Tag: Compensation Surveys

Iran’s Countrywide Protests and What They Mean for Employers

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor markets that are making headlines worldwide and wants to share news and updates on the conditions in these markets.

“Blood that is spilled unfairly will boil until the end of time,” goes an old Persian saying. For nine weeks, the streets of Iran have been shaken by protests calling for the overthrow of the religious theocracy that has ruled for over 40 years. Iran’s countrywide protests began on September 16, when 22-year-old Mahsa Amini died in police custody. Amini was detained in Tehran for allegedly not observing the country’s dress code for women and collapsed into a coma at a police station. A photo and video of Amini in the hospital were shared online and quickly went viral.

Iran has a long history of demonstrations and unrest. But the events since mid-September are different. They are led by women and young girls with no organizing force or leadership. They are spontaneous, persistent, widespread, and supported by people from different layers of society. Students and older Iranians, merchants and labor unions, and the middle and working classes have taken to university campuses and onto the streets of over 100 villages, towns, and cities across the country. Iranian expatriates have also rallied in support in Berlin, Washington DC, and Los Angeles.

And despite violent clashes with security forces, more than 14,000 arrests, and mobile and internet restrictions, dissent rages on with remarkable defiance.

The protests and the economy

The demonstrations across Iran now go far beyond Amini’s death and women’s rights. They have moved from demands for reform to demands for systemic changes, an expert told NBC News.

The protests have quickly swelled in response to the Islamic republic’s economic stagnation. The BBC says that, on average, Iranian families are “quite a lot poorer than they were 15 years ago.” Iran’s middle class has shrunk dramatically since 2018, with a third of its population falling into poverty. 23% of the youth population is unemployed, according to the Financial Times.

Additionally, Iran is facing a record inflation of 42.9%. Its currency, the Rial, has sunk to all-time lows. Since August, the Iran Rial has lost more than 20% of its value against the United States (US) dollar.

Businesses, shop owners, and bazaar traders in several cities closed their stores and went on strike, joining the protests in solidarity, Bloomberg and Iran Wire report. According to a primer from the United States Institute of Peace, factory workers in the energy and petrochemical industries also went on strike.

The Iran Chamber of Commerce warns that every hour of internet restrictions due to the protests costs US$1.5 million in damages to the Iranian economy. Research from the Tehran Computer Trade Union Organization states that 47% of internet businesses have lost more than 50% of their income. If the internet disruptions continue, 73% of businesses with less than 50 employees will lose over US$1,100 daily.

The government is considering a 20% pay raise for state workers. Still, the Rial’s sharp fall has eaten away at any benefit for workers, says London-based Iranian news website Iran International.

How we can help

Policies and procedures for keeping pay programs functioning in highly volatile markets such as Iran are critical. Organizations must develop a Special Measures Policy to determine the triggers and equivalent measures to support staff and ensure business continuity during political unrest. In addition, decide how your organization plans to implement the next steps for your staff. Employees need to know they can rely on their employer to help them during times of uncertainty.

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Speak with our consultants today to find out how we can create one for you.

References:

Turkiye's Hyperinflation

Turkey’s Hyperinflation and How Employers Are Weathering the Crisis

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor markets that are making headlines around the world and wants to share news and updates on the conditions in these markets.

Turkey, a Eurasian hub of 84 million people, is weathering an unprecedented economic and monetary crisis. Inflation is a major issue, with rising prices chipping away at purchasing power every week.

The Turkish Statistical Institute reported that Turkey’s annual inflation rate reached 83.45% in September, the highest in 24 years. Independent economists from ENAGrup believe the actual figure is 186.27%.

Inflation has been soaring in Turkey for 16 months, yet Bloomberg reports that price growth in the transcontinental country has been in the double digits since early 2017.

The country has suffered debt and currency calamities in the last few years, says The Wall Street Journal, but the current crisis is different. According to a report from Capital.com, aggressive interest rate cuts, high energy and commodity prices, heavy dependence on imports, and a depreciating Turkish Lira have contributed to surging inflation rates.

