As part of a broader initiative within the United Nations system to simplify and clarify job evaluation and build linkages to other HR processes, UNAIDS agreed to participate in a pilot project to link job evaluation and performance management criteria. Through such a linkage of job grading and performance measures, it was intended to assess how individual staff serving at the same grade level could be consistently evaluated. Taking such an approach, it was also decided to test the possible use of a multi-rater (360°) framework.
What was the challenge?
The approach to performance appraisal within United Nations agencies is determined by each agency; however, all agencies generally use a method known as MBO—Management By Objectives—based on cascading objectives from the organization to the individual. The structure of the objectives is not linked to the grade of the job, nor is there any process to align objectives across grade levels. This results in a discrete performance assessment for each individual, which can only be completed by the immediate supervisor, limiting the perspectives in performance assessment.
What was the solution?
For the pilot, UNAIDS adopted a new performance management solution that changed the basis of assessment from MBO to using the standards of job evaluation, which provide consistent criteria by grade level. The UN classification standards are based on a simplified and transparent table of values against four factors of classification. A set of corresponding values to measure performance was established to provide clear and consistent measures. The new measures also enabled the testing of the 360-degree feedback, since the standard was easy to understand and relied solely on the evaluators’ experience working with the individual being assessed.
The nomination of peer evaluators was left to each staff member following criteria defining a good cross-section of evaluators, while supervisors reviewed and approved the list on a strictly confidential basis.
Another change under the pilot program was the introduction of a four-point rating scale, replacing the existing five-point scale. The new rating scale was introduced to align more closely with the focus of the assessment, which emphasizes the confirmation of achieving the expectations of the incumbent’s grade level. Using grade-level-specific measures, evaluators were asked to answer three questions:
Did the staff member display competence in the subject area of work?
Did the staff member listen and take into account perspectives from the team and the client?
Did the staff member deliver the needed services/outcome, meeting expectations in terms of timeliness and quality?
An online platform was created for capturing performance data with a review timeframe of five weeks established for the conduct of the exercise.
What was the outcome?
The exercise covered some 400 staff serving in 80 country offices, including staff at UNAIDS headquarters in Geneva. Within five weeks, more than 2,000 evaluations were completed, covering eighty percent of the staff. Examination of the ratings showed a broad correlation between supervisor and peer assessment, validating the multi-rater approach. Participants also indicated the pilot system was generally easily understood and accessible across the user community.
As a comparison, the prior system used by UNAIDS achieved just a six percent completion rate over twelve months.
What’s the takeaway?
Linking performance to the same factors used to evaluate jobs and anchoring them to what makes their job level distinct simplifies performance management. A simple performance standard facilitates 360° feedback.
You can learn more about Community™ Performance here.
A regional network of civil society organizations in Africa is committed to advocating for fair, equitable, and transparent tax systems across the continent. Through grassroots organizing, capacity building, policy advocacy, and research, the organization empowers communities and institutions to challenge tax injustices and promote sustainable and inclusive development. Coordinating these efforts is its Secretariat, strategically located in Nairobi, Kenya. Given its mandate, attracting, retaining, and developing a multidisciplinary and multinational workforce is essential for the organization to effectively realize its vision of an Africa where tax justice prevails. To achieve this, it partnered with Birches Group to design a grading structure that clearly articulated the differentiation and progression of work in the organization, along with a pay scale guided by a compensation philosophy defining its target market and position.
What was the challenge?
The newly established grading and pay structure provided the organization with a solid foundation for managing its diverse workforce based on the principles of equivalent worth and significant difference. To fully utilize this structure, the organization recognized the need for a comprehensive framework to manage individual pay progression within salary ranges, inform promotion decisions, and recognize employees’ varying levels of experience and knowledge.
The challenge was two-fold: bridging the structural framework with the people within it, and establishing sustainable pay equity practices to maintain fairness and effectiveness over time.
What was the solution?
Guided by the principle of equal pay for work of equal value, the organization, in collaboration with Birches Group, implemented a clear and transparent framework to address both challenges. This framework, Community™ Skills, expands upon the principle by explicitly defining the knowledge gained through experience as the primary determinant of value. In this approach, equity involves consistently and transparently measuring and remunerating the value of experience—recognizing that individuals have varying levels of experience and should be compensated proportionately.
Through Community™ Skills, the organization established a framework with clear criteria for pay management by articulating the progression of knowledge across five distinct stages—Basic, Proficient, Skilled, Advanced, and Expert. Each stage directly aligns with specific pay points: Minimum, 1st Quartile, Midpoint, 3rd Quartile, and Maximum, respectively. By adopting this structured approach, the organization has achieved greater clarity, consistency, and precision in managing workforce compensation and career progression.
What was the outcome?
A persistent gap in HR has traditionally been the disconnect between structure and capacity—the divide between what is considered “hard” vs “soft” HR. By building upon a solid job-based foundation and integrating a skills-based approach, the organization effectively bridged this gap. This resulted in a systematic and efficient approach to managing resources for salary increases and provided actionable insights into workforce capabilities. It also positioned the organization to make informed promotion decisions and to strategically reinforce skills growth through targeted learning and development.
What’s the takeaway?
Now in its fifth year of implementing the Community™ Skills framework, this regional network of civil society organizations in Africa serves as a prime example of how there is an alternative to the conventional, often imprecise practices of utilizing time-based steps or performance as proxies for experience. Instead, it explicitly measures experience for what it is—knowledge, expertise, and skill—enhancing transparency, fairness, and effectiveness in workforce management.
