Category Archives: Compensation

Postings and discussions about compensation topics

Cutting Costs and Relocating Families With Children – An Optimistic View

Posted on June 4, 2009 by | 1 comment

Author:
Liz Perelstein –  School Choice International

 When companies are faced with the need to cut costs, education allowances are always an area of sensitivity.  Historically it was not uncommon for families to forgo an assignment unless their children got into the “right” schools, and the assumption was that companies would foot the bill for the entire education.  Often allowances included everything from school tuition and fees to transportation, meals and uniforms.  Assignees had no hesitation asking for exceptions for music lessons, exotic field trips to other countries, and it was not uncommon, certainly not unheard of, for a company to acquiesce.In today’s economic climate, when expatriate packages have diminished and localization is an increasingly popular approach when sending families overseas, there is a great deal of confusion about whether education allowances can be subject to the same type of austerity.  Localization plus packages usually continue to support schooling on assignment; for families otherwise being localized, support for schooling may be withdrawn more gradually or in stages.

While education has long been a sacred cow, it is not impossible to reduce corporate spending on education, and, in fact, local schooling may be desirable if we are to think about the real purpose of education, and the opportunity that a global assignment offers children.  In some communities overseas, children attending international schools are so sheltered from their host country that they never encounter a local person except for their maid and their driver.  To really learn about a country, many children may benefit tremendously from genuinely opening their minds to new cultures, languages and world views.

The key to including localization in corporate education programs is to do so thoughtfully, offering different approaches in different countries depending on whether or not local education is viable for an expatriate child, and it should depend on the country s/he comes from as well as the one s/he is going to.  An analysis of the local curriculum, customs surrounding education, as well as assessments should be compared with similar information from the home country at various age levels to ensure that children are not placed in a precarious situation.  Of course, exceptions for children with academic, physical or other special needs do need to be considered on an exception basis.

School Choice International has developed a web based tool called Global Education Explorer  which enables companies to compare this critical educational information across countries to ensure that policy decisions are grounded in research and information and not simply made in a vacuum.  If cuts in corporate education support are made thoughtfully and appropriately, our children can be our genuine future ambassadors in our quest for true globalization.

More About Liz:

1 Comment

Posted in Compensation, Expatriates

Tagged , ,

Report from Mombasa – Africa Forum 2009

Posted on June 1, 2009 by | 8 comments

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

Many of you will already know that last week, the second Africa Forum conference, sponsored by the African Development Bank, Birches Group LLC and ORC Worldwide, was held at the lovely Sarova Whitesands Resort and Spa in Mombasa, Kenya.  The conference was attended by representatives from leading employers in Africa, with delegates from Kenya, Tanzania, Uganda, Sudan, Democratic Republic of Congo and South Africa.  I was lucky to be one of the organizers and presenters at the conference, so I thought I would share some of the proceedings with you.

Keynote Address
The conference opened with a wonderful conversation with Dr. Sipho Moyo, Residential Representative for the AfDB in Tanzania.  Dr. Moyo spoke about what managers look for from HR in terms of support, ideas and insight.

Overview of African Markets
The keynote address was followed by an overview of African markets.  The presentation included statistics capturing the impact of the global economic crisis on Africa, through reduced GDP growth rates across the region, higher inflation (double digit levels in over 25 countries), and reduced trade.  There was also a discussion about the nature of the labour markets in Africa, and the key role leading employers across all sectors, including international public sector organizations, play in the market.  Finally, some summary market data was shared for all countries in Africa, with a special look at Kenya, Mozambique, Malawi and Nigeria.

African Cafe I
The next session was a series of small group discussions.  Three topics were selected by the group – Market Intelligence, Impact of the Global Economic Downturn, and Incentive Pay.  Each topic was featured as a discussion group, and  participants rotated through all three topics, thus having a chance to participate in all of them.  These were lively, interactive discussions, where participants were able to raise issues, share their experiences and learn from the experience of others.

Focus on East Africa
Since the event was held in Kenya, we turned next to an in-depth look at the East African market, focused on Kenya, Tanzania, Uganda, Rwanda and Burundi.  There was comparative data to highlight the similarities and also the unique features of each labour market in the region.

Building a Pan-African Workforce
A lively discussion followed led by Awinja Wameyo of AfDB, about the challenges the bank faces in building a workforce for their operations across 25 countries in Africa.  Topics of particular interest to the group included recruitment of professionals from the African diaspora, and the desire for diversity, and how best to achieve it.

