to our series on workplace equity! In our previous blog posts, we explored the foundational steps toward achieving a fair and equitable work environment, from establishing equivalent worth and developing a grading structure to utilizing salary surveys. We emphasized the importance of transparency and communication in building trust with your staff. 

Now, it’s time to take the next significant step in your equity journey: implementing a salary scale. While establishing clear job grades and salary ranges is essential, it’s only the beginning. A salary scale provides a structured framework for your compensation, ensuring consistent and fair pay across your organization. It acts as a roadmap for staff progression within those ranges, ensuring that growth and compensation are aligned in a way that’s both fair and motivating.  

In this post, we’ll discuss how implementing a well-defined salary scale can be a vital tool in your equity journey. We’ll explore the benefits of having pay ranges, guide you through developing a salary scale that supports your equity goals, and offer practical tips for successful implementation. 

Why a salary scale matters 

The salary scale defines the minimum, midpoint, and maximum pay for each role within an organization. The salary scale is the most important document in human resources, providing valuable insights into the organization’s structure, job grading, and the value placed on different grade levels. The overlap between grades also illustrates how staff can progress through the ranks. 

Think of a salary scale as a roadmap for compensation. This roadmap guides both employers and employees, ensuring everyone understands the organization’s compensation philosophy and policy.  

For employers, a clearly defined salary scale offers numerous advantages, including: 

  1. Budgeting and forecasting. Salary scales facilitate accurate budgeting and forecasting by providing a clear picture of salary costs. This predictability allows for better financial planning and resource allocation. 
  1. Transparency and trust. With clearly defined pay ranges, organizations promote transparency and build trust with their employees. Everyone understands the compensation philosophy and how their pay is determined, reducing the potential for confusion or resentment. 
  1. Legal compliance. Having a salary scale ensures compliance with equal pay regulations and lessens the chances of pay discrimination. By establishing clear criteria for pay, organizations minimize legal risks and promote fair treatment. 
  1. Talent attraction and retention. A competitive salary scale helps to attract talent and retain existing staff. When employees know their employer is ensuring their compensation is fair and competitive, they are more likely to stay with the organization and contribute to its success. 
  1. Pay movement based on skills growth. As staff develop their abilities and expertise, their value and contributions to the organization increase, and their compensation can reflect that growth. This framework ensures fairness and equity by recognizing employees for continuously improving and developing within their roles. 

Salary scales also provide significant value for employees: 

  1. Clarity and understanding. Employees gain a clear understanding of the salary range for their role and how their pay is determined. This transparency fosters trust in the compensation strategy. 
  1. Fairness and equity. A structured salary scale ensures pay is based on objective criteria, such as the equivalent worth of the job (job evaluation) and referencing external labor market conditions (salary benchmarking). This helps eliminate biases and promotes a sense of fairness. 
  1. Career growth. Salary scales provide a roadmap for career progression. Employees can see the potential for salary increases as they gain experience deeper into the range, or take on a higher level of responsibility and scope and advance within the organization. 
  1. Motivation. Knowing their pay is linked to skills growth motivates staff to perform well, seek development opportunities, and improve their capabilities. 
  1. Organizational culture. A structured pay scale provides employees with a sense of security and stability. 

Developing an equitable salary scale 

Developing an effective and equitable salary scale requires careful planning and execution. It involves creating a tool that reflects your organization’s values, ensures internal cohesion, and remains competitive within the labor market. Here are the key steps: 

  1. Establish a job structure. A clear job structure shows how jobs are organized and ranked based on their purpose, scope, and placement within the organization. 
  1. Develop a compensation philosophy. Your compensation philosophy outlines your approach to choosing comparable organizations, setting your desired market position (lead, match, or lag), and benefits package. 
  1. Benchmark salaries against the market. Assess your organization’s competitiveness by benchmarking your jobs against similar grade levels in the labor market. This step involves comparing your internal pay grades and salaries for specific roles with those offered by similar organizations. 
  1. Define your composition and position. Define your target market position and the criteria for selecting your target comparator organizations. 
  1. Tailor job levels. Adopt a tailored approach that reflects expectations around employment and opportunities for each job level. 
  1. Design your compensation package from a ‘total compensation’ perspective. In most markets around the world, especially in developing markets, benefits make up a significant portion of compensation. To truly be competitive in the markets you’re trying to reach, analyze your total compensation package to include cash and in-kind benefits that are common practice in those markets. Consider locally mandated benefits, market practices, and benefits that promote desirable behaviors. 

Implementing and maintaining your salary scale 

Now that you’ve developed your salary scale, the next step is to communicate your analysis to management and prepare to communicate the changes to your staff. 