The Caribbean Development Bank (CDB) is a focused multilateral development bank (MDB) and international organization committed to fostering a strong community for its staff. To remain competitive, CDB has progressively refined its compensation strategy and closely monitored developments among comparator institutions.
What was the challenge?
Competition within the multilateral banking and international organization community can be quite demanding. While being a smaller institution, CDB faces direct competition from organizations such as the World Bank and the United Nations, which have active programs in the same countries where CDB functions. In building its market model for setting salaries for its internationally recruited staff, CDB has found the greatest challenge in market competition has been for its more senior-level staff. CDB recognized that staying competitive in this area is essential to effectively serve the Caribbean region.
What was the solution?
In building the sample of comparator employers against which CDB would examine its levels of compensation, it recognized that the pay progression found in the development banks is indeed more aggressive for senior management roles than in other international organizations. As a result, CDB decided to give greater “weight” to the market data from the development banks, whereby 80% of the market reference would be drawn from these comparators for senior management roles.
What was the outcome?
By placing greater weight on development bank data for senior-level roles, CDB has been able to more closely match the progression of compensation found in these key comparators. Since this adjustment in market assessment was limited to senior roles, CDB has been able to sustain its critical market position in a very cost-effective manner by focusing on these critical roles where there are limited numbers of staff.
What’s the takeaway?
Refining comparator weighting in building the market sample is a very effective approach to targeting and optimizing market position. It enables an organization to focus on critical roles in a broader context of market positioning.
You can learn more about Community™ Market here. To see other client experiences related to optimizing market position, click here.
We are proud to announce that on May 20, 2025, Birches Group successfully achieved SOC 2 Type 2 compliance, marking a significant milestone in our ongoing commitment to data security, privacy, and operational excellence. This certification, awarded by an independent third-party auditor, builds on our previous SOC 2 Type 1 achievement and confirms that our security controls are not only well-designed but also operate effectively over time.
What is SOC 2 Type 2 Compliance?
SOC 2 (Service Organization Control 2) is an auditing standard developed by the American Institute of Certified Public Accountants (AICPA). While SOC 2 Type 1 evaluates the design of controls at a specific point in time, SOC 2 Type 2 goes further—assessing the operational effectiveness of those controls over an extended period. This certification validates that Birches Group consistently maintains the highest standards of security, confidentiality, and availability for our clients’ data.
Why SOC 2 Type 2 Matters
In today’s digital landscape, data security is not a one-time effort—it’s a continuous responsibility. As a trusted provider of HR management solutions, Birches Group understands the importance of safeguarding sensitive information. SOC 2 Type 2 compliance gives our clients added assurance that our systems are secure, reliable, and resilient over time. We want to thank our clients for their continued trust and support in Birches Group.
Key Highlights of the Certification:
Security: We continue to implement advanced safeguards to protect against unauthorized access and ensure data integrity.
Confidentiality: Our strict protocols ensure that sensitive client information remains protected and accessible only to authorized personnel.
Availability: Our systems are designed for reliability and uptime, ensuring consistent and uninterrupted service delivery.
“SOC 2 Type 2 certification is more than a badge—it’s a reflection of our long-term commitment to protecting our clients’ data and delivering dependable, secure HR solutions. It shows that our controls are not only well designed, but consistently effective over time.”
—Jeffrey Slater, Co-founder & Partner, Birches Group LLC
Next Steps and our Continuing Journey
SOC 2 Type 2 certification is the result of months of rigorous evaluation, continuous monitoring, and a company-wide dedication to best practices. But our journey doesn’t stop here. Birches Group remains committed to evolving our security posture, staying ahead of emerging threats, and delivering trusted, secure HR solutions to clients around the world.
For more information on SOC 2 Type 2 compliance or to request a copy of our report, please contact us.
In our Q&A spotlight, we explore the insights of a thought leader in workforce management, delving into their experiences in building and sustaining effective workforce strategies.
Katrina Sam is the Head of Performance and Reward at the Asian Infrastructure Investment Bank (AIIB), with over ten years of experience in multilateral development, compensation, talent management, and data science. She designs and implements policies and programs aligned with the Bank’s vision and goals. Prior to AIIB, she served as Director of Human Resources and Administration at the Caribbean Development Bank. With a 20-year career in human resources, she has provided services across the Caribbean and spent nine years advising on internal HR practices at one of the Big Four accounting firms.
Q: I want to start with a simple question about the principle of equal pay for work of equal value. How is that, or is that practiced in your organization?
Yes, I think that is a key principle of compensation benefits administration here at AIIB. And it has been a principle for all of the organizations with which I have been associated for the last 20 years.
Q: Well, does that also form part of the management dialog in your organization?
In my current organization, the Bank has repeatedly articulated its commitment to equity, and obviously, as a grounding principle in our compensation and benefits program. It is something that we discuss and that we keep in mind. It is the foundation upon which all our HR practices rest.
Q: Is it well understood by the staff and management that those are the base principles that govern HR in your organization?
Certainly, I’ve been with the institution for three years now. And, in my work and in the projects and the initiatives that I have led over the last three years, we have sensitized staff and managers to this as a core principle and trying to help them to understand what it what it means and how it impacts all of the work that we do in HR and had it permeate the organization in general.
