NAGING NG NGO MA MANAGING CO COMP MPENSAT NSATION ION IN - - PowerPoint PPT Presentation

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NAGING NG NGO MA MANAGING CO COMP MPENSAT NSATION ION IN - - PowerPoint PPT Presentation

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NAGING NG NGO MA MANAGING CO COMP MPENSAT NSATION ION IN VOLA LATILE ILE ECO CONOMIES OMIES March 3, 2016 Webinar Specialized HR consultancy headquartered in New York, with offices in Manila, Philippines; Ume, Sweden; and

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March 3, 2016 Webinar MA MANAGING NAGING NG

NGO

CO COMP MPENSAT NSATION ION IN VOLA LATILE ILE ECO CONOMIES OMIES

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  • Specialized HR consultancy headquartered in New York,

with offices in Manila, Philippines; Umeå, Sweden; and Riga, Latvia

  • We conduct NGO Local Pay salary and benefits surveys

in about 86 countries globally, and multi-sector surveys in 148 countries

  • We work with over 300 international NGOs and

development organizations

  • We partner with the CHS Alliance to promote sound HR

practices in the development sector

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  • Introduction
  • Key Concepts
  • Case Study – Malawi
  • A Policy Driven Approach
  • Dollarization
  • A Quick Look at Expat Compensation
  • Wrap-Up
  • Q & A
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  • Inflation:

– Measures the increase in cost of living – Typically issued by government statistics bureau – Market basket approach measures prices in country over time – Government statistics sometimes unreliable

  • Devaluation

– Measures currency exchange rates, typically versus USD or

  • ther hard currency

– Currency markets are volatile and react to many factors including political ones

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  • Donor budgets are fixed
  • Impact on price of local

goods and supplies

  • Compensation increases
  • ver time
  • Impact (
  • n hard currency

budgets

  • Increase in price for

imported raw materials

  • Supply of hard currency

through banking system

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  • Desire to be kept “whole”
  • Concern about ability to

maintain their standard of living

  • Can they afford staple items

for their family?

  • Look to employer to help
  • Making less in hard currency

terms (does that really matter?)

  • Imported goods will increase

in price

  • Ability to cover offshore

expenses

  • Will seek in-kind benefits

rather than currency (keeps value)

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  • Employers competing for talent form a labor

market

  • Labor markets behave according to the classic

economic theory of

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  • There has been a period of economic instability

since 2012:

– Inconsistent growth – Steady, high inflation – High devaluation

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Source: Barry Rodin, Independent Economist

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  • They are

for salary setting, but…

  • There is

between salary market movement, inflation and devaluation

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Source: Birches Group LLC, NGO Local Pay Survey

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Source: Birches Group LLC, NGO Local Pay Survey

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Employment Value Proposition

Affiliation Work Content Career Benefits Pay

 Variety  Challenge  Structure  Autonomy  Feedback  Impact  Advancement  Personal Growth  Recognition  Training  Employment Security  Mission and Values  Reputation and Ranking  Work Environment  Institutional Culture  Base Salary  Support to Expatriation  Reward  Pay Process and Transparency  Health  Retirement  Work Arrangements  Tuition

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  • ,

,

  • Defines the relationship of the employer to the

market, and within/across the team

  • Determines level of competitiveness and provides a

structure aligned to career progression

  • Provides for staff to enjoy a certain quality of life
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  • Compensation Policy

– Targets the appropriate market position and composition to sustain competitiveness – Defines the reach of the organization for seeking critical skills

  • Good Administration

– Enables the securing of timely/accurate market data – Translates market data into dynamic salary structures – Brings and to setting and maintaining pay

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  • Maintain office operations
  • Address staff anxiety
  • Demonstrate responsiveness which is responsible
  • Maintain linkage to established pay policies
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  • Sets precedent for later and other countries
  • Sensitive to:

– Resource constraints – Linked to the market – Community image

  • Allows organization to act quickly without lengthy

approvals

  • Has an exit strategy
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SLIDE 24

Define a Trigger Point Define a Response Set a Timeframe and Monitor Plan Your Exit

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  • Significant devaluation

– Example: Minimally 40% within a six month period accompanied by price spikes in basic commodities such as food

  • High inflation

– Example: 50% devaluation at one time, or inflation above 20% for three consecutive months

  • Consider what data source you will use
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SLIDE 26
  • Temporary allowance of 25% of inflation or

devaluation amount

  • Immediate payment

– Ongoing allowance, not part of base salary – Bonus to cover any retroactive period

  • Always consider your competitive market position
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  • Check market movement regularly
  • As more employers respond to the crisis, market

will start to move up

  • Periodically, say every three months, decide if you

should convert some or all of Special Measures allowance to regular salary

  • Always consider your competitive market position
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  • Market has caught up or overtaken the amount of

Special Measures Allowance

  • Convert Special Measures Allowance to regular

salary and end the allowance

  • Always consider your competitive market position
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Trigger is Reached

  • 25% of the

trigger amount is established as a special measures allowance

  • Take your

market position into account and adjust accordingly Market Monitoring

  • During the

next 3-6 months, monitor market movement

  • When market

movement

  • ccurs,

increase base salary and reduce allowance in equal amounts Market Exceeds Special Measures

  • Roll into salary
  • Eliminate

allowance

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  • Trigger is 40% devaluation over 6 months
  • 3-month devaluation is 43%;
  • Special measures allowance of 10.75% (25% of 43%) is

instituted

  • 4 months later, survey data shows market movement of 7%

– Option 1: Recharacterize 7% from allowance to salary – Option 2: Continue market monitoring

  • 6 months later, survey data shows market movement of 13%

– Move remaining allowance into salary and eliminate

  • Marketing monitoring is critical,

:

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  • What is granted cannot be taken away or reduced;

at best it can be frozen

  • It is

to tailor measures for individual staff to address different personal situations or needs

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  • Employees want to know
  • Employees understand that their employer cannot

necessarily “keep them whole,”

  • Managers and employees alike appreciate the

clarity a clear policy provides

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  • Advise staff of measures taken at each stage to

demonstrate responsiveness

  • Remind managers and staff about the policy

provisions

  • Be empathetic to their financial pain
  • Emphasize a continuing link to the labor market
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*Hard currency is US dollars, UK Pounds, Euros, and other global reference currencies

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¡No! Nein! Não! Нет! Hakuna! 不！ Nej!אל! ไม่! Non! Nee! لب!

In a n any ny lan angu guag age, e, the he an answ swer is no s no!

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  • Unless

– It is supported by comparator practice – There is no functioning local currency

  • Caution

– Paying in foreign currency in some countries is illegal – Staff may be at risk if they participate in black market transactions

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  • Easy to start
  • Simple to explain
  • Difficult to set exchange

rate

  • Local currency could
  • Creates a mindset which

separates local staff from the local economy

  • Difficult to end
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If you switch to hard currency, you will overpay your staff. In the case of Malawi from 2012 to present, if your compensation tracked cumulative devaluation, it would have increased by the market (increase of 391% vs 136% market movement)

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  • If a significant number of employers adopt hard

currency, it skews the market in relation to those still using local currency

  • Case in point: Mozambique
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  • As an employer, it is the labor market that

determines the level of pay

  • Special Measures are temporary and supplemental,

not a replacement for labor market comparisons

  • Goal is stabilization not insulation
  • Demonstrates your willingness as an employer to

respond within the constraints of resources and sensitivity to the broader context

  • Clear communication is absolutely essential
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  • Objectives
  • Are they on a local payroll?
  • How is their package constructed?

– Local rate – Balance sheet – Other

  • Not all of their pay is spent locally
  • Does the company already pick up some costs

directly?