Laying the foundation 

Before introducing the salary scale, it’s best to establish solid groundwork. Laying the foundation for your salary scale includes taking the following measures: 

  • Secure management buy-in. Clearly articulate the rationale behind having an up-to-date salary scale. Highlight the issues it can address, such as pay inequities, challenges in attracting talent, and potential legal risks. Underscore how the salary scale will contribute to a more equitable and competitive compensation structure, ultimately benefiting the organization as a whole. 
  • Establish a robust job evaluation process. Ensure that your job evaluation process is in place before developing your salary scale, as it provides the basis for slotting jobs accurately within the structure. 
  • Ensure transparency. Openly communicate how the new salary scale will be implemented. Outline the timelines, phasing plans, and any potential impact on existing compensation arrangements to manage expectations.  

Rolling out the scale 

Once the groundwork is laid, the focus shifts to effectively rolling out the new scale and ensuring its smooth integration into your compensation strategy: 

  • Equip managers for effective communication. Managers play an important role in communicating the changes to their teams. Provide them with the necessary resources, such as talking points, FAQs, and training on handling sensitive questions. Doing so will help ensure a smooth transition and minimize potential misunderstandings or concerns. 
  • Link skills growth with salary progression. Clearly define the link between growth in knowledge and experience and salary progression within the scale. Establish transparent expectations and criteria for advancement, ensuring employees understand how their growth in skills can influence their compensation growth. 

Maintaining and reviewing the scale 

Implementing your salary scale is not a “set it and forget it” exercise. Continuous maintenance and review are crucial to ensure its ongoing effectiveness and relevance. This ongoing process includes: 

  • Regular reviews and updates. Markets are dynamic, and your salary scale should be, too. Review and revise your scale annually to stay competitive. Consider factors such as labor market data and industry trends to ensure your compensation remains aligned with the labor market. 
  • Conducting pay equity audits. Regularly conduct pay equity audits to identify and address any potential gaps or inconsistencies within the salary scale. This should be a continuing process to ensure the scale remains fair, effective, and compliant. 

Partner with the experts at Birches Group 

Developing, rolling out, and maintaining your salary scale can be complex. While the tips and best practices outlined above provide a solid starting point, navigating the intricacies of compensation management often requires specialized expertise. This is particularly true when it comes to implementing fair pay management mechanisms, which is the focus of our final blog post in our Equity in Action series. 

Successfully integrating fair pay practices into your compensation strategy calls for a deep understanding of legal frameworks, labor market dynamics, and ethical considerations. This is where partnering with experienced compensation professionals can make all the difference. 

Our team of experts specializes in: 

  • Pay equity audits. We conduct comprehensive audits to identify and address any gender, race, or other pay gaps, ensuring your organization meets legal requirements and promotes fairness. 
  • Salary scale design. We design robust and competitive salary structures tailored to your organization’s needs and market benchmarks. 
  • Compensation strategy consulting: We provide guidance on developing and implementing effective compensation strategies. 

Birches Group’s consultants have years of experience designing salary scales for different types of organizations. Download our comprehensive e-book, Strategy, Structure, and Synthesis, to learn more.  

Ready to create a fair and equitable compensation program? Contact Birches Group today for a strategy consultation. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

A person reviews charts and graphs on paper, seated at a glass table with a laptop and a notebook.

EQUITY IN ACTION: UTILIZE SALARY SURVEYS

Written by Noel Madolid on . Posted in Resources.

In our ongoing blog series on workplace equity, we’ve explored the importance of fair and just compensation practices. We’ve discussed equity, which means paying employees fairly based on their skills and contributions. We’ve introduced a five-step framework for achieving equity. This framework highlights the significance of establishing equivalent worth in developing a grading structure.

However, achieving workplace equity goes beyond internal alignment. It’s about ensuring that your organization’s compensation is competitive within the labor market. This is where salary surveys become valuable.

Building the foundation with a consistent approach

To make sure you’re paying your employees fairly, we recommend using a consistent approach to evaluating jobs. It is best to implement a job evaluation methodology that aligns with the job matching applied in the salary survey.

Many organizations use a job evaluation approach that differs from what was applied in the surveys they use. But doing so makes it difficult to ensure the accuracy of the survey results, which could impact how pay is managed.

The role of salary surveys in workplace equity

Salary surveys offer a window into the labor market, providing insights into current compensation trends and benchmarks. Using salary survey data, organizations can ensure fair pay that is aligned with the market.

These surveys are comprehensive reports that collect and analyze data on compensation practices across a range of jobs, sectors, and geographical locations. The data includes details about base salaries, bonuses, cash and in-kind benefits, and non-salary and after- service benefits.

By providing an objective, real-time snapshot of prevailing market rates, salary surveys enable organizations to  

  • Evaluate internal pay structures against the labor market and identify potential pay gaps.
  • Understand the market forces influencing compensation, enabling informed decisions about pay practices.
  • Offer competitive compensation packages that attract and retain talent, as well as align with their Employment Value Proposition (EVP).

Ultimately, salary surveys help inform organizations in developing their compensation strategies that foster equity and support their overall objectives.

Aligning salary surveys with internal grading structures

In previous blog posts, we discussed how grading structures—categorizing jobs based on value and complexity— establish consistent pay practices within your organization. Each job grade within this structure is associated with a specific salary range.