A paper from the Middle East Institute states that Turks have been driven to protect their savings by changing Lira deposits into gold and foreign currencies such as the Euro and United States (US) dollar. The tendency to keep savings under the pillow is also an ongoing trend.

What the government is doing

The Turkish government has taken several measures to protect households from high inflation. These mechanisms include:

  • Protecting Lira-denominated bank deposits
  • Raising the minimum wage by 50% in January and by 30% in July
  • Giving social transfers to poor households
  • Placing a 25% cap on rent increases
  • Reducing taxes on utility bills and introducing fuel and energy subsidies
  • Slashing value-added taxes on specific goods

But the measures have had little impact on the lives of Turks.

What the employers are doing

As their purchasing power shrinks and their job security erodes, many Turks are falling out of the middle class, says The Economist.

People are getting upset as they see their living standards falling. Businesses have been affected by the Lira’s fall in value, while people’s wages have been depleted because they can now buy less with their money. The price surge has upturned household and company budgets, and many are scrambling to cut costs. Over two-thirds of Turks are struggling to pay for food and cover their rent, according to a survey by the Yoneylem Social Research Center.

As a result, workers are negotiating higher salaries, and employers are taking proactive steps. Here are a few examples of what employers in Turkey are doing in response to mounting inflation:

  • Implementing across the board salary increases of between 15% to 30%
  • Improving allowances for items such as meals and transportation
  • added cash incentives or bonuses

Beginning summer last year, Mustafa Tonguc, the chief executive of DHL Express in Turkey, compiled a list of the cost of 50 essential products and compared them with their German equivalents to persuade bosses at headquarters to raise the wages of over 1,000 staff. According to the Financial Times (FT), Tonguc would raise wages three more times in the year ahead. “We as a business can’t fix the global economy, but we can take care as much as we can of our people,” Tonguc told FT. “In the last 12 months, many companies went bankrupt. We felt people should be assured of their job security,” he added.

How we can help

Policies and procedures for keeping pay programs functioning in highly volatile countries like Turkey are vital. A Special Measures Policy should be set up to determine the triggers and equivalent measures to support staff and ensure business continuity during volatile periods. In addition, organizations must decide how they plan to implement the next steps for their staff. Employees need to know that they can rely on their employer to help them during times of crisis.

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Speak with our consultants today to find out how we can create one for you.

References:

Strategy in Sub-Saharan Africa

Vital Partners, Shared Priorities: The US Strategy Towards Sub-Saharan Africa

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor markets that are making headlines worldwide and wants to share news and updates on the current conditions in these markets.

The White House released in August 2022 the US strategy toward Sub-Saharan Africa (SSA). Its renewed policy supports four main objectives, including advancing pandemic recovery and economic opportunity.

A priority and opportunity

SSA is of growing importance on the world stage. Comprising 49 countries, the region is a geopolitical priority and an emerging economic opportunity. SSA countries hold roughly 25% of United Nations General Assembly seats. Moreover, the region is integrating into the world’s largest free trade area.

The US Department of Commerce’s International Trade Administration describes SSA as presenting real opportunity, with indicators such as:

  • A combined market population of over 1.2 billion people (that is expected to double by 2050),
  • A gross domestic product of more than US$1.5 trillion, and
  • Home to some of the fastest-growing economies in the world.

The World Bank reports that economic activity in the area is set to expand by 3.6% in 2022, 3.9% in 2023, and 4.2% in 2024. Additionally, its young population makes SSA an attractive investment destination. Massive demographic shifts in this part of the world provide tremendous opportunities to create jobs, boost incomes, and reduce poverty, especially in a global environment of slowing growth.

China and its growing influence in the region

The world is well aware of Africa’s importance, encouraging countries to expand their political, economic, and security engagement with African states. In the past 20 years, new actors, such as China, have been shifting dynamics across SSA. And Chinese influence in the region is real and significant.

In 2001, China received less than 3% of the region’s exports, compared to nearly 19% for the US. In 2009, China overtook the US as SSA’s largest trading partner. Almost 20 years later, China has emerged as the region’s single greatest export partner, holding an 11% share of exports in 2019, while the US share dropped to 5%. China’s Belt and Road Initiative has invested in SSA through transportation, power, water supply, and other infrastructure projects. China has also provided loans, investments, and aid.