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  • NGOs should pay careful attention to labor market movement

rather then inflation/devaluation “noise”

  • A policy-driven approach promotes transparency and

reassures staff that the company will help when necessary, without sacrificing their market-driven basis for compensation

  • You need reliable data, especially in the most dynamic global

markets

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  • General Inquiries

info@ngolocalpay.net

  • Curtis Grund, Practice Leader (New York)

curtis.grund@birchesgroup.com

  • Warren Heaps, Partner, Birches Group LLC (New York)

warren.heaps@birchesgroup.com Online:

  • Birches Group website

www.birchesgroup.com

  • NGO Local Pay website

www.ngolocalpay.net

Questions and Answers

  • We have compiled questions submitted during

the session

  • We will answer as many as we can in the time

remaining

  • Others will be answered in writing and

summarized for all attendees

https://www.linkedin.com/groups/3371682

Join NGO Local Pay

  • n LinkedIn
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SLIDE 45
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BG Office Survey Country Partner Office

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  • Salary and benefits surveys

–

  • Salary scale design
  • Job evaluation, competencies and performance

management solutions using our ™ system

  • Training courses for NGO Compensation, and Job

Design and Evaluation

  • Consulting on compensation, expatriate

management, HR policy and organization design

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  • Afghanistan
  • Angola
  • Armenia
  • Bangladesh
  • Belgium
  • Benin
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Central African Republic
  • Chad
  • Chile
  • China
  • Colombia
  • Congo, DR
  • Costa Rica
  • Cote d'Ivoire
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Ethiopia
  • Georgia
  • Ghana
  • Guatemala
  • Guinea
  • Haiti
  • Honduras
  • Hong Kong
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Jordan
  • Kenya
  • Kosovo
  • Kyrgyzstan
  • Laos
  • Lebanon
  • Lesotho
  • Liberia
  • Madagascar
  • Malawi
  • Malaysia
  • Mali
  • Mexico
  • Mongolia
  • Mozambique
  • Myanmar
  • Namibia
  • Nepal
  • Netherlands
  • Nicaragua
  • Niger
  • Nigeria
  • OPT
  • Pakistan
  • Papua New Guinea
  • Peru
  • Philippines
  • Rwanda
  • Senegal
  • Sierra Leone
  • Somalia
  • Somaliland
  • South Africa
  • South Sudan
  • Sri Lanka
  • Sudan
  • Swaziland
  • Switzerland
  • Syria
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Turkey
  • Uganda
  • Ukraine
  • United States
  • Vanuatu
  • Vietnam
  • Yemen
  • Zambia
  • Zimbabwe
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SLIDE 49
  • Afghanistan
  • Albania
  • Algeria
  • Angola
  • Argentina
  • Armenia
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Benin
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Cape Verde
  • Central African Republic
  • Chad
  • Chile
  • China
  • Colombia
  • Comoros
  • Congo, Dem Republic of
  • Congo, Republic of the
  • Costa Rica
  • Cote D'Ivoire
  • Croatia
  • Cuba
  • Djibouti
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • Fiji
  • Gabon
  • Gambia
  • Georgia
  • Ghana
  • Guatemala
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Iceland
  • India
  • Indonesia
  • Iran
  • Iraq
  • Israel
  • Jamaica
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea, Republic of
  • Kosovo
  • Kuwait
  • Kyrgyzstan
  • Laos
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Lithuania
  • Macedonia, fYro
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Mauritania
  • Mauritius
  • Moldova
  • Mongolia
  • Montenegro
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nepal
  • Nicaragua
  • Niger
  • Nigeria
  • Oman
  • Pakistan
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Qatar
  • Romania
  • Russia
  • Rwanda
  • Samoa
  • Sao Tome & Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Seychelles
  • Sierra Leone
  • Slovakia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Syria
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Uganda
  • Ukraine
  • United Arab Emirates
  • Uruguay
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Yemen
  • Zambia
  • Zimbabwe