Salary survey data is critical in informing the design and ongoing update of these structures. By referring to labor market data, your organization ensures that its compensation remains aligned with prevailing trends, essential for promoting equity.

Utilizing salary surveys to inform pay ranges

Once you have aligned your job grades with the market, use survey data to inform your organization’s compensation strategies for establishing appropriate pay ranges for each grade. These pay ranges typically include a minimum, midpoint, and maximum.

When setting pay ranges, consider:

  1. Target market position. What is your organization’s desired percentile ranking compared to the market?
  2. Target market composition. With which specific sectors and organizations does your organization compete for talent?

Because the labor market evolves, your organization needs to regularly review and update these pay ranges based on the latest market data. This ensures your compensation packages remain competitive and attractive.

Best practices for utilizing salary surveys

Selecting and using the right salary surveys is the key. Here are a few best practices to keep in mind:

  • Choose reputable and relevant surveys. To get good data, make sure the surveys use a good sample of employers in your target market and are done by credible organizations. Consider the survey methodology, job matching and data collection process, and the quality of comparators. Ensure the survey fully captures employer practices on salaries and benefits. This is especially important in developing markets where benefits can be a significant part of totalcompensation.
  • Analyze and interpret survey data carefully. Don’t just rely on the raw figures. Understand the data within the context of your organization’s specific needs and goals.
  • Use multiple surveys. To gain a broader perspective and validate your findings, relying on multiple salary surveys from different providers is often helpful.

Tapping Birches Group for labor market data

As we’ve seen, salary surveys are an indispensable tool for promoting equity in compensation. By making the most of salary survey data, organizations can determine if their pay practices are fair and aligned with the labor market.

At Birches Group, we offer comprehensive compensation consulting and salary survey data to help organizations achieve pay equity. Our team of experts can guide you through survey participation, data analysis, and the development of a compensation strategy that fosters equity and supports your organization’s goals. Contact us today to learn more.

Coming next

In the next installment of our Equity in Action series, we’ll walk through developing and implementing pay ranges. We’ll show you how to define and manage these ranges within your internal grading structure to help your organization achieve pay equity.

In the meantime, if you have any questions about workplace equity, please don’t hesitate to reach out to Birches Group. We’re here to support your journey toward a more equitable workplace.

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

EQUITY IN ACTION: DEVELOP A GRADING STRUCTURE 

Written by Noel Madolid on . Posted in Resources.

In our earlier blog articles on equity, we explored the foundational concepts of pay equity and transparency and the importance of job evaluation. Today, we’ll explore a practical tool that helps bring these principles to life: the grading structure.

A grading structure serves as the backbone of your compensation program. It systematically categorizes roles based on their responsibilities, skills, and value to the company. This clarity in roles and compensation levels not only ensures fair pay but also fosters transparency and trust within your workforce. 

The importance of role clarity before grading 

Before creating your grading structure, conducting a comprehensive job evaluation is imperative. The process involves analyzing each role within your organization to understand its distinct responsibilities, needed skills, and the value it brings to the organization. Well-defined roles are the building blocks of a fair and equitable grading system, preventing ambiguity, overlap, and potential pay disparities. 

Choosing the right grading structure model 

There are three types of grading structures, each with its own advantages and considerations: 

  1. Individual grade levels. This traditional, hierarchical system offers distinct levels for career progression, with promotions tied to skills growth and capacity development. While it can provide clear paths for advancement and is easier to manage, it may also create rigid structures where movement to the next grade requires an increase in salary. 
  1. Broad-banded grades. This approach features wider salary ranges and fewer levels, emphasizing lateral movement and skill broadening without necessarily increasing pay. It provides greater flexibility for employees to grow in skill or job level within the organization without focusing solely on climbing the ladder. 
A diagram illustrates a five-step salary grading structure, with each gradient-colored step labeled A to E, ascending from bottom left to top right, and a thick black arrow pointing upward.
  1. Project grade levels. This system is designed for organizations that need roles that have short lifespans to reflect the project timing without the possibility of promotion. A structure like this is only appropriate for project-based organizations with fixed-term contracts. Project-based structures often have higher minimums, reflecting the need for employers to reach experienced talent that can “hit the ground running.” 
A diagram with three rectangular blocks labeled A, B, and C. A is blue on the bottom left, B is green in the middle—the highest—and C is yellow on the top right, illustrating a clear salary grading structure.

At Birches Group, we primarily use a robust individual job-level system. Our years of experience in global human resources (HR) have allowed us to define 14 generic CommunityTM Job Levels. Each of the 14 levels, from BG-1 to BG-14, is expressed in milestones of contribution that show differences in depth and complexity. For an in-depth discussion on our 14 CommunityTM Job Levels, download a copy of our job evaluation e-book, Determining Equivalent Worth: The Simplest Approach to Job Evaluation. 

Defining your grade levels 

Once you’ve chosen a model, you can begin grouping roles with similar responsibilities, skills, and value into grade levels. 