The US reframes its Sub-Saharan Africa partnership

The US is responding to growing foreign activity and influence in SSA and is engaging a region undergoing significant transformation. “It would be a strategic mistake for the US to abandon its engagement with SSA altogether—especially as US adversaries and competitors are relentlessly increasing their investment in the region…” said Daniel Runde, Director of the Project on Prosperity and Development, and Sundar Ramanujam, Research Associate of the Project on Prosperity and Development at the Center for Strategic & International Studies (CSIS).

Biden’s policy differs from those of previous administrations because it focuses on overhauling its relationship with SSA from donor-recipient to genuine partnership. “Biden’s team extols Africa’s strengths and is proposing US-Africa partnerships on a range of issues,” said Mark Bellamy, Senior Advisor of the Africa Program at CSIS.

Further, Devex reports that the strategy has generally been well-received and is seen as sending a strong message about US engagement in the region. “It’s a strategy that reflects the region’s complexity—its diversity, its power, and its influence—and one that focuses on what we will do with African nations and peoples, not for African nations and peoples,” said US Secretary of State Antony Blinken as he announced the strategy.

It’s also an effort to make regional engagement authentic and not just a battleground to compete with China and Russia. “Too often, African nations have been treated as instruments of other nations’ progress rather than the authors of their own,” added Blinken in his announcement.

Why this matters to employers

With the intent of the US to reestablish ties and reinvest in SSA, employers with a presence in the region can anticipate a significant shift in the labor market in years to come. Monitoring the labor market as early as possible is critical for your organization to seize economic opportunities and remain competitive. Keeping an eye on market shifts enables your organization to plan and make informed decisions about hiring, pay management, employee benefits, and more.

How we can help

We at Birches Group survey leading employers in over 150 countries with a consistent methodology designed for dynamic, emerging markets across SSA. We survey labor markets of varying sizes, focusing on employers that set trends. Get updated and relevant data on every country in SSA. Speak with our consultants today to understand our data and how you can use it for your organization.

References:

Zambia’s Debt Crisis: What You Should Know

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor markets that are making headlines worldwide, and wants to share news and updates on the current conditions in these markets. 

Defaulting on debt

In November 2020, Zambia became the first African nation to default on its Eurobonds during the COVID-19 pandemic, bringing the country’s debt distress into headlines around the world. The debt crisis resulted from “years of economic mismanagement,” the International Monetary Fund said. Drought in 2019 and COVID-19 in 2020 worsened Zambia’s economic challenges.  

A precarious macroeconomic situation 

But the Zambian economy was witnessing “a weak macroeconomic condition” even before the COVID-19 outbreak, the United Nations Conference on Trade and Development said. Growth was sharply declining. Zambia was facing severe challenges such as high inflation, unsustainable debt levels, low international reserves, and tight liquidity conditions, according to the economic outlook of the African Development Bank (AfDB). 

Over the past five years, Zambia’s economic growth slightly accelerated in 2017 and 2018, slowed in 2019, declined to a negative in 2020, and resumed in 2021, as reported by the 2022 Index of Economic Freedom. In 2018, Zambia’s Gross Domestic Product (GDP) was estimated at US$ 26.31 billion, with an annual growth rate of 4 percent. But an “expansionary fiscal policy mainly financed by external and local borrowing” caused Zambia’s debt to hit 91.6% of its GDP in 2019 and 104% in 2020.  

Inflation nearly doubled, and the Zambian kwacha quickly depreciated by 64%. When COVID-19 hit Zambia being in this situation, the country’s precarious macroeconomic position took a turn for the worse. The Zambian economy fell into a deep recession, the AfDB said. More inflation, currency depreciation, and a significant debt burden forced Zambia to default on its debt obligation and seek more relief from lenders. 

A new dawn for Zambia 

In August 2021, Zambia’s trajectory significantly shifted with the election of a new government led by longtime opposition leader Hakainde Hichilema. As Zambia’s seventh president, Hichilema inherited a nation with unsustainable debt larger than previously known and had to deal with the impact of its debt default.  