Q: How do you use job evaluation to kind of backstop or support the concept of equal pay for equal work?
For the past 13 months, we’ve been engaged in a job evaluation exercise, grounded in the belief that jobs are the foundation for everything else. By accurately valuing roles and creating a synchronized, equitable job-worth hierarchy, we ensure that all subsequent decisions reflect the principle of equal pay for equal work. We’re also pursuing Edge recertification, which includes annual reviews of gender equity and pay to uphold these values.
Q: How is your organization doing with regard to that?
Very well. We are far below the accepted standard of a 3% gap. With every assessment, our performance improves. Therefore, we are satisfied with our efforts to eliminate anomalies in pay gap analysis and gender-based pay differentiation.
Q: Do you find that your grading structure serves you well in terms of helping support career pathing and clarity around roles and so on?
The Bank is at a pivotal inflection point as it approaches its 10th anniversary early next year. Since its inception, the current structure has largely remained the same, with only a few additional grades introduced since 2016 to support career growth. While this structure has served us well, looking ahead to 2030 and our projected growth, it’s time to revalidate and adjust it to ensure it remains fit for purpose.
Q: The Bank is growing. You’ve doubled in size in the last couple of years, and you want to double again. So, your workforce becomes bigger and more multidisciplinary. Is the current structure still fit to support that purpose?
Well, I’ll let you know at the end of our exercise. But for now, we believe the current structure can accommodate both existing and projected roles. The key focus is ensuring clarity and consistency in how we evaluate and position those roles within the structure. So, while the framework itself is sound, we’re reassessing how we apply and sustain it moving forward.
Q: I understand the Bank is planning to go forward with more hub office locations like the one you have in Abu Dhabi. As you move away from the current models, which focus on international recruitment and international staffing, do you anticipate creating a complementary category of nationally recruited staff?
No, we do not. I can say that confidently.
Q: Last year, we had the pleasure of supporting your market assessment, helping define where the Bank aims to position itself within the international compensation landscape. As this remains an evolving process, how well do you feel the current methodology is serving your goals, particularly in attracting and retaining the talent you need?
The methodology continues to serve us well in maintaining our desired market position. As a global employer, we strive to remain competitive. Unlike some other MDBs, we’re not limited to recruiting from member countries—we draw talent from around the world. Today, our workforce represents over 70 economies, and this inclusive approach has supported our competitiveness and aligned well with our overall philosophy.
Q: Ultimately, the real test of any pay system is whether it enables you to reach the talent markets you’re targeting. It’s always a delicate story, especially given the volatility of the current economic climate. Do you feel the methodology you’re using is robust enough to navigate these challenges and maintain your reach?
We’re confident that our market posture and total rewards philosophy have been robust in getting us to this point. That said, we’re always evolving—continuously monitoring and assessing the market to make timely adjustments. Following our most recent exercise, we believe the updates we’ve made will help us stay competitive in attracting the global talent we’re aiming for.
Q: There’s an ongoing debate within the MDB community around compensation for front-office versus back-office roles. Some organizations support pay differentials within the same grade, while others prioritize a strict equal pay approach to maintain team cohesion. How is AIIB navigating this issue—does the Bank lean toward differentiated compensation or a unified, equal pay for equal work model?
At AIIB, we’ve remained firmly committed to the principle of equal pay for equal work, as workplace harmony is a key priority for us. Our pay ranges are designed to reflect and accommodate role differences, such as front-office versus back-office, without introducing hard distinctions. This approach allows us to fairly manage professional differences within a unified and equitable framework, unlike some organizations that have opted for more segmented compensation models.
Q: Each salary grade at AIIB has a defined range of pay. How does this range allow you to recognize differences in experience and knowledge within a particular grade? Do you feel it adequately acknowledges these factors as it should?
Over the past 12 years, I’ve been fortunate to work with organizations where pay ranges were broad enough to reflect differences in skills and job value, and AIIB is no different. Our ranges are sufficiently wide to accommodate staff along the continuum, allowing us to recognize and reward differentiated skills and the value each individual brings to the table.
Q: Are you seeking to be a career organization where the current structures can support people staying and measuring their development, and the candidates can anticipate building a career here?
Yes, the Bank is in its 10th year, and my colleagues in Learning and Organization Effectiveness are working diligently on building career ladders and defining opportunities. Over the past three years, we’ve promoted more than 40% of our staff, which is notably higher than most MDBs. Our goal is to ensure that staff understand the career opportunities available and know they can have a long, fulfilling career at AIIB.
Q: When providing career opportunities through learning and development programs, do staff perceive the Bank’s approach as equitable in how these opportunities are offered?
From my perspective, particularly with the annual promotion program I oversee, we’ve worked hard over the past four cycles to communicate the criteria for advancement. We’ve set clear thresholds, emphasizing both performance and readiness for the next level. While any organization goes through a period of growth and evolution, staff have become more comfortable with the process, though some still seek further clarity. We strive to consistently communicate the criteria and hold managers accountable for adhering to them when making promotion nominations.
Q: When it comes to recognition and reward, some organizations distinguish between skills growth (recognition) and performance (reward). Does AIIB differentiate between these two, or are they combined into a single assessment?