Market Intelligence
Day Two began with an in-depth look at market intelligence, and how the Birches Group surveys are tailored to address many of the challenges faced in small, volatile markets, with such a wide range of practices.  Birches Group staff demonstrated the Indigo survey portal for the group as well.

We also spoke about the comparative framework — how to best determine the right approach to matching positions in the African market to survey benchmarks consistently.

African Cafe II
Next we had another series of discussions on topics chosen by those in attendance at the Forum:  Intra-Regional Assignments, Performance Management and Talent Sourcing.  It was a wonderful chance to share insights and learn from each other.

Untying Knots
Following lunch, we kicked off the final afternoon of the Forum with a stimulating presentation about Performance Management and Pay Design.  Gary McGillicuddy spoke about the Birches Group Community approach to performance management, which uses multi-rater feedback and the answers to three simple questions to manage evaluations effectively and efficiently.  Gary also spoke about the “Wedding Cake” of pay design, demonstrating that in an organization, time-based, competency-based and performance-based compensation systems can coexist to drive overall organizational effectiveness.

Employer Branding
The closing presentation was an overview of employer branding.  Curtis Grund of ORC Worldwide shared his personal experiences as well as a summary of the leading practices in employer branding.  Curtis also looked at some employer website to highlight best practices.

In Summary
The Africa Forum 2009 was a great opportunity for human resources professionals in Africa to discuss critical issues, learn about trends, and most importantly, share information with each other and form what we hope will be an ongoing network for sharing and collaboration.

We expect that Africa Forum will be repeated, next time in Southern Africa.  Stay tuned for more information about next year’s Forum.  We are grateful, also, to the African Development Bank, for lending it’s name and providing resources to make the Forum a reality.

Conference Presentations
If you were unable to attend the Africa Forum, but would like to receive copies of the presentation materials, please let me know by using the Contact Us link.  Just indicate your interest in receiving the Africa Forum materials.

More About Warren

Warren Heaps

Warren on LinkedIn

Email Warren

Birches Group

8 Comments

Posted in Benefits, Compensation, Cross Cultural Insights, Expatriates, General, International Benefits

Tagged , , , , , , ,

Dealing with Compensation 101

Posted on May 31, 2009 by | 2 comments

bio_400x400

Author:

Chuck Csizmar – CMC Compensation Group

I once supervised a Compensation Analyst who had spent a great deal of time attending professional seminars and workshops.  She had attended these instructional sessions to learn about Compensation, as part of her professional development.

One result of that education was a favored response when faced with a challenge at work; she would fall back on her class work experience by saying, “the greatest minds in Compensation say that . . . “.  It took a great deal of patience on my part to educate this part time practitioner / part time student in the difference between the classroom / textbook answer and the reality of the workplace.

A short while ago I came across an HR blog in which the author was instructing readers in how to create a merit performance matrix.  Very good stuff, I thought, admiring the technical step-by-step instructions, except I knew from long experience that the procedure being described would never work in the real world.  Didn’t the author realize that?

Yes, it is very important to understand the technical foundations of Compensation methodology and practice, but first and foremost you need to anchor yourself in the real world, to know what will work and not work in your own organization – no matter what the finest minds in Compensation think.

Why doesn’t Compensation theory always match compensation reality in the workplace?

  • Business realities:  management will typically know more about a particular business situation than you do.  What you are able to provide to the decision-making process as a Compensation professional is limited to your particular subject area, while management usually has the bigger picture – the perspective of multiple viewpoints. Your compensation advice may not fit their business reality, no matter how logical an argument you make.
  • Bias of decision-makers: decision-makers may feel that they intuitively *know* the right approach to take (they’ve done it before, if-it’s-not-broke- don’t-fit-it mentality, a friend / relation / old college chum suggested an approach, etc.).  Perhaps they read an article just the other day and now are insistent to follow the advice of an author who doesn’t have a clue about their particular business.  Years ago I worked for a company whose CEO forced HR to implement a particular benefit plan because he had read a magazine article.  It does happen.
  • Problem avoidance: short of killing the messenger, one solution for management is to do nothing about a problem (you’ve exaggerated it, the solution costs too much, there’s still time, etc.).  Senior managers can be like politicians in avoiding the *big* decision unless it bites them in the leg.  It can sometimes be dangerous to your career if you try to force a decision.
  • Business culture or model: some initiatives just don’t “fit” in your organization.  Managers with a laid back organization style will not be interested in demands to document everything, standardize policies and procedures and have approved forms for every possible use.  Picture your head banging against the wall.