According to Deloitte, debt restructuring, talks with the International Monetary Fund (IMF), and a more stable exchange rate, among other measures, would be “fundamental to Zambia achieving macroeconomic stability.” Hichilema outlined an ambitious agenda to address structural weaknesses through macroeconomic reforms guided by an IMF program. 

Engaging the IMF 

“Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path,” the IMF said. The government began to actively seek a comprehensive debt restructuring. Specifically, it initiated a creditor engagement strategy to secure immediate debt service relief and better terms, the AfDB said. 

On December 6, 2021, the government of Zambia announced it had reached a staff-level agreement on a US$1.4-billion extended credit facility with the IMF from 2022 to 2025. On September 6, 2022, the IMF’s Executive Board approved a 38-month credit facility amounting to US$1.3 billion to “restore economic stability and foster higher, more resilient, and more inclusive growth.” 

These recent events marked a significant milestone and set the path for negotiations with Zambia’s lenders to restructure the country’s external debt.  

Focusing on economic recovery 

The country’s economic outlook has markedly improved, given renewed optimism and increased investor confidence post-elections. Additionally, the newly elected government has made several important policy announcements, including an enhanced focus on rebuilding the economy and creating an enabling business environment to foster growth. 

Zambia’s growth in the coming years is to be likely driven by “a clear path to debt sustainability, leveraging the country’s mining potential, increased private sector participation, focus on job creation, and good governance,” said Deloitte & Touche (Zambia) Managing Partner Humphrey Mulenga in Doing Business in Zambia. Economic activity will gradually pick up, with the World Bank estimating growth at an average of 3.8% from 2022 to 2025. While the market sentiment has markedly improved, the Zambian economy remains fragile, the IMF said in a September 2022 report. 

How we can help 

We at Birches Group survey leaders in over 150 countries with a consistent methodology designed for dynamic, emerging markets such as Zambia. We survey labor markets of varying sizes, focusing on employers that set market trends. Our survey data empowers organizations to monitor and benchmark positions in local markets and create salary structures tailored to each country’s requirements while conforming to global standards. 

Speak with our consultants today to access up-to-date labor market data and understand how to use it for your organization. 

References:

Using Local Market Data

USING MARKET DATA FROM NEIGHBORING COUNTRIES AS A PROXY IS NOT THE RIGHT APPROACH

Written by Kai Donesa on . Posted in Resources.

When companies need to set or review salaries, they normally use local market data as their external reference. But what do you do when there is no local market data available? This is common in smaller countries where there are not as many established employers and little to no survey providers are present. As HR consultants, we have received many inquiries on this matter and have seen companies resort to using salary data from nearby countries in the region as their proxy.

While it is understandable that in this case, companies would think that salary data closest to them in terms of proximity could be a valid alternative because perhaps countries within the same region would share similar characteristics, this is certainly not the case. We conduct salary surveys in over 150 countries, three times a year and would argue that while the country next door would have many similar jobs as your own, salary rates and pay packages are considerably different.

In Birches Group, we believe that local staff salaries should always be based on local market data. Here’s why:

The cost of labor in every country varies significantly, even if they all belong to the same region. Local conditions and availability of talent are what drive salary movement in any country. Talent that could be widely available in one market, may be very limited in another. So, when smaller markets reference their salaries against larger markets, especially if they are regional locations where wages are usually three to four times higher, those salaries would be overstated if put into the local context.

Using the example above, this is a chart that illustrates the equivalent pay range for a BG-10, a Seasoned Professional, in each of the Southeast Asian labor markets. If you are an employer in Laos and lack salary data for a BG-10 level, it would not be advisable to reference the equivalent salary range in Thailand just because you share a border with them. Similarly, if you were to apply Thailand pay ranges locally in Myanmar, not only are you significantly overpaying, but this would also be challenging to defend and maintain moving forward.