At AIIB, recognition and reward are closely linked, though we have distinct programs for each. For example, our Applause platform facilitates both peer-to-peer and manager-to-staff recognition for going above and beyond daily expectations. We also have financial reward programs, including high-performer awards and promotions based on performance. While recognition and reward overlap, we maintain separate initiatives, but both are integral to our approach.
Q: When recruiting new staff, do you have effective mechanisms in place to assess candidates’ experience and differentiate them in terms of recruitment ranking or starting salary positioning?
While I’m not directly involved in recruitment, the principles we follow align closely with those in many organizations I’ve worked with, including my experience in executive recruitment. When hiring, we consider efficiency, skill, and experience, particularly in the development space. We recruit from organizations with which we’re familiar, and our ability to attract talent is influenced by external market pressures, our location, and internal pay relativity. These factors guide how we position candidates and make offers.
Q: Given the challenge of forming an international workforce from diverse domestic markets with varying conditions, how do you ensure equity in positioning individuals, especially when salary history may not be a relevant factor?
For us, pay history doesn’t drive our offers. We’ve established grade levels and salary ranges for jobs, and we focus on the skills and value an individual brings to the table. An individual’s nationality or country of origin is not a factor in determining pay; it’s based solely on their proficiency and contribution.
Q: When managing a workforce through their career growth, how closely are the approaches for pay movement, learning and development, and promotion aligned or integrated?
To answer your question, AIIB is still growing and evolving, particularly compared to other multilateral development institutions. One of the strategic decisions that stood out to me when I joined was how the Bank integrated performance and reward into a single portfolio. Unlike many organizations that separate performance management from compensation and benefits, AIIB brings them together, signaling their close interconnection. As a result, our efforts to recognize growth, reward staff, and promote individuals are well integrated, and these factors play a key role in decisions around career advancement and pay increases. So, yes, they are closely linked.
Q: While you have solid frameworks in place, different occupations offer varying opportunities, which can sometimes be seen as an equity issue. How much counseling do you provide staff about realistic expectations, especially since some roles are core to the Bank’s function, while others may be more contingent? Are staff well-informed about what to expect in these areas?
AIIB is still an evolving organization, and many discussions are happening at both individual and departmental levels. Last year, we implemented a strong HRBP function, which is still relatively new. Our HRBPs have been working hard to provide counseling and coaching to both managers and staff. While I’m not involved in all these conversations, I’m available to clarify policies, intentions, and technical details. Ultimately, our HRBPs are on the front line and leading these discussions.
Q: As the Bank has grown and welcomed more members, how do you see its reputation and culture evolving, particularly in terms of fairness and workplace policies? How important is it for both staff and members that AIIB is perceived as a fair and equal place to work?
It’s incredibly important to us. In every interaction with our members and board, we emphasize and demonstrate, with data and insight, that fairness and equality are ideals we’re actively striving to achieve. This focus is at the forefront of all our workforce management efforts and will remain our guiding principle as we move forward.
This interview is part of the inaugural edition of Community Magazine, Birches Group’s publication on workforce management. Subscribe to receive the full issue and future updates. Subscribe here
Birches Group provides insights into volatile labor markets that are making news headlines, focusing on key developments.
Since early 2025, the Democratic Republic of Congo (DRC) has been gripped by escalating conflict as the March 23 Movement (M23) armed rebel group seizes critical urban centers, including Goma and Bukavu. This surge in violence has rapidly destabilized the region, creating an exceptionally volatile environment for organizations and their employees. The situation demands immediate and decisive action from organizations operating in Africa’s second-largest country.
To navigate these complex challenges, organizations must adopt resilient and adaptable strategies, potentially including the implementation of special measures to address the unique demands of this crisis. Establishing clear protocols for these measures enhances organizational resilience and operational continuity, even in the face of extreme adversity.
The M23’s renewed offensive
The intensifying crisis in the DRC is rooted in the dramatic resurgence of the M23. The rebels, the most prominent of over 100 armed groups vying for dominance in the mineral-rich east, reignited their offensive after a period of relative dormancy, exploiting existing regional tensions and vulnerabilities.
This resurgence has demonstrated a level of organization and military capability that caught both regional and international observers off guard. Recent intelligence reports suggest advanced weaponry and sophisticated logistical support, potentially indicating external backing and fueling regional tensions.
Rapid territorial gains
Over the past several weeks, the M23 expanded its territorial holdings in eastern DRC. In late January 2025, they occupied Goma, the provincial capital of North Kivu and an economic and humanitarian center. This resulted in the large-scale displacement of civilians. In mid-February 2025, the crisis when the M23 took possession of Bukavu, the provincial capital of South Kivu, further extending their area of control. The rebel group has threatened to continue their offensive toward Kinshasa, the DRC’s capital.
The Congolese government, backed by regional and international forces, is struggling to contain the M23’s advances. Protests in Kinshasa have seen demonstrators demanding immediate government action and expressing anger at the international community’s perceived inaction.
Humanitarian crisis
The fall of both cities has caused massive displacement, straining humanitarian resources. Millions have fled, seeking refuge in overcrowded camps. The insecurity has forced most organizations to suspend operations, leaving families without essential supplies.
The UN High Commissioner for Refugees (UNHCR) reports that the escalation of violence since January 2025 has pushed the number of internally displaced persons to a record high of 6.4 million, with over 90,000 seeking refuge in neighboring countries.
These figures underscore the immense human cost of the conflict, with hundreds of thousands of individuals and families uprooted from their homes, often multiple times, seeking safety and necessities.