The process of defining grade levels involves grouping roles with similar attributes. This ensures that employees with comparable responsibilities and skill sets are placed within the same grade, promoting fairness and transparency. 

Aligning job grades with your organization’s needs 

Your grading structure should reflect your organization’s mission, the relationship between each grade level, and how staff should move from one level to the next. It’s essential to review and adjust your structure every five or so years to keep it aligned with your evolving organization. 

The Birches Group framework 

Birches Group helps organizations create appropriate grading structures that align with their roles and future needs. Our framework is known for its clarity and simplicity, making it easy to create effective and fair grading structures.  

We offer various tools, resources, and consulting services to help you navigate this process and achieve your equity goals. Our grade structure design consulting service mainly focuses on existing roles in your organization, job progression, and the anticipation of more teams or positions to be added. 

Coming up next 

In our next blog post in the equity series, we’ll explore how to use salary surveys to ensure your compensation practices remain competitive and equitable.  

If you’re ready to take the next step in your equity journey, contact Birches Group today. We’re here to guide you through the process and help you build a workplace where everyone feels valued, recognized, and rewarded. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

equivalent worth

EQUITY IN ACTION: START BY ESTABLISHING EQUIVALENT WORTH

Written by Kai Donesa on . Posted in Resources.

In the first blog of our equity series, we showed that equity emphasizes fairness, consistency, and transparency in compensation. Now, we shift our focus to the practical steps organizations can take to translate the discussion surrounding equity into tangible action.  

Achieving equity in the workplace goes beyond good intentions and adhering to a set of principles. It hinges on establishing a clear, objective understanding of the equivalent worth of different jobs within your organization. This entails evaluating each role based on the purpose, responsibilities, and complexities inherent in the work. And that’s where the invaluable tool of job evaluation—a process for assessing and comparing jobs—comes in. 

The foundation: Job evaluation 

Job evaluation is a systematic process used to determine the equivalent worth of various jobs within an organization. It is the foundation for achieving equity. The process involves organizing and understanding the vast array of roles that make your company function, creating a clear picture of how they relate to each other.  

Why does job evaluation matter so much? Because it plays an essential role in establishing a fair and equitable workplace: 

  • Fair compensation. Job evaluation helps ensure employees are paid fairly for the work they do, based on the complexity, purpose, and responsibilities of their roles. 
  • Clear career progression. Clear career progression hinges on defining job hierarchies and relationships through job evaluation, which is critical for determining the appropriate job level. This establishes a transparent framework for career progression. Staff can then understand how their current roles fit into the bigger picture and can tailor a roadmap for the steps they can take to grow within your organization. 
  • Equity and fairness. Job evaluation helps identify potential equity issues, such as pay disparities between similar roles. A fair and equitable workplace recognizes employees who contribute and deliver more to their jobs and the organization. Staff who contribute more through their growth in skills and knowledge, even if they are in the same job grade, can be recognized through higher pay within the range. 
  • Objective benchmarking. Job evaluation enables organizations to fairly compare their compensation program against the wider labor market.

The cornerstone: Establishing equivalent worth 

Job evaluation isn’t simply about ranking jobs from “highest” to “lowest.” It’s about understanding the value different roles bring to fulfill your organization’s mission. It provides a common language to discuss the complexity and impact of various roles, fostering better understanding across departments and teams. 

Moreover, job evaluation provides a structured and justifiable approach to determining and managing compensation, ensuring internal equity, helping your organization comply with pay equity laws, and showing a strong commitment to fair treatment for all employees. 

Bringing clarity: Hierarchical relationships 

Job evaluation establishes a hierarchy of roles within your organization, informing the creation of job grades and salary ranges. This is a critical step towards achieving equity, as it brings a structured approach to your compensation program.  

Similar roles, based on their inherent value to the organization, are grouped together. These groups are then assigned specific pay ranges, ensuring that employees performing work of similar complexity receive comparable compensation, regardless of their occupation, tenure, or background.  

A structured approach to compensation management fosters a sense of internal cohesion and transparency and promotes trust in the compensation program. Establishing hierarchical relationships helps staff understand how their pay is determined and relates to other roles in the organization, reducing the potential for misunderstandings and perceptions of inequity. 

Birches Group’s job evaluation approach 

At Birches Group, we understand that traditional job evaluation methods can be complex and time-consuming. That’s why we’ve developed a unique approach that considers only three factors: 

  • Purpose: Why does this job exist within the organization?
  • Engagement: How does this job communicate and collaborate with internal and external stakeholders to carry out its function? 
  •  Delivery: How does this job plan, organize, and deliver work to fulfill the organization’s mission? 

Our approach is simple, consistent, and easy to understand. It focuses on the complexity and impact of the work itself, rather than just job titles or vague descriptions. This ensures a comprehensive and accurate assessment of job complexity, enabling you to make informed decisions about compensation.

The journey to equity continues 

Job evaluation is the essential first step toward building a compensation structure that is fair, transparent, and competitive. Birches Group’s job evaluation approach provides a clear, unbiased path to establishing equivalent worth for every role within your organization. 