Aside from management giving you a dose of reality across the cheek , sometimes those subject matter experts who instruct in Compensation techniques fail to ground their instructions with a caution to their students: check this process out in the reality of your workplace *before* you take a laboratory technique and wave it in the face of your management.

Two examples:

1)      Merit matrix:  when designing a pay-for-performance merit increase matrix the standard rule is to place the average increase percentage in the cell block most populated by employees (average performance and average position-in-range).   The sound reasoning for this technique is to better manage the costs associated with that year’s annual increase process.

A lot of years ago I followed that approach in my first compensation leadership role.  I still have a little bump where my head hit the wall.

Here’s the rub; such a technique requires that the matrix change every year, as the analysis demands you study where the population averages are for each year.  But management will likely have none of that. They want the same matrix every year, for ease of administration and communication.

2)      Cost of living as a basis for pay increases: I once watched over a fascinating exchange on a Compensation bulletin board where the debate raged on for days over the appropriate formulae to use for calculating the cost of living vs. cost or labor as it affected the average pay increase that management would approve.  Each side would provide formulae, charts and graphs and quotes from notable experts to press home their opinion.

The reality for this exchange is that management does not use the cost of living as a prime determinant in their decision-making.  They are more likely to roll their eyes at the technical debate and ask only about competitiveness and bottom line cost – and why can’t we do the same as we did last year?  If their decision relates to the cost of living in some way, that’s only a nice coincidence that they can use in their communications.

An area that separates the compensation technician from the compensation professional is the ability to deal with what I call the “softer” side of compensation.  Survey statistics, charts and formulae are very good to a point, but management will want to know what it means and what to do about it.  So the answer isn’t simply reporting the data, but in taking that next step to help management understand and strategize their next move.

The contribution you can make to your organization is blending the technical knowledge (the how-to) with seasoning and experience to understand what will work for your organization, considering culture and management bias.  Technical knowledge will give you the same answer every time, but knowing how to use that knowledge like a craftsman’s tool to aid in achieving business objectives – that is the key to success as a Compensation professional.

2 Comments

Posted in Compensation, Leadership Development, Training

Tagged , , ,

Does Your Company Really Pay For Performance?

Posted on May 18, 2009 by | 2 comments

bio_400x400

Author:
Chuck Csizmar – CMC Compensation Group

To answer this question most companies would say that, yes – they have a pay-for-performance (PFP) program.  Such a statement is chic, politically correct and offers a wonderful message about how the company values its employees.  What’s to argue with?  Paying employees on the basis of what they have contributed to the company makes sense, right?  If they give more they receive more, right?

On the other hand, to answer that question in the negative is to suggest that you are not fair to your employees, that your idea of proper reward is to bypass individual performance in favor of treating everyone the same, regardless of contribution.  However, as that acknowledgement would paint you as an insensitive employer, it’s likely you’ll fall in line and say “YES, of course we pay our employees for their performance.”

But do they?  Do you?

There is a tendency by many in management to believe that the granting of variable pay increases automatically means that their company provides pay for performance.  However, if as is usually the case practically everyone receives some form of pay increase, is there really a distinction being made between high performers and those who merely occupied a chair for the past 12 months?  Isn’t such a practice (if we haven’t fired you, then you’ll get an increase) more like a modified attendance award?

The decision to adopt pay for performance strategy should include two critical elements:

  • The decision not to pay if the employee hasn’t performed
  • The decision to make it worthwhile for an employee to be a high performer

One of the common pay practices that continue to hamper the effectiveness of PFP plans for base salary increases is the misuse of the annual merit pay pool through inflated performance evaluations and automatic increases.  This practice will increase your costs, and in a manner that will not effectively reward employee performance.

Making PFP work for your company will require hard decisions from line managers who are otherwise accustomed to maintaining employee morale through the avoidance of objective performance reviews.  We have seen that, while there is a shift to rewarding individual effort, more monies are not being provided as a result of that shift.  So in order to more effectively use available salary increase dollars companies need to reward their high performers with money effectively taken away from (not granted to) those performing at lower levels.

This may also mean that average performers, the bulwark of so many companies, will receive less than they might otherwise expect (which is at least an average raise).  What it comes down to is a company’s ability to afford proper rewards for higher achieving employees (motivating and retaining them in the process) by reducing or eliminating rewards to those deemed as underperforming.