Regional instability
The implications of this conflict extend far beyond the DRC’s borders. The M23’s resurgence has destabilized the region, exacerbating existing tensions between neighboring states. Allegations of Rwanda’s support for the M23 remain a central point of contention.
Efforts to find a peaceful resolution have included direct talks between the presidents of the DRC and Rwanda in Doha, Qatar, on March 18, 2025. However, parallel peace negotiations between the Congolese government and the M23 in Luanda, Angola, were called off, with the M23 citing European Union sanctions as a primary reason.
Impact on organizations and employees
Beyond security threats, the conflict ignited a humanitarian crisis, compounding operational challenges. The workforce is devastated, with disrupted services, fear, and the threat of violence.
Mass displacement. The UNHCR reports extensive displacement, with communities fleeing to overcrowded camps and neighboring regions.
Economic disruption and market instability. International financial institutions report severe disruption of economic activity, impacting various sectors, including the crucial mining industry.
Heightened security risks. Increased kidnappings, looting, and armed robberies, along with heightened security presence and checkpoints, pose significant risks.
The situation in eastern DRC remains dire and unpredictable, with concerns about the a wider regional war. UNHCR Chief Volker Türk warned of potentially catastrophic consequences, “If nothing is done, the worst may be yet to come, for the people of the eastern DRC, but also beyond the country’s borders.”
The necessity of a Special Measures Policy
Operating in volatile labor markets like the DRC, with its displacement, economic disruption, and security, requires more than standard human resources (HR) policies and procedures. Traditional HR policies often prove inadequate in the face of such instability, demanding a proactive and resilient approach. A comprehensive Special Measures Policy becomes essential.
A Special Measures Policy assists managers and supports staff during crises like civil unrest. It defines clear triggers and immediate responses to protect employees and ensure business continuity while the organization adapts to changing labor market conditions in the following months.
Crisis HR: The Birches Group advantage
The current situation in the DRC requires a strategic approach to workforce management. Organizations must prioritize HR policies that mitigate risk and ensure operational continuity.
Birches Group provides specialized expertise in designing Special Measures Policies tailored to high-risk environments. We help organizations develop policies that fit local conditions while aligning with corporate objectives.
For organizations committed to maintaining operational resilience and safeguarding their workforce in the DRC, strategic HR planning is essential. Birches Group offers the expertise and resources necessary to navigate these challenges effectively. Book a strategy call with us today.
We are proud to announce Birches Group’s achievement on August 15, 2024, of SOC 2 Type 1 compliance, a critical step in our ongoing commitment to data security and privacy. This certification, awarded by an independent third-party auditor, underscores Birches Group’s commitment to maintaining the highest standards of security, confidentiality, and availability for our clients.
What is SOC 2 Type 1 Compliance?
SOC 2 (Service Organization Control 2) is an auditing standard developed by the American Institute of Certified Public Accountants (AICPA) and is widely recognized as the gold standard for companies that need to demonstrate their commitment to data security and trustworthiness. The SOC 2 Type 1 audit requires rigorous assessments and testing to validate an organization’s ability to protect the security, confidentiality, and availability of its clients’ data.
Achieving SOC 2 Type 1 compliance confirmed that we have implemented the necessary controls and procedures to ensure our systems are secure and our clients’ data is protected.
Why SOC 2 Type 1 Matters
With the ongoing threat of data breaches, it’s critical for companies like Birches Group offering HR management solutions to prioritize security. We understand the importance of security as our clients trust us with sensitive information, and we want them to rest assured knowing that their data is protected. We want to thank our clients for their continued trust and support in Birches Group.
Key Highlights of the Certification:
Security: Birches Group has implemented robust measures to protect against unauthorized access, ensuring the integrity and confidentiality of client data.
Confidentiality: The company has established strict protocols to safeguard sensitive information, ensuring it is only accessible to authorized personnel.
Availability: Birches Group guarantees that its systems are reliable and available to meet the needs of its clients, minimizing downtime and ensuring continuous service.
“We are proud to achieve SOC 2 Type 1 certification, which reflects our firm commitment to data security and operational excellence. This certification is a testament to the hard work and dedication of our team, and it reinforces our promise to provide secure and reliable services to our clients.“
— Jeffrey Slater, Birches Group LLC Co-founder & Partner
Next Steps and our Continuing Journey
Achieving SOC 2 Type 1 involved a detailed process including risk assessments, reviewing policies, and improving our robust security controls. In early 2025, we aim to complete SOC 2 Type 2 compliance, further demonstrating our dedication to data security.
Data security is an ongoing commitment at Birches Group, and we will continue to assess the threat environment, keep abreast of emerging technologies, and adapt our policies, processes, and tools to maintain data security, confidentiality, and availability to provide the best possible service to our clients.
For more information on SOC 2 Type 1 compliance or a copy of our report, please contact us.
Birches Group delivers expertise on emerging labor markets from around the world, including insights into current trends and events that affect these markets.
Ethiopia’s central bank allowed the Birr, its local currency, to float or trade freely based on market forces on July 29, 2024. This decision triggered an immediate plunge of about 30% in the Birr’s value against the United States (US) Dollar. According to the Commercial Bank of Ethiopia, the country’s largest lender, the exchange rate had been 57.48 Birr per dollar on July 26, 2024. By August 16, 2024, it devalued further to 103.96 Birr per dollar, a drop of over 80%.