In our upcoming blog post, we’ll explore the next critical step: building a grading structure that aligns with your job evaluation assessments and organizational needs. In the meantime, we invite you to schedule a call with our experts to discuss your job evaluation needs and challenges.  

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

achieving equity

EQUITY IN ACTION: INTRODUCING OUR FIVE-STEP APPROACH TO ACHIEVING WORKPLACE EQUITY

Written by Kai Donesa on . Posted in Resources.

Equity has become a central conversation point in human resources (HR). But it’s no longer enough to simply talk about the importance of a fair and just workplace—the demand for concrete action is stronger than ever. Organizations are now being held accountable for putting those ideals into action. And while the importance of achieving equity is widely acknowledged, many organizations struggle to put discussions and understanding into action.

The challenge lies in the lack of a clear roadmap. Often, organizations don’t have a solid framework and the necessary tools to address equity concerns. This can lead to ad hoc approaches that yield inconsistent results and unfair outcomes.

At Birches Group, we understand organizations’ challenges in embracing and attaining equity. That’s why we’ve developed a comprehensive five-step approach to achieve equity in compensation management.

In this blog series on equity, we’ll be introducing our five-step approach to achieving equity. We’ll explore each step, equipping you with the framework and tools you need to move beyond rhetoric and create a more equitable workplace. Discover how to transform equity from a buzzword into a reality within your organization.

The problem of inequity

Inequity within an organization’s compensation structure is a persistent issue with far-reaching consequences. It demotivates staff, creates a sense of unfairness, and ultimately hinders an organization’s ability to attract and retain top talent. Here are some of the most common examples of inequity we see:

  • The gender pay gap. Women, on average, continue to earn significantly less than men for comparable work.
  • Locale-based pay inconsistencies. Employees performing the same job in different locations can receive significantly different salaries based solely on geography.
  • Occupation-based pay biases. Certain occupations may be systematically over or undervalued compared to others.

Unfortunately, traditional pay practices have often fallen short, exacerbating equity issues:

  • Using salary history when setting starting salaries. This perpetuates existing pay gaps by anchoring starting salaries to potentially biased historical data.
  • Determining pay increases based solely on time or tenure. By simply rewarding staff for the time spent at an organization, organizations may be overlooking employee performance or the value the staff brings to their role.
  • Relying solely on “pay for performance.” While performance should be a factor, this can be subjective and susceptible to bias. Another reason “pay for performance” shouldn’t be used is because staff performance isn’t always a consistent measure year after year.
  • Differentiating pay based on occupation instead of job grade level. Some organizations believe certain functions or occupations (such as IT) should be paid higher because they’re considered “hot jobs.” However, salaries must be examined based on the job’s grade level within a salary scale.
  • Ad hoc succession planning. When promotions and development opportunities are determined subjectively by managers, it can perpetuate personal biases.

These traditional approaches are often reactive and fail to address the root causes of inequity. 

As more states and countries enact pay transparency laws, organizations need a framework and tools not only for ethical reasons, but also for legal compliance and building a truly equitable workplace.  

The Birches Group approach

At Birches Group, we understand that achieving workplace equity requires a clear, objective, and systematic approach. We believe that fair compensation isn’t just about salary numbers; it’s about ensuring that every employee feels valued and recognized for their contributions.

Our framework: building a foundation of fairness

Our framework is built on the fundamental principle of establishing the equivalent worth of each job within your organization. This is achieved through a consistent job evaluation process that considers the skills, knowledge, and responsibilities required for each role.

When organizations have a standardized method to objectively assess jobs across different grades and units, it becomes the cornerstone for aligning other HR functions. This includes job design, salary benchmarking, recruitment, pay movement, and performance evaluations.

Steps toward an equitable compensation program

Here is how our five-step approach works:

  • Start by establishing equivalent worth. Begin by conducting a comprehensive job evaluation that accurately assesses the complexity and value of different roles within your organization. This evaluation process will create a clear hierarchy of positions, setting the stage for the next step.
  • Establish a grading structure. Once the distinctions between roles are established, develop a structured grading system to categorize them effectively. This grading structure will become the backbone of your compensation strategy.
  • Utilize salary surveys. Leverage the job evaluation and grading structure to conduct a thorough analysis of external market conditions through salary surveys. Our extensive database of compensation and benefits surveys spanning over 150 countries provides valuable insights for benchmarking against sectors.
  • Develop pay ranges. Establish well-defined pay ranges for each grade, ensuring they align with your internal job evaluations and external market data. This ensures that compensation is both externally competitive and internally equitable and sensible.
  • Implement fair pay management mechanisms. With the job evaluation, grading structure, and pay ranges in place, it’s time to implement a transparent and equitable system to manage employee progression within these ranges. This includes clear criteria for promotions, raises, and bonuses, all based on objective and well-defined skill stages and expectations.

We emphasize consistent and precise methods for evaluating jobs, managing salaries, and assessing staff performance. This ensures that everyone has the same opportunities for advancement and is evaluated based on the same objective criteria.