The risk exposure is that if managers, through the utilization of performance management programs, do not properly identify and restrict awards for non-deserving employees, the PFP budget will not have enough funds to afford appropriate rewards for high performers.  So you should ask yourself, who is it you would rather disappoint?  Who has less impact on your business and whose loss will be less disruptive to your operations?

While published reports clearly indicate a trend away from one-size-fits-all reward systems, one should look below the surface to learn whether employee performance is being appropriately measured and rewarded.

To effectively use a pay-for-performance system a company should:

  • Educate employees as to what performance will be rewarded.  This requires measurements, and that performance objectives align vertically in the organization (employee goals relate to supervision, whose own goals relate to management, and on upward to corporate goals);
  • Provide a well-defined rating scale that helps managers distinguish between levels of performance
  • Provide a clear distinction of reward between those who have delivered and those who have not.  An employee who does not see a relative gain from working hard all year is a lot less likely to repeat their performance the following year.

So the next time you are asked whether your company rewards employees for their performance, perhaps your answer might not differ, but now you recognize the distinction being made by your employees.   It is up to you whether to be satisfied with your answer.

More About Chuck:

2 Comments

Posted in Compensation, Leadership Development, Training

Tagged , , ,

Talent in Ghana

Posted on May 12, 2009 by | 4 comments

Imported Photos 00033 Author:
Yendor Felgate –  Emergence Consulting

The traditional wisdom on Africa is that there is a one way passage for talent to more ‘developed markets’. Experience suggests that a continuous ‘brain drain’ is occurring, where talented professionals are being ‘denuded’ from home markets, exacerbating an already tenuous scarce skill situation.

Change is Coming

Recently I hosted a talent management workshop in Ghana, where I am starting to see signs that things may be changing.  This is not say that the ‘war for scarce skills’ does not exist or that the predominant trend has changed, but rather we are seeing a more complex picture emerging.

The change may have started even before the impetus of the global financial services meltdown, if anecdotal evidence from headhunters and resourcing specialists working in Africa are accurate.  Ghana may be a useful case in point to begin to understand the emerging changes in talent behaviour and the resultant complexities for business in Africa.

Recent Trends

Ghana is a democratic West African country that has been independent for over 50 years.  Traditionally the country has been economically reliant on commodities and natural resources, though is diversifying rapidly into financial services and telecoms.  Recent trends suggest an increasing level of foreign direct investment and interest from the region in the opportunities offerred by Ghana.

In the past, global education and career opportunities were valued over local organisations and career paths.  The first change to this dynamic was the rapid expansion of Nigerian banks and the telecom revolution in Ghana. Both sectors are large consumers of talent and ‘overheated’ the local and expatriate skill markets, largely by paying aggressively.

The second major trend is the exciting opportunities for entrepreneurs.  This has attracted interested from first and second generation Ghanians based outside the country.  Initially, this took the form of direct investment, but is increasingly involving Ghanians leaving corporate roles outside Ghana, to take up local opportunties.

The final trend is the global instability in ‘developed’ job markets, where many Ghanians are now looking to return to corporate and professional roles within the country.  The perceived ‘gap’ between global and local has diminshed significantly.

The net result is that many corporates in Ghana are able to compete for talent more effectively than before. I think this is the real change – global players may now not be the automatic default choice for African talent. African business has a window of opportunity they can exploit. However, the complexity lies in the detail.

The challenge is that good people have many opportunities both locally and regionally they can explore in corporates and on the entrepreneurial front. My sense is that this has less to do with money, but the personal connection people make to these opportunities.  In my language, an holistic employee value proposition is more important the ever.

What About Pay Levels?

Ghana Pay Ranges

Total Compensation in Ghana

Pay levels amongst leading employers in Ghana are competitive, but relatively low when compared to more developed countries, and also to many countries in Africa.  As you can see from the illustration, total annual compensation in Cedi ranges from about 5,000 to 20,000 Cedi for support staff positions, while pay for professionals varies from approximately 24,000 to 80,000 Cedi.

Source:
Birches Group LLC Survey of Leading Employers – September, 2008

In Summary

The difficulty most Ghanian businesses face is that they are not used to working with the intangible concept of the employee value proposition and tend to want to compete on remuneration, whilst keeping relatively conservative management practices.  This is changing, but I hope it is sufficiently rapid to fully utilise what may be a very narrow period of talent parity.