Understanding the devaluation
Ethiopia’s adoption of a new exchange rate policy, as reported by the Associated Press and Africanews, marks a historic shift. For half a century, the government maintained control over foreign currency prices.
The National Bank of Ethiopia introduced this policy change, alongside other reforms, with several key goals in mind:
Curbing the rise of an unregulated parallel market for foreign exchange
Enhancing the country’s appeal to foreign investors
Securing up to US$10.7 billion in financial aid from the International Monetary Fund (IMF), the World Bank, and other creditors.
Ethiopia, Africa’s second-most populous country, faces severe economic hurdles. It grapples with high inflation rates of approximately 20% and a critical shortage of foreign currency reserves. The Associated Press highlights that the Birr has been one of the weakest currencies in the region in recent months. Moreover, the country defaulted on its debts in December 2023, worsening its economic difficulties.
Analysts are concerned that Ethiopia’s currency crisis could further stoke inflation and potentially trigger social unrest. Bloomberg notes that Nigeria and Egypt, which partially relaxed controls on their local currencies in 2023 and March 2024 to secure IMF funding, have since grappled with rising prices and growing civil unrest.
Ethiopia’s move toward a more flexible exchange rate marks a significant but risky step. The government aims to stabilize the economy and attract foreign investment, but the potential for increased inflation and social instability underscores the complexities of this transition.
What the Birches Group’s Market Monitor reveals
Based on our review of our Market Monitor reports over the past 12 months, labor market conditions in Ethiopia have significantly changed since August 2024.
In our Market Monitor, dated August 1, 2024, Ethiopia entered our Six Levels of Volatility at Level Two. Such a volatility level shows dynamic market conditions, with an exchange rate movement exceeding 20% within the last six months. Our tracking shows a 32.8% exchange rate movement in Ethiopia over the past six months. This shift suggests increasing volatility and potentially emerging economic pressures that have begun to affect the labor market.
In our most recent Market Monitor, dated August 15, 2024, the situation escalated dramatically, with Ethiopia’s volatility level rising to Level Four. This corresponds to a “sudden or unexpected socio-economic event,” which includes a currency devaluation of 50% or more in six months or less, as well as a disjointed and unclear comparator response in our salary surveys. Our tracking now shows a 79.8% exchange rate movement in Ethiopia over the past six months.
Next steps for employers
The devaluation of the Ethiopian Birr presents a challenging landscape for employers in Ethiopia. However, decisive and informed action can mitigate the impact on both your workforce and your organization.
Take immediate action
The recent devaluation of the Birr has created an immediate need for employers in Ethiopia to adjust their compensation strategies.
For employers that denominate salaries in Birr:
An immediate adjustment is highly recommended. To mitigate the impact of the devaluation on employees’ purchasing power, an increase of 10 to 20% should be applied now. While this does not fully match the prevailing rate of inflation or completely close the gap, it is a significant measure. A 10-20% increase is a substantial adjustment, and staff would appreciate it if they received it tomorrow.
Organizations that have not dollarized now face pressure to raise salaries to stay competitive. This gap of 80–90% compared to dollarized employers will be hard to ignore and will require adjustments. You should make moderate adjustments to start closing the gap without overcompensating, as market conditions are likely to shift over the next 12–24 months. Historically, it takes about 2.5 years for a market to stabilize after a major exchange rate change. Managing these expectations will be crucial. Some organizations may feel compelled to dollarize simply to keep up with others, but if you choose to remain Birr-pegged, you’ll need a strong rationale for both your senior management and staff.
For employers that denominate salaries in US Dollar:
A major risk factor is that employers have effectively lost control of the market position of their pay, which is now determined by the exchange rate of the Birr, not by the supply and demand for talent nor by other compensation market fundamentals.
Such a drastic adjustment in a short period, especially when it’s beyond your control, poses significant challenges. While staff may enjoy the immediate increase in purchasing power (about 80% more in Birr than a few weeks ago), the real challenge will be managing expectations over the next year or two. The increase of 80–90% far exceeds adjustments made for inflation, which was 26% over the same period. It also surpasses market movement adjustments, which averaged about 20% based on our surveys from July 2023 and July 2024. Our surveys cover a wide range of roles, from general laborers to senior experts, and the general adjustment over the past year was about 20%, roughly aligning with inflation.
Experience shows that those who dollarized are now 80% ahead of the market position from three weeks ago and 90% ahead from a year ago. Such a gap is difficult to justify and maintain. You will face pressure to avoid further significant adjustments while managing expectations in a high-inflation environment, where inflation remains in double digits.
For organizations denominated in hard currency, it’s advisable to cut your losses and transition to Birr as soon as possible. Plan for a long adjustment period of 2 to 2.5 years with relatively low salary increases to avoid being significantly ahead of the market. Manage staff expectations during this period.
Monitor the market regularly
The economic situation in Ethiopia remains fluid. Employers should stay abreast of labor market changes and adjust their strategies accordingly. Regularly reviewing salary data and the overall economic climate will help ensure compensation packages remain competitive and equitable. Given that Ethiopia is in Level Four, employers should review and update their salary scale three times a year to prevent compensation from lagging or leading the market.