What sets Birches Group apart

What truly sets Birches Group apart is our focus on:

  • Skills-based compensation. We move beyond traditional approaches that rely on tenure or subjective performance evaluations. Our framework recognizes employees for the skills and knowledge they bring to the table.
  • Data-driven transparency. We use our compensation and benefits surveys of over 150 countries to help organizations inform their pay strategies based on comprehensive labor market information, ensuring that compensation decisions are fair, objective, and defensible.

What’s next

Achieving equity in the workplace isn’t just a moral imperative; it’s a strategic advantage. The Birches Group approach offers a precise and data-driven framework for building a compensation system that rewards contributions.

Stay tuned for the next installment of this blog series on equity, where we’ll explore key aspects of our five-step approach in detail. With our insights and tools, learn how to transform your compensation practices and other HR programs to achieve lasting equity within your organization.

If you’re ready to see what equity can look like for your organization, schedule a call with our team.

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

High Inflation

ON THE HORIZON: INFLATION PROJECTIONS FOR 2024 ACROSS THE GLOBE

Written by Kai Donesa on . Posted in Resources.

Inflation has dominated economic conversations in recent years. As we approach the second half of 2024, this bulletin offers insights into what to expect on the inflation front worldwide. To help you prepare for the next few months, we’ll explore expert projections, examine critical trends, and discuss the potential implications for organizations. 

Global inflation is on the downturn, but not out 

After years of historically high inflation, many analysts are cautiously optimistic about 2024. Inflation has been cooling worldwide, raising hopes of a soft landing this year. While the sting of rising prices may not vanish entirely, major institutions forecast that the global inflation rate is on a gradual downward slope.  

The International Monetary Fund (IMF) predicts global headline inflation to fall to 5.9% in 2024, down from an estimated 6.8% in 2023. This decline is attributed to various factors, including easing supply chain pressures and higher interest rates. 

But the path to price stability may be bumpy. JP Morgan economists warn that core inflation, which excludes volatile food and energy prices, could remain sticky at around 3% globally in 2024.  

Overall, inflation will likely ease faster than expected. While it is estimated to remain above pre-pandemic levels, a significant decrease from 2023 is anticipated.  

It is important to note that the global average masks significant differences between countries and regions. Advanced economies are expected to see faster disinflation, with inflation falling by 2.0 percentage points to 2.6%. For emerging and developing economies, inflation is projected to decline by just 0.3 percentage points to 8.1%. 

High-inflation economies 

While growth remains a priority, high inflation will be a pressing concern for many countries in 2024. The IMF has identified 20 economies across regions likely to experience significant price increases. 

Many of the world’s highest-inflation economies are concentrated in Sub-Saharan Africa, the Middle East, and Central Asia. This vulnerability can be attributed to dependence on volatile commodity prices, conflicts disrupting supply chains, and currency depreciation. These issues create a perfect storm for rising prices, squeezing household budgets and hindering economic stability. 

Three volatile economies to monitor 

Some economies face a delicate balancing act. It’s crucial to keep an eye on developments in Venezuela, Zimbabwe, and Sudan, which are projected to have the highest percentage change in annual inflation this year. The potential for significant volatility in these economies is high. 

Venezuela 

230% inflation, widespread dollarization, US oil industry sanctions 

Venezuela, a Latin American country rich in oil reserves, faces a projected inflation rate of 230%—the highest in the world. But, according to El Pais, experts believe inflation in Venezuela is on a downward trend. In April 2024, the IMF notably lowered its projected inflation rate in Venezuela to 160%.  

Capital Economics reports that several factors are behind Venezuela’s inflation plunge. These factors include widespread dollarization, steps to liberalize the economy, a rise in oil exports, and an easing of US sanctions on the oil industry since October 2023. 

However, Venezuela’s economic outlook in the near term depends on whether US sanctions (for repressing political opposition and alleged criminal activity) are further relaxed or reimposed in April 2024. 

What does our market monitoring reveal? 

Our 2024 Market Monitor reports paint a picture of Venezuela navigating a volatile market. The reports consistently place the Latin American nation at Level Five on a six-level volatility scale. 

Level Five signifies a labor market that heavily uses hard currencies. Salaries are widely denominated in US Dollars or Euros, and staff can legally hold bank accounts in these currencies. This dollarization protects against inflation but highlights Venezuela’s challenges in stabilizing the Bolivar, its local currency.

What steps do we recommend? 

Given Venezuela’s status at Level Five on our Market Monitor, we recognize the challenges faced by organizations operating in the country. Our salary surveys also show that employers have adopted the practice of denominating salaries in US Dollars or Euros, reflecting a lack of confidence in the Venezuelan Bolivar. 

In countries with Level Five volatility, the solution often sought is to change the local currency scale into one denominated in a major hard convertible currency. While this might seem straightforward, many factors must be considered before making such a big switch. 