More About Yendor:

4 Comments

Posted in Compensation, General, Leadership Development, Training

Tagged , , , ,

Labour Market Dynamics in Mongolia

Posted on May 4, 2009 by | Comments Off on Labour Market Dynamics in Mongolia

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

This former communist country has undergone a rebirth recently, but still faces economic and and social challenges.  These factors, in turn, have a strong influence on the local labour market practice.

 

Brief History and Background

Mongolia became an independent country in 1911.  By 1924, however, a Soviet-influenced government was established, and flourished until the early 1990s.  A new, democratic constitution was adopted in 1992, and democratic elections were held in 1993.  Since then, Mongolia has been making the transition to a full market economy.

Over the last several years, Mongolia has enjoyed a robust growth rate, with GDP increases from 7.3% in 2005 to 10.2% in 2007.  Much of this growth has been driven by the mining sector, with large operations focused in cooper, gold and other commodities.  There also has been increasing foreign investment in other sectors, such as software development, telecom and food.

The global economic crisis and collapse of commodity prices has resulted in a slowdown in Mongolia.  GDP growth for 2008 dipped to 8.9%, and the Asian Development Bank predicts a further drop to just 3.0% for 2009.  From January, 2008, to April 30, 2009, the local currency, the Tugrik, has depreciated against the US dollar by about 22%, putting additional pressures on the Mongolian economy, which imports 80% of its oil, and many other basic commodities and raw materials.  Projected inflation for 2009 is about 9.5%.

Overview of the Labour Market

Birches Group recently completed the annual survey of the market in Mongolia.  The information that follows is based on the recently published survey results.

Total compensation levels in Mongolia range from about $7,400 for unskilled support staff positions such as Messengers and Drivers, to $36,000 for Managers and other senior level professionals.

mongolia-pay-ranges

Total Compensation in Mongolia

Let’s focus in on Working Level Professionals, i.e., college graduates with 3 to 5 years of experience in their respective fields, such as Finance, HR, Procurement, Engineering, Sales and Marketing.  In the graph, this group corresponds to the second column in the Professionals category.

For a Working Level Professional in Mongolia, the median total compensation ranges from about $14,000 to $22,000.  However, as the “footprint chart” illustrates below, there is a much wider range of compensation in the market – from around $9,500 to over $30,000.

mongolia-compensation-footprint

Market Footprint – Working Level Professional

The footprint chart shows the full range of the market, from the 25th percentile of the minimum or entry level salary to the 75thpercentile of the maximum, as well as the MRP or “market reference point” which illustrates the average rate for incumbents in the job.  By viewing the market with this perspective, employers can gauge not only the market references, but also get a good idea about the span of pay (from min to max) in the market.

What else besides salary?

As is common in developing countries, the typical package in Mongolia for a Working Level Professional includes not only salary, but allowances, incentives and in-kind benefits.  Let’s take a closer look at the market practice for these items.

At the 50th percentile, the average breakdown of total compensation is as follows:

Composition of the Compensation Package

mongolia-compensation-breakdown

Composition of Compensation Package

The chart above indicates a base salary of $15,926, representing about 84% of total compensation.  The rest is made up of allowances (6.5%), short-term incentives (4.5%) and in-kind benefits (5.2%).  The most common allowances are meal and beverage allowances, and cash allowances such as 13th month, mobile phone allowance and seniority premium.

For in-kind benefits, the chart below shows the categories provided; recreational activities and meals are the most common.

mongolia-in-kind-benefits1

In-kind Benefits

 In Summary

Mongolia is a dynamic market which has experienced good growth in recent years.  While there is much slower growth occuringnow, employers with businesses there still must keep abreast of market changes.  Rich survey data is one of the best ways to ensure that your compensation packages remain competitive, cost efficient, and responsive to your employee’s needs.

More About Warren

Warren Heaps

Warren on LinkedIn

Email Warren

Birches Group

Comments Off on Labour Market Dynamics in Mongolia

Posted in Compensation, International Benefits

Tagged , , , , ,

Why Managers Don’t Manage Pay

Posted on April 27, 2009 by | 1 comment

bio_400x4003Author:

Chuck Csizmar – CMC Compensation Group

When an employee is promoted to their first manager’s position, they are given the proverbial Keys to the Kingdom – your company.They now have the authority to spend your company’s money.From hiring, to promotions, to salary reviews and equity adjustments they are now able to make the decisions that directly impact (increase) your labor costs.