Market practice on compensation and benefits is different for every country. For some markets, certain allowances or benefits are mandated by local law, while other markets do not share the same requirement. In other countries, employers provide benefits to address local hardships, such as a company shuttle provided to staff to address the lack of public transport. But if you look at other countries in the same region, this may not be the case. Also, some countries have benefits that are cultural in nature making it unique to their market, while others could have something else. If you reference pay practices from other countries, you risk ignoring the unique conditions of your own market. See this example below:

The chart above illustrates total compensation pay packages for a BG-10 Seasoned Professional in ten countries in east and southern Africa. If you look closely, each component of total compensation varies for every country. Using the example above on pay practices, if you are an employer in Tanzania for example, the pay mix at the BG-10 level is comprised of not only cash benefits on top of base salary but in-kind benefits as well. But choosing to use salary data from Kenya because they are close and they are a regional hub, the pay mix toward total compensation is not the same. If you apply this in the local Tanzanian context, you are missing market practices on in-kind benefits compared to other employers in the local market.

So What Should You Do?

If your organization is in a small market in need of salary survey data, we recommend working with a survey provider whose methodology is designed for developing markets. Survey providers are equipped to launch local salary surveys that can bring employers the market data they need to inform their pay management policies accordingly.

Birches Group’s Community Market Compensation and Benefits Surveys are designed with developing markets in mind. And because developing markets are dynamic, our surveys cover all elements toward total compensation to give our clients the full context of the local labor market. Contact us to access the market data you need or to learn more about our subscription options.

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.

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

Sri Lanka Economic Crisis: What You Must Know About the Current State of Affairs

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group has been monitoring the volatile economic conditions in Sri Lanka and wants to provide updates on the current labor market conditions happening in the South Asian nation. 

The past few months have not been easy for Sri Lanka, and the condition has only worsened. The country has been facing economic, political, and social crises due to the impact of the COVID-19 pandemic, rising foreign debt, and a depreciating rupee. According to a news report from BBC, the country’s inflation rate is now at 54.6% as of June 2022. Our August 1 Market Monitor shows that the exchange rate movement against the US dollar, Euro, British pound, and West African CFA franc in the past six months is at 79%. Moreover, after protests forced President Gotabaya Rajapaksa to flee to the Maldives and Singapore, Sri Lanka is in a state of emergency. 

Losing skilled talent 

These are challenging times for employers and staff in the South Asian island nation. It has been noted that there is an increasing number of skilled and educated Sri Lankans—from IT experts to hospitality and marketing professionals—who want to work overseas, where they can maximize the rupee’s devaluation and survive hyperinflation. According to Manusha Nanayakkara, the minister of labor and foreign employment, almost 168,000 Sri Lankans have registered to work abroad. Many intend to work in the Middle East, particularly in Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). An independent survey conducted in November 2021 by the country’s Institute for Health Policy reveals that 1 in 4 Sri Lankans wanted to emigrate if they had the opportunity. This ratio has increased to 1 in 3 in July 2022.  

Compensation in Sri Lanka and the Middle East 

Our July 2022 multi-sector survey indicates that compensation ranges in Middle Eastern labor markets are significantly higher than in Sri Lanka. Our survey results show that the average annual salary ranges for support staff at Birches Group Level 6 in Sri Lanka receive a minimum of US$ 5,810 and a maximum of US$9,896, while a senior professional at Birches Group Level 10 receives a minimum of US$ 14,246 and a maximum of US$ 23,517. In Kuwait, support staff at Birches Group Level 6 would be paid approximately seven times more, between U$ 48,054 and US$ 76,418, while a senior professional at Birches Group Level 10 would receive between US$ 108,420 and US$ 153,708. As the chart above indicates, the figures are even higher in the UAE, Saudi Arabia, and Qatar. 

Next steps for employers 

Birches Group’s Market Monitor categorizes labor market conditions according to levels of volatility, with Level One as the lowest (reporting standard market conditions and market movement between 0–20%) and Level Six as the highest (where the country has reported labor market collapse, departure of most comparators from the market, and absence of reliable data on currency and inflation). In our most recent Market Monitor, Sri Lanka is now at Level Four, where labor market conditions reflect sudden, unexpected social or economic events, currency devaluation of 50% or more in six months or less, and there is disjointed and unclear comparator response. When the labor market becomes volatile, such as what we are seeing in Sri Lanka, organizations should place policies and procedures to keep pay programs functioning and to maintain business continuity. 