The most significant factor is assessing the prevailing labor market conditions. This involves evaluating the usefulness of local money in daily life. Is the local currency still primarily used for trading goods and services? If so, every effort should be made to maintain a pay structure based on local currency and to monitor and update this pay structure actively. 

Zimbabwe 

190.2% inflation, currency depreciation, newly introduced currency 

Zimbabwe, a nation in Sub-Saharan Africa with immense mining potential, has been overshadowed by a persistent struggle with high inflation and currency devaluation. 

The IMF projects Zimbabwe’s inflation rate to reach 190.2%. In April 2024, this forecast was significantly adjusted to 602.6%. According to Lloyds Bank’s International Trade Portal, inflation increased amidst currency depreciation, worsened by the scarcity of foreign currency in the country.  

Economists note that Zimbabwe’s financial woes are deeply entrenched. Over the years, Zimbabwe has grappled with currency instability, introducing various currencies. Abandoned in 2009 and reintroduced a decade later as the Real Time Gross Settlement Dollar, the Zimbabwean Dollar, lost over 70% of its value on the official foreign exchange market since January 2024, making it one of the world’s worst-performing currencies, according to Associated Press. In addition, the US Dollar is used in more than 80% of transactions and is favored over the volatile Zimbabwean Dollar.  

A recent development to watch is the introduction of the Zimbabwe Gold (ZiG), the country’s sixth attempt at a new currency since 2008. Launched in April 2024, the ZiG replaces the Zimbabwean Dollar to combat high inflation and restore confidence in the financial system. However, its effectiveness in curbing inflation is yet to be seen. 

What does our market monitoring reveal? 

Our monitoring of the Zimbabwean labor market and foreign exchange rates in recent months reveals a vital feature of the economy: dollarization. This is reflected in the country’s consistent ranking at Level Five on our volatility scale. 

Foreign currencies, such as the US Dollar and Euro, are widely used at this level. Salaries are commonly denominated in these currencies, and staff can legally hold Dollar or Euro bank accounts. 

What steps do we recommend? 

Zimbabwe’s Level Five status on our Market Monitor presents challenges similar to Venezuela’s. Our recent salary surveys show a widespread shift towards US Dollar-denominated salaries, highlighting the declining trust in the local currency. 

A Level Five designation signifies a highly volatile labor market, often prompting organizations to consider a switch to a hard currency like the US Dollar. However, such a transition requires careful consideration of several factors. 

The most critical factor is the usability of the local currency in daily transactions. Does it remain the primary currency for buying goods and services? If so, prioritizing a pay structure based on the local currency with regular monitoring and adjustments is vital. 

Sudan 

127.3% inflation, currency depreciation, continuing armed conflict 

Sudan, a country situated in Sub-Saharan Africa, has long been an agricultural hub. Additionally, the nation is endowed with natural resources, including gold and oil, which hold significant economic potential. 

The IMF projects Sudan to face an inflation rate of 127.3% in 2024. In April this year, this projection was slightly decreased to 114.6%. This severe inflation is driven by multiple factors, including political instability, economic mismanagement, and the depreciating value of the Sudanese Pound by at least 50%.  

The primary driver of Sudan’s inflationary spiral is the power struggle between Sudan’s two leading generals and their respective military factions since April 2023. This conflict has led to widespread instability, severely hampering economic activities and disrupting supply chains.  

What does our market monitoring reveal? 

Our monitoring of foreign exchange rates in Sudan reveals a volatile economic environment. In early January 2024, the market was characterized by rapidly evolving conditions at Level Three, indicating significant exchange rate movements of over 40% within six months. This suggested that the Sudanese pound was already experiencing notable fluctuations. 

By January 15, the conditions had shifted to Level Four, signaling a sudden, unexpected social or economic event. The currency underwent severe devaluation of 50% or more within six months, reflecting a drastic and rapid decline in the Sudanese pound’s value. Responses from salary survey comparators in Sudan have also been disjointed and unclear, reflecting a chaotic economic environment with no clear or consistent strategy to address the crisis. 

What steps do we recommend? 

Organizations operating in Sudan should monitor economic indicators closely, particularly currency devaluation. Over the past six months, Sudan’s currency devaluation has reached 65.1%. Nevertheless, many organizations still denominate salaries in the local currency.  

It is critical to regularly review salaries to manage them effectively in volatile environments like Sudan. Using data from the latest Sudan salary survey, organizations should create a focused group of comparators that includes market leaders in salary practices, employers with adaptable pay policies, and companies that predominantly pay salaries in the Sudanese Pound. 

Lastly, update your organization’s salary scales three times a year based on your focused group of comparators. This approach involves trimestral adjustments to the pay scale, forecasting currency movements for the upcoming quarter, and implementing a stabilization allowance alongside the revised salaries. 

How Birches Group’s Market Monitor can help 

Stay informed about volatile economies worldwide and identify potential disruptions before they escalate. Sign up to receive our Market Monitor, a PDF report delivered to your inbox every two weeks. Our team examines labor market conditions and economic indicators across over 150 countries, helping you spot countries that require closer attention.  