However, most of these managers turn out to be, at best, well intentioned amateurs at the process of making pay decisions that are appropriate for the needs of the business.Fresh from being anointed they often lack the basic internal education necessary to make business vs. emotional decisions – and their actions commit you and the company to costs that may not be in your company’s best interests.

Actions taken by these managers not only increase direct costs, but often irritate other staff members as the circumstances become known, creating morale and internal equity problems at the same time.The net result is usually a corresponding lack of engagement and ultimately separations by disenchanted employees.

Note:  Most employees leave managers, not companies.Thus actions do have consequences.Likely this is not what you envisioned when you made that promotional decision.

Now, how did (fill in the name of your company here) get themselves into this mess?

First of all, no one *really* trains managers on how to properly attract and reward employees via base salaries and incentive pay.

A few anecdotal examples:

  • Just because some bloke is a good “XYZ Operator” does not mean they will be an equally good “XYZ Manager”.The skill sets for success are dramatically different.
  • How many managers understand your company’s philosophy about pay?Do you?How many understand the workings (the what and the why) of the company’s pay practices and methodology?These are the folks responsible for spending 40% to 60% of your revenue in the form of employee pay, and even the most well-intentioned is prone to make mistakes.
  • Managers want to be liked; they do not wish to pick favorites, do not want to discriminate on the basis of performance and definitely do not want to have their decisions challenged.They would rather point a finger at HR and assign the blame to them for having to assess performance and distinguish one employee from the other.Left to their own devices they would give everyone as much as they can.

If you were a high performing employee, would you like to work for this sort of Manager?If you were coasting at work, barely putting your time in, would you want to work for this sort of Manager?Which sort of employee do you think will eventually tire of being undervalued, and quit? Leaving the Manager with a staff of . . . .You get the picture.

Ineffective managers are always afraid that an unhappy employee will decide to quit, but that is usually a selfish thought.Their prime concern is more often what your departure would mean to their deliverables, to their reputation as a manager.Your departure is typically viewed as an inconvenience to them, not an avoidable loss for the company.A reflection of this is when managers resist a transfer that is clearly in the employee’s career interests.The manager’s concern is how that transfer affects their department – and whether their personal success becomes that much more difficult to attain.

Ineffective Managers can be a defensive lot, challenging attempts at reform.Why?Because of their fear that spotlighting reform action will demonstrate their ineffectiveness (make them look bad), and that is unacceptable.Typically their advantage within the company is that the more ineffective the manager, the stronger their political connections. And as senior management oftentimes surround themselves with those most agreeable to their own way of thinking, it’s not surprising.

Assuming the company’s willingness to make key decisions and the presence of the all-important support from senior management, companies can correct the problems that they’ve created.They can:

  •  Select candidates for management positions on the basis of their skills / potential for actual management (dealing with people, managing projects, business-oriented, professional demeanor, etc.
  • Educate Managers in the philosophy and methodology of the company’s pay programs, ensuring that this information is shared with their staff
  • Construct job specifications that call for a Manager to manage, as a prime accountability, limiting or even eliminating the retention of individual contributor responsibilities
  • Measure and reward the performance of the Managersprimarily on the basis of how they have actually managed their employees, or on the performance of their unit
  • Encourage Managers to develop the potential of their employees, to the point that a staff member being promoted / transferred upward is a mark of success for the Manager
  • Ensure that procedural checks and balances are in place to ensure that pay decisions are reviewed by at least one higher level
  • Hold Managers to an annual salary budget; let them develop the budget and monitor / adhere to it during the year

Consider the above as a checklist that can be used to test your company’s vulnerability to wasted money, employee morale problems / turnover and avoidable cost increases.

Would you be comfortable with how your own company would score?

My advice to clients is to face these issues straight on, to implement policies & procedures that save money without penalizing high performers or mistreating their employee base.But the challenge will always remain, as there is an inherent reluctance on the part of many managers to make the tough decisions, because we do want to be liked, we do like to give good news, and we do not like to play judge and jury with an employee’s career.

But that behavior is not managing is it?

1 Comment

Posted in Compensation, Leadership Development

Tagged , , ,

Payroll for Expatriates – How Hard Can This Be?