Avoid dollarization
In times of currency volatility, the idea of dollarizing salaries can be appealing. But Birches Group advises against dollarization, except in extremely limited cases. Denominating salaries in US Dollars or other hard currencies creates a divide between the international development community and the broader local market.
Dollarization may seem like a quick fix for your organization’s current challenges, but it can lead to significant overpayment of staff in the long run. As we highlighted to our clients in our August 15, 2024, webinar on the Ethiopia crisis:
“Dollarized employers will be delivering approximately 80% more in pay today than they were two weeks ago, and over 90% more than one year ago, despite no significant underlying changes in the labor market fundamentals.”
Once inflation slows down and the labor market catches up, likely within the next two years, organizations that have dollarized salaries will find themselves significantly out of sync with local pay scales.
While dollarization might offer a temporary sense of stability, it’s a risky strategy that can create more problems than it solves.
The critical need for a Special Measures Policy
Employers need a clear plan for navigating the compensation challenges during economic crises. A Special Measures Policy defines how your organization will adapt its compensation approach in a crisis. But, more importantly, having such a policy allows you to act quickly as soon as unexpected volatile events like currency devaluation occur.
Birches Group partners with organizations to craft Special Measures policies. Contact our team today to learn more.
More resources
Birches Group conducted a webinar about Ethiopia on August 15, 2024, attended by over 200 participants. We are happy to make the recording available to clients upon request, and are also publishing an FAQ that summarizes the most common questions and answers discussed during the webinar.
Birches Group provides insights into global labor market trends and developments, with a focus on events that affect labor markets around the world.
In June 2024, stories claiming Saudi Arabia didn’t renew a 50-year deal with the United States (US) to keep oil priced in dollars sparked speculation about the petrodollar’s collapse. Online commentators warned this could undermine the US dollar’s status as a hard currency.
But is there any truth to this narrative? Birches Group is here to cut through the noise and provide human resources (HR) leaders with the facts.
The myth of the petrodollar agreement
Contrary to recent speculation, there is no evidence of a formal “petrodollar agreement” between the US and Saudi Arabia. The misconception stems from a 1974 pact signed by US Secretary of State Henry Kissinger and Saudi Prince Fahd bin Abdulaziz Al Saud. However, the pact fostered close economic and military cooperation, not an exclusive oil-for-dollars arrangement.
MarketWatch reports that the closest thing to a “petrodollar agreement” was a secret deal between the two nations later that year: the US promised military aid and equipment in exchange for Saudi Arabia investing billions of dollars of its oil sale proceeds in US treasuries. Bloomberg News reported the confidential diplomatic cable, obtained from the US National Archives, in 2016.
While an agreement in late 1974 involved Saudi investment in US treasuries for military aid, this falls short of a formal petrodollar deal. Experts and fact-checkers have confirmed these claims to be inaccurate.
Why the misinformation spread
The recent spread of misinformation can be attributed to several factors:
Unverified claims can quickly gain traction on platforms where critical scrutiny is often lacking.
Heightened geopolitical tensions can create a fertile ground for the dissemination of misleading information.
Economic uncertainties worsen the issue, making people more susceptible to sensationalist stories that tap into their fears.
Moreover, the fake news—pushed by “a combination of crypto speculators, gold bugs, and conspiracy theorists”—is an example of confirmation bias among those eager to see the dollar’s decline. Paul Donovan, Global Chief Economist at UBS Wealth Management, adds that “confirmation bias encourages people to ignore what is realistic if their prejudices are seemingly confirmed.”
The resilience of the US dollar
The petrodollar’s demise is not as imminent as suggested, and the US dollar’s strength is still secure, Wall Street and foreign policy experts say.
The dollar’s strength is rooted in an interplay of factors, including the size and stability of the US economy, its role in international trade, and the established trust in its financial institutions.
Research from the US Federal Reserve System shows that the US dollar’s global popularity doesn’t depend on the goodwill of oil exporters. It’s based on the US’s status as the world’s largest economy and goods importer, with deep, liquid capital markets backed by the rule of law and military power.
“Saving oil in dollars is not fundamentally what makes the dollar powerful in global trade,” notes David Wight, author of Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967-1988. “The power of the dollar in global trade is why most oil is sold for dollars.”
The reality of the US-Saudi relationship
According to the London-based newspaper The New Arab, US-Saudi relations have improved in recent months. The reality is far more nuanced than a simple oil-for-dollars arrangement—it encompasses security, trade, and diplomatic ties.
Paul Salem, President of the Middle East Institute, says that Saudi Arabia is looking for a “deeper security assurance and relationship with the US.” However, the geopolitical and economic landscape are very much different from what they were decades ago.
Mark Finley, an Energy and Global Oil Fellow with Rice University’s Baker Institute for Public Policy, notes that the US economy has a smaller share of the global economy than it was 50 years ago. In addition, Saudi Arabia has recently worked to diversify its alliances, including increasing its ties to Russia and China.
“Saudi Arabia has ambitions to establish itself as a regional powerhouse, and this involves a complex balancing act,” says Carla Norrlof, a Professor of Political Science at the University of Toronto and a nonresident Senior Fellow with the Atlantic Council. Nevertheless, recent shifts in Saudi foreign policy reflect a diversification strategy rather than a complete abandonment of the US dollar.
A landmark trade and defense deal
Amid rumors that Saudi Arabia is not renewing a petrodollar pricing deal with the US, both countries are in fact close to signing a historic trade and defense agreement.