To avoid losing skilled employees leading to brain drain, organizations in Sri Lanka must address the situation by establishing a Special Measures Policy. Through the Special Measures policy, employers can define the appropriate triggers within labor market conditions that warrant a change or update in salaries and benefits. These triggers, in turn, outline what organizations will do to help cushion the impact of hyperinflation on their people.   

How can we help 

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Contact us today to find out how we can create one for you. 

References: 

  • 1 August Market Monitor Report 
Ghana’s Cost of Living Crisis: What You Need to Know

Ghana’s Cost of Living Crisis: What You Need to Know

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group has been keeping an eye on economic conditions in Ghana and wants to provide updates on recent developments in the West African nation. 

One of West Africa’s more prosperous countries has been rocked by a cost-of-living crisis. Inflation in Ghana reached 29.8% in June 2022, the highest level in two decades. The Guardian reports that food prices have risen by 30.7% since last year, and energy costs have sharply climbed. Transportation costs have also gone up. 

Our August 1 Market Monitor further indicates that the Ghana cedi has seen an exchange rate movement of 34% against the US dollar, Euro, British Pound, and West African CFA Franc in the past six months. As inflation persisted and broadened, hundreds took to the streets of the capital Accra to protest the deteriorating economy. 

President Nana Akufo-Addo has stressed that the economic challenges the country is facing are the effect of the COVID-19 pandemic and the war in Ukraine. The government is seeking a support package from the International Monetary Fund (IMF), which visited Ghana in July. In a July 13 statement, the IMF said that such adverse developments “have contributed to slowing economic growth, accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation.” 

What the labor market indicates 

The Ghanaian labor market exhibits rapidly evolving market conditions. Birches Group’s Market Monitor categorizes labor market conditions according to levels of volatility, with Level One as the lowest (reporting standard market conditions and market movement between 0–20%) and level six as the highest (where the country has reported labor market collapse, departure of most comparators from the market, and absence of reliable data on currency and inflation). In our latest Market Monitor, Ghana is classified as Level Three, where there are rapidly evolving market conditions, movement of more than 40% in the last 12 months, and multiple reviews and revisions are typical amongst comparators. While the surge of inflation has been swift in the country, labor market data has not moved as fast.  

Based on our salary survey analysis, no labor market movement was observed in July 2021.  

The chart above shows labor market movement in Ghana against reported inflation rates from July 2021 to July 2022 based on Birches Group’s multi-sector salary survey. As seen in the chart, labor market movement significantly increased in 2022, but inflation rates have always been much higher and moved at a faster rate from 2021. We believe this is because inflation or the cost of living is not directly proportional to the cost of labor. 

Next steps for employers 

When labor market conditions become volatile, such as in Ghana, organizations should establish policies and procedures to keep pay programs functioning and maintain business continuity. Through a Special Measures Policy, organizations need to determine the appropriate triggers based on labor market conditions that demand an update in salaries and benefits. Organizations must also decide how they plan to implement the next steps for their staff. Employees need to know that they can count on their employer to assist them amid the burgeoning crisis. 

How can we help 

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Contact us today to find out how we can create one for you. 

References: 

  • 1 August Market Monitor Report 

UNDERSTANDING TOTAL COMPENSATION

Written by Kai Donesa on . Posted in Resources.

In Birches Group, we apply a total compensation approach when analyzing salary survey data.  While we understand that many employers are primarily interested about how their base salaries compare against other comparators, we should not forget that benefits also play an important role in many markets, particularly in developing countries.

For many years, Birches Group has been conducting salary surveys in over 150 countries around the world. Our experience working with high growth markets has shown us that when employers center their decisions on base salary alone, they are essentially discounting the value benefits have in that market and its possible impact on staff recruitment and retention.