Posted on April 18, 2009 by | 1 comment

Author:
Dave Leboff – Expaticore Services LLC

Why does it seem that expat payroll administration is so hard to get right? Why is it so hard to deliver pay correctly and timely to this class of 50 or 150 important employees when it seems so smooth for the other 10,000 or 100,000? The answer lies in the reality that payroll for expatriates often seems to be the second job of those involved.

Expat policies are developed with care and designed to compensate the employee fairly, facilitate mobility, be competitive with peer companies and are sensible economically. Policy development usually sits within the HR function. Executing that policy always requires the involvement of your payroll function which has to deliver and record expat compensation and benefits correctly and compliantly, in one or two countries concurrently – and often multiple two-country permutations.

Payroll professionals are talented, hardworking experts who handle thousands upon thousands of domestic pay transactions with 99+% accuracy. But their success is dependent upon the efficient application of rules to situations – many of them coded in the software they use. For example, limits for FICA or 401(k) contributions in the US require no effort by the payroll professional. They correct limits and computations are part of the tools they rely on.

With expatriates, the rules are not built in. For example, a US employee working on assignment in Mexico may have US payroll running every two weeks. In Mexico it may run every month. In Mexico there may be requirements to deliver 13th month and vacation pay as well as other legislated perquisites. How should this be reflected on the US payroll? Should the expat receive the extra Mexican benefits or should the payroll delivery be manipulated to eliminate them from the gross deliverable? There are foreign exchange interplays. Splitting pay is often involved. Paycodes and general ledger coding relevant to expat benefits need to be organized so that the underlying accounting gets done correctly.

As you can see from this simple example, payroll professionals must not only clearly understand how the company wants to address compensation and benefits for expats, they need to drive many decisions relating to how the compensation and benefits are delivered, how they are accounted for, how changes will be authorized and instructions presented to them. They need to ensure that there are proper codes set up so that items that may be exempt from tax in another jurisdiction show up as taxable in theirs if appropriate. They must understand when and how to “gross up” for taxes, which is not a simple process in many cases and software managing payroll around the world does not often have grossup capability built in.

So the next time you ask “why can’t the payroll department get the expats right?” understand that they are handling expat concepts that are unusual and complex. There are ways to reduce the burden on payroll professionals who deal with expatriates. We will continue to address these issues over time within this International HR blog.

More About Dave:

Dave Leboff

Dave on LinkedIn

Email Dave

Expaticore

1 Comment

Posted in Compensation, Expatriate Taxation, Expatriates

Tagged , , ,

A Glimpse of Pay and Benefits in Africa

Posted on April 11, 2009 by | 2 comments

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

Africa is a Diverse Continent

Africa is a vast continent with over 50 countries.  There is much diversity, too, amongst the people, cultures, climate, economies and businesses across the region.  Not surprisingly, there is also tremendous diversity in compensation in Africa — not only the obvious differences in actual amounts of pay, but importantly, a wide range of practices in addition to base salary.

Pay and Benefits in Africa

Birches Group recently examined the total compensation for Working Level Professionals – college graduates with five to eight years of experience and a level of technical expertise in their respective profession.  Typical positions included Accountants, Brand Managers, Bankers, Engineers, Human Resources and other occupations across ten markets in Africa.

Pay Ranges in Africa

Pay Ranges in Africa

The results confirmed the wide range of absolute pay levels – from around $40,000 to over $110,000 per year.

Allowances and In-Kind Benefits Are Important

The salary numbers only tell half the story.  In many developing countries, employers provide allowances and in-kind benefits to local staff.  These benefits include cash allowances such as 13th month and vacation bonus, as well as cash or in-kind payments for transportation, food, housing, recreational activities, and more.

Percent Allowances and In-Kind Benefits

Percent Allowances and In-Kind Benefits

Allowances and in-kind benefits provide from 8% to over 30% of the total package, depending on the country.  Therefore, it’s critical to consider these elements in designing pay packages.  To overlook these “extras” and focus just on base salary would result in a potential gap against the market.

Global Approaches Need Local Tailoring

Global employers take pride in having consistent approaches to compensation around the world.  But in developing countries, local practices and insights need to be fully considered in the broader context of the employer’s compensation strategy.  The best way to ensure your pay package is competitive is to reference a good market survey, that captures all of the elements of compensation in the market, from the leading employers present in the market.

More About Warren

Warren Heaps

Warren on LinkedIn

Email Warren

Birches Group

2 Comments

Posted in Compensation

Tagged , , , ,