In May 2024, media outlets such as Foreign Policy, NBC News, Reuters, and The Wall Street Journal reported that the two nations are reaching the final stages of a Strategic Alliance Agreement. The treaty would commit the US to help defend Saudi Arabia. In exchange, Saudi Arabia would grant the US access to its territory and airspace to protect US interests and regional partners.
Fact vs. fiction: The final verdict
The notion of a formal “petrodollar agreement” is a myth, and the US dollar remains a resilient currency.
HR leaders must navigate the complexities of the global economic landscape with a discerning eye, separating fact from fiction, to make informed decisions that safeguard their organizations and employees. HR teams should rely on credible resources for information on developments. Additionally, they should keep a close eye on evolving international relations and their potential impact on global business operations.
Les enquêtes salariales sont un outil important pour les ressources humaines. Les organisations ont besoin de ces enquêtes pour gérer et maintenir les rémunérations de manière adéquate chaque année. Toutefois, les méthodes d’enquête peuvent varier considérablement d’un fournisseur à l’autre, notamment en ce qui concerne les informations collectées, la méthode d’appariement des postes et le traitement et la présentation des données relatives à l’employeur.
Avant de décider quelles données d’enquête utiliser, il est essentiel que les praticiens des ressources humaines se familiarisent avec le type d’informations que chaque enquête fournit, la méthodologie qui sous-tend l’analyse et les limites qui accompagnent chaque approche. Voici quelques points à garder à l’esprit pour aider les organisations à éviter les erreurs typiques en ce qui concerne les enquêtes salariales :
Les limites liées à l’utilisation des données sur les emplois – dans notre article intitulé « Mesurer la position sur le marché », nous avons expliqué que l’on a accordé trop d’importance à certaines professions, simplement parce qu’elles sont considérées comme des « emplois en vogue ». Mais la variance des professions n’est pas aussi importante qu’on le pense, surtout lorsqu’on se penche sur les enquêtes salariales. En effet, lorsque vous mettez à jour votre échelle salariale, vous mettez essentiellement à jour vos niveaux de grade, et les niveaux de grade sont génériques, ils ne sont pas basés sur les professions. Les données relatives aux emplois peuvent constituer une référence supplémentaire utile pour approfondir les données du marché. Mais il est important de noter que ce ne sont pas ces données qui influencent l’échelle des salaires, mais les données relatives aux niveaux de grade.
Les limites liées à l’utilisation des données sur les titulaires – nous avons mentionné dans plusieurs de nos articles précédents à quel point les données sur les personnes en place peuvent être trompeuses lorsqu’elles sont utilisées comme référence pour les données d’une enquête. De nombreux employeurs pensent que si une enquête salariale fait état des salaires réels des titulaires, les données du marché sont en quelque sorte perçues comme plus « exactes ». Au Birches Group, nous pensons que les données sur les échelles de salaires, et non sur les titulaires, offrent une vision plus stable et plus réaliste du marché du travail. Les salaires des titulaires sont basés sur la personne et dépendent fortement des qualités de l’individu qui occupe ce poste. Lorsque l’on travaille avec les salaires des titulaires, il est courant de trouver des valeurs aberrantes qui faussent considérablement les données globales du marché parce que leurs salaires individuels sont influencés par d’autres facteurs distincts du poste. Mais lorsque les échelles salariales deviennent la référence, cela donne une image plus précise de l’évolution du marché et sert de bornes qui empêchent les valeurs aberrantes dans l’analyse.
Les limites liées à l’utilisation du seul salaire de base – certains employeurs, lorsqu’ils étudient les données d’une enquête salariale, ont tendance à fonder leur analyse sur les seules informations relatives au salaire de base. Cette approche pose problème car, sur la majorité des marchés du travail dans le monde, le salaire de base n’est qu’une composante de la rémunération réelle d’un employé. Pour être considéré comme un employeur de choix, il faut prendre en compte l’ensemble des avantages sociaux, qu’ils soient en espèces ou en nature, ainsi que les pratiques du marché en matière d’avantages non salariaux, tels que la retraite, les soins médicaux, etc. Sur certains marchés, les avantages sociaux ont un impact important sur le recrutement et la fidélisation. Dans d’autres pays, certains avantages sont obligatoires, d’autres sont culturels, d’autres encore répondent à des difficultés locales.
Birches Group mène des enquêtes sur les rémunérations et les avantages sociaux dans plus de 150 pays à travers le monde. Notre approche multisectorielle est conçue pour les marchés en développement à forte croissance, où les principaux employeurs déterminent les tendances et les pratiques du marché local. Nous recueillons des données dans une perspective de rémunération totale, car dans nombre de ces marchés, le salaire de base n’est qu’une partie de la réalité. En outre, comme les marchés en développement sont volatils, nos enquêtes utilisent les données relatives aux échelles salariales afin de fournir à nos participants une vision plus précise du marché, liée à l’objectif du poste et non à son titulaire. Enfin, nos enquêtes sont mises à jour trois fois par an, en avril, juillet et octobre, ce qui garantit à nos clients des données actualisées à chaque fois. Contactez-nous pour en savoir plus sur notre enquête sur les rémunérations et les avantages sociaux dans votre pays.
Want to know if your existing compensation practices have the elements of a good compensation program or if there are areas that could use some improvement? Take our quick Compensation Program Assessment Quiz
Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.
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