If you are working with developing market data, here are three reasons why total compensation is the best approach:

  • Pay Packages Can be Varied – Every organization has its own pay policy. This policy then guides how organizations design their pay packages. Depending on how competitive they want their salaries to be, the types of benefits they can include, and their target peer group, you can imagine how varied pay packages can be in just one single country. In some markets, benefits could be government mandated, some could be cultural, and others could address local market conditions. If all these benefits are provided by majority of your target comparators, then it would not be enough to compete on base salaries alone.
  • Market Practice – As mentioned, some benefits are considered statutory, while others are cultural in nature. It is the responsibility of the employer to know what the local market practice is and tailor their pay policy around this. Not only do you have to abide by what the law states, but also some benefits are given for historical reasons. Concentrating on just cash could make you fall short in the point of view of your staff.
  • Being Competitive – Not all organizations compete the same way. Some companies like to have competitive base salaries but not provide many benefits, while others may not have competitive base salaries but offer very attractive benefits. The only way HR can properly determine competitiveness is through a total compensation view. We believe that it is important for employers to have a “healthy” mix of base salary, cash, and in-kind benefits at every level, where pay packages are competitively aligned to your market but still following internal policy.

Birches Group surveys are designed with developing markets in mind. Our survey reflects employer practice for a wide variety of allowances and benefits, both cash and in-kind, demonstrating nuances commonly found in these markets. And because developing markets are dynamic, every country is updated on an ongoing basis three times a year, in April, July, and October. Contact us to access the survey data that you need.

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.

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

JOBS, GRADES, INCUMBENTS: UNDERSTANDING THE LIMITATIONS OF SURVEY DATA AND HOW TO AVOID SURVEY DATA PITFALLS

Written by Kai Donesa on . Posted in Resources.

Salary surveys are an important HR tool. They are necessary for organizations to properly manage and maintain compensation every year. However, survey approaches can differ greatly from one provider to the next, particularly in the information they collect, their approach to job matching, and their treatment and presentation of employer data.

When deciding which survey data to use, it is essential for HR practitioners to familiarize themselves with the kind of information that each survey provides, the methodology behind the analysis, and the limitations that come with every approach. Here are some things to keep in mind to help organizations steer clear of typical salary survey missteps:

  • Limits When Working with Job Data – in our article, “Measuring Market Position”, we explained that too much emphasis has been placed on certain occupations just because they are considered ‘hot jobs.’ But occupational variance is not as significant as you think, especially when looking at salary surveys, because when you update your salary scale, you essentially update your grade levels – and grade levels are generic, not based on occupations. When looking at survey data, job data can be a useful additional reference if you want to look deeper into the market data. But it is important to note that job data is not what impacts your salary scale, but grade level data.
  • Limits When Working with Incumbent Data – we have mentioned in a few of our past articles how incredibly misleading incumbent data can be when used as a survey data reference. Many employers believe that if a salary survey reports actual incumbent salaries, the market data is somehow perceived as more ‘accurate’. In Birches Group, we believe that salary range data, not incumbent data, provides a more stable and realistic view of the labor market. Incumbent salaries are person-based, highly dependent on the qualities of the individual sitting in that position. When working with incumbent salaries, it is common to find outliers that significantly skew the overall market data because their individual salaries are influenced by other factors separate from the job. But when salary ranges become the reference, this provides a more accurate picture of market movement and serves as bookends that prevent outliers in the analysis.
  • Limitations When Working with Just Base Salary – some employers, when looking at survey data, tend to rest their analysis just on base salary information. The problem with this approach is that in majority of labor markets around the world, base salary is only one component of an employee’s actual compensation. To be considered as an employer of choice, you will need to look at the full package, and that includes benefits – cash and in-kind – as well as market practices on non-salary benefits such as pension, medical, etc. In some markets, benefits have a big impact when it comes to recruitment and retention. In other countries, some benefits are mandatory, some cultural, while others address local hardships.

Birches Group’s conducts compensation and benefits surveys in over 150 countries around the world. Our multi-sector approach is designed for high growth, developing markets where leading employers determine local market trends and practices. We capture data from a total compensation perspective because in many of these markets, base salary is only part of the picture. Additionally, because developing markets are volatile, our surveys make use of salary range data to provide our participants a more accurate movement of the market that is linked to the purpose of the job, not the incumbent. Lastly, our surveys are updated three times a year, every April, July, and October which guarantees our clients fresh data every time. Contact us to learn more about our Community™ Compensation and Benefits Survey in your country.