Get your free copy of the Market Monitor today, available in English, Spanish, and French. 

Reach out to Birches Group today 

Does your organization have a Special Measures Policy for unforeseen events like hyperinflation? Crafting such a policy requires expertise. Our consultants can guide you through the process, ensuring your policy is effective. Contact us to discuss your specific needs and get started on creating a Special Measures Policy that fits the local conditions of your markets. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.

Cost of Labor

WHY COST OF LABOR SHOULD GUIDE YOUR COMPENSATION

Written by Kai Donesa on . Posted in Resources.

Ensuring fair staff compensation can be a delicate tightrope walk for organizations. As a labor market leader, your organization wants to attract and retain top-tier talent while staying within the defined compensation budget. 

Human resources leaders use a range of factors to set and adjust pay. The two most common factors guiding compensation strategies are the cost of labor or the cost of living. The cost of labor reflects the market value of a specific job. In contrast, the cost of living reflects the expenses that staff need to support a particular standard of living in a given location.  

There is an ongoing debate about which factor should hold more weight. Should you base your salary on the market’s value for a role (cost of labor), or should one’s civil status and standard of living dictate pay (cost of living)? 

This blog post argues that your staff compensation strategies must be guided by the cost of labor for a fairer and more sustainable approach. Let’s explore why the cost of living is an unreliable benchmark and, more importantly, why the cost of labor should take center stage.  

Why the cost of living is unreliable 

Some organizations use the cost of living for setting salaries. However, it falls short of achieving fairness. Here are a few reasons why relying on the cost of living can be misleading: 

Outdated and flawed. While traditionally used to adjust salaries, the cost of living is heavily influenced by individual circumstances, making it an unreliable measure. Factors like civil status, number of dependents, and spending habits can significantly affect an individual’s cost of living. Basing salaries solely on the cost of living doesn’t reflect the actual value of the job in the labor market.  

Location bias. Using the cost of living creates a geographical bias. But location shouldn’t dictate a job’s worth. A highly skilled monitoring specialist in a field office might be paid significantly less than a less-experienced colleague at the country headquarters simply because of where they work.  

Challenges in defining the cost of living. Defining a fair and accurate cost of living presents a challenge. Unlike a fixed measure, it varies significantly between individuals. The amount needed to live comfortably can differ greatly from person to person. Even within the same country, people can have vastly different spending habits and consumption choices, making a single standard impossible.  

Unrelated to the job. The primary purpose of compensation is to pay staff in exchange for their services. But the cost of living focuses on personal circumstances unrelated to the job’s purpose. It does not dictate how much a job is worth in the labor market, so why use it to determine salaries? 

A shift in perspective 

Employers must remember that it is not their responsibility to maintain their staff’s lifestyle. While a competitive salary should allow staff to afford a decent standard of living, individual choices and financial situations significantly affect that equation.  

Better yet, focusing on the cost of labor ensures clarity and transparency. You communicate your compensation policy and how much you’re willing to pay for roles in your target markets.  

Why the cost of labor matters 

Although the cost of living seems like a compassionate way to structure salaries, it doesn’t build a fair and sustainable compensation program. Here’s why focusing on the cost of labor is the better, and often the only, approach that matters: 

Objectivity and transparency 

Donor justification. For nonprofits relying on donor funding, the cost of labor provides precise, objective data for justifying salaries. Donors expect the responsible use of funds, and using the cost of labor as a benchmark shows that salaries are based on labor market value. The cost of living offers little justification in this scenario. 

Reaching the right talent. Attracting the right talent with the right skills in the private sector requires understanding market value. By understanding salary trends and compensation practices for roles and grade levels in their target markets, organizations can craft competitive offers. 

Sustainability 

Clear and job-based: The cost of labor focuses on the value of the job itself. It considers market data for positions of equivalent worth, ensuring fairness and clarity in attracting and retaining the talent that you need. 

Informed decisions and budget alignment. By understanding your compensation costs through the lens of the cost of labor, you can make better-informed decisions that align with your budget and brand identity within the labor market. Focusing on the cost of labor also allows for more strategic adjustments during economic downturns or periods of social unrest, fostering long-term sustainability. 

In conclusion 

We recommend setting salaries using the cost of labor—how much other employers in the labor market pay for the same or similar roles. This approach involves setting pay based on labor market survey data grounded on simple and clear job evaluation, which moves quite independently of the cost of living and is impacted by supply and demand in the labor market. 

Get in touch with Birches Group  

Basing salaries on the cost of labor is a crucial feature of a well-designed compensation framework, but it’s only the beginning. Another feature is credible market data, such as salary surveys, to help assess your position in the market. 

Stay on top of labor market trends. Access our comprehensive salary surveys and use our data to make informed compensation decisions. We publish updated labor market data three times a year in over 150 countries, making sure you have the most current information for your talent management needs. 

Contact Birches Group today to learn about our salary surveys and how they can benefit your organization. 

Carla is a part-time copywriter on 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.

Follow us on LinkedIn for more content on pay management and HR solutions.