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.

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

composition and position from the salary survey

BUILDING YOUR SALARY SCALE: DETERMINING COMPOSITION AND POSITION FROM THE SALARY SURVEY

Written by Kai Donesa on . Posted in Resources.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale

Salary surveys are an important tool and step that managers use when building or refining their company’s salary scales. This helps managers establish and set appropriate compensation and benefits within their organization based on information provided by other employers present in the labor market. Current salary surveys offer different methodologies to capture market data, each one with differing employer samples, compensation and benefits information collected, and more importantly, varying approaches to job evaluation. All these are important factors to consider when selecting the right survey to use when building your salary scale.

Often, especially in large labor markets, there has been a preference among many employers to go with the salary survey that has the biggest employer sample. While this approach may seem reasonable, the reality is that many of the employers in the survey will not be relevant comparators, especially if they do not compete with you for the same jobs or share similar characteristics as your organization.

After establishing your compensation policy, creating your job structure, and participating in your chosen salary survey, determining your composition and position in salary surveys is the next crucial step towards building your salary scale.

Selecting the Right Comparator Group

Composition refers to the composition of the market used to establish your competitive position. Many employers will say, “We want to be at the 50th percentile of the market.” Composition answers the question, “50th percentile of what market?”

When designing your scale, you should establish a refined comparator sample, made up of employers important to your organization. Your compensation philosophy should identify the number of comparator organizations to be selected and the criteria they must meet to be included in your market comparison. Examples of criteria to consider include:

  • Talent competitors (those you recruit talent from and lose talent to)
  • Industry peers
  • Organizations of the same size or in the same geographic location
  • Other leaders in your market outside of your sector

Keep in mind that participants in a survey can change each year, with new ones added and old ones dropped. The key is having consistent criteria that ensure, even with a changing survey sample, your selected comparator group is consistent and still sufficient to meet your requirements.

Targeting Your Market Position

Once you have narrowed down your target comparator group, you will need to identify your desired market position. Position is the expression of how competitive you wish to be against your defined market – your target market position. The 50th percentile, or median, is a common target. That means you will be right in the middle of the pack. Is that where you need to be to reach the talent you wish to recruit and retain? Is it the same for all levels of the organization?

Before deciding on a percentile, it is important to refer to your organization’s pay policy. This will ensure that your resulting analysis aligns with the standards approved by your management, is credible, and is easily defensible to stakeholders. Selecting your target market position also depends on whether you wish to lead, match, or lag the market.

If you match the market, you are anchoring your salary scale to where the market is today. With lead or lag positions, you are deciding to either get out in front of the market or trail behind. A simple way to lead is to estimate the market movement from the date of your scale for a period of time forward — typically a year. This ensures your scale is competitive even as other employers adjust their compensation during the same period. A lag position is usually not desirable, as you will be trying to constantly catch up to your peer organizations.

If your organization is facing challenges to recruit or retain talent, you should reassess your target market position and adjust it to ensure your organization is positioned competitively against your chosen market. Sometimes recruitment and retention issues are limited to specific grades or bands. While some organizations may use the same target market position for all grade levels, labor markets are not uniform and do not move in a linear fashion. Certain grade levels can move faster due to high demand, hot skills, or other considerations. Organizations can choose a more competitive target market position for job levels where these talent challenges exist.

Finally, do not forget to consider budgetary resources. Whatever steps you take in the design of your structure need to be made with the cost impact in mind.

Understanding the importance of determining your composition and position from the salary survey can improve the way your organization can move forward with your salary scale. Hopefully, with this information, organizations will feel more informed and empowered to build one of the most important tools in human resources management. Birches Group conducts salary surveys in over 150 countries around the world and uses a simple and straightforward job evaluation approach to ensure consistency throughout. Through our surveys, we help organizations design salary scales that will fit their needs. Contact us to learn more about how we can help you get started.

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 to know your score!

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.

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