Are You A Minimalist Employer?

Posted on June 11, 2009 by | Comments Off on Are You A Minimalist Employer?

bio_400x400Author:
Chuck Csizmar – CMC Compensation Group

In recent months I have dealt with several US clients who faced an overseas challenge of high employee separations coupled with difficulty in recruiting qualified staff.   These companies were at a loss to understand the cause of their problems, as each felt that they were already paying out a great deal more for employees then they were accustomed to in the US.

A quick study revealed that, while the client’s international employees were indeed receiving a great deal more than their American counterparts, in many areas they were in fact being given no more than the minimum benefits mandated by statutory requirement.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what the local government says you must?

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out that everyone else was granting five or more weeks.   By ignoring competitive practice they were paying the price by struggling to build a quality staff.  They had earned a reputation in the local market as a “minimalist employer”.

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to back at home.  Every country is a separate and unique entity, with differences in HR policies, practices, and statutory requirements, each of which must be acknowledged and addressed in order to maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with social charge and benefit distinctions as well.

Operating under the guidance of US employment law and US-based corporate practices is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.

If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

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Why Culture is Important in International Business

Posted on June 8, 2009 by | 12 comments

Denise HummelGuest Author:
Denise L. Hummel – Universal Consensus

Editor’s Note:  We are especially pleased to welcome our first Guest Author, Denise Hummel, who contributed the piece that follows on the importance of culture in international business

Doing business on a global basis requires a good understanding of different cultures.  What works in your country might not work well in another, and could even be interpreted as an insult!  And in your role as an international human resources professional, it’s important to raise the awareness of cultural issues within your organization to ensure effectiveness.

Consider the following basic questions:

When George Bush gave Chinese Premier Li Peng a gift of cowboy boots embroidered with the American and Chinese flags, was it an appropriate gift?

  1. Yes, a thoughtful sentiment and a keepsake appropriate to the occasion
  2. No, a significant miss on the part of administration protocol experts
  3. Yes, a good choice, if only he had known the Premier’s correct shoe size

Answer: 2. 

Unfortunately, in China, the soles of the feet are considered to be the lowliest part of the body and gifts of footwear, no less embossed with the nations’ respective flag, was a significant miss on the part of administration protocol experts.

When formalizing a deal in the Middle East, it is imperative to

  1. Determine that the contract is iron clad with strict attention to jurisdictional issues of international law to secure a just outcome should there be conflict
  2. Solidify the interpersonal trust relationship as this rapport is critical both during the deal and if conflict develops
  3. Retain legal counsel in the country in which the business undertakings will primarily take place and ensure that this attorney has a golfing relationship with most members of the judiciary.

Answer: 2.

When doing business in the Middle East, the surest indicator of a successful business relationship has very little to do with the content of the contract or the extent to which the language will hold up in court.  Court systems in many of these countries move slowly with inconsistent results, and your business counterparts in many Middle Eastern countries do not put their faith in the legal system to determine the outcome of a conflict.  Absolutely essential to the success of the deal is the interpersonal rapport and relationship established during the negotiation stage and at every point thereafter.  Failure to understand and cultivate this aspect of the deal increases the risk of failure to a critical degree.

In sending an email to a Japanese colleague with whom may wish to collaborate on a potential business deal, you would be most successful if you

  1. Begin the email by addressing the individual warmly and openly, by his first name, immediately closing the cultural gap
  2. Always use Mr. , Miss or Mrs. followed by the last name of the individual, followed by an embracing and forthright interaction
  3. Use the last name, followed by the term “sama” to address your email, followed by clear text set forth with the utmost formality.

Answer: 3.

The risk of email is that it lacks certain social contextual cues such as body language, eye contact and intonation and can therefore create misunderstandings.  There is also no way to see the demeanor or reaction of your counterpart and adjust your communication strategy to compensate for a misunderstanding once it is created.   When in doubt, it is always safer to err on the side of greater formality and deference.  The Japanese have become accustomed to making allowances for informal communication from other countries, but you will proceed with more credibility if you make a sincere effort to adapt to their customs.  The use of the term “san” and, for those in a position of high authority, “sama” is honorific.  Use the last name, followed by the honorific term, followed by extreme clarity and formality in the text, with as few assumptions for context as possible.

Summary

The cultural nuances that affect international business obviously go far beyond the ability to greet your international colleague or choose the correct gift.  Issues related to the culture’s time orientation, whether it is an individualist or collectivist society, space orientation, and power distance, not to mention conflict assumptions and non-verbal communication all affect understanding your colleague across the table, as well as your chances of being understood. 

Preparation by a trained expert related to these issues not only assures that unnecessary blunders will be avoided, it brings to each of us a personal knowledge that deepens our understanding of others, thereby promoting acceptance, understanding, and on the level of international relations, peace and prosperity.

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Posted in Cross Cultural Insights, Expatriates, General, Leadership Development, Training

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.

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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.

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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.

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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.

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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.

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Employer Mandated Health Coverage in Dubai

Posted on May 7, 2009 by | 2 comments

George Bashaw

Author:
George Bashaw – Atlas Global Benefits

On January 1st, the Dubai Health Authority (DHA) initiated the first phase of employer mandatory health insurance for expatriates and UAE nationals working in Dubai.  All expats new to Dubai must obtain a Health Benefit Contribution (HBC) compliant insurance policy.

Background

The population of Dubai has exploded from 300,000 to 1.5 million since the Department of Health and Medical Services (DoHMS) was created over thirty years ago.  Considering the growth and significant demographic changes in Dubai, the DoHMS has done an adequate job (World Health Organization ranks the UAE 44th).  Did I say something in “Dubai” is “adequate”?  The two words are mutually exclusive. In Dubai, they simply strive for the best.  Therefore, the DHA was established to accomplish this goal by 2015.  What does this mean for you?

Existing Plans

If you manage an existing health plan in Dubai, it is valid until it expires. Upon renewal during 2009, the new plan must be HBC compliant.  By January 1st 2010, all corporate health plans must be HBC complaint.

Payment and Administration

Who pays the HBC?  The employer pays the tab.  The HBC is a flat-rate for all employees, including UAE nationals and expatriates.  There is another hitch.  All HBC policies must be sold by authorized insurance companies. Since most employers will provide benefits above the notional standard, there is a group of authorized insurance companies waiting to sell you a top-up plan.

Choosing a Clinic

Not so fast.  All employees must choose a primary clinic to complete enrollment.  They can do so by visiting an OCP (Outpatient Care Practice)clinic in person, on the web www.dha.gov.ae, or through their employer.  Want the good news?  The employer may choose a default OCP clinic.

Employer Responsibilities

Just so there is no confusion on the rules, I copied this from the DHA website: 

  1. This is a mandatory system enforced by law – employers must comply
  2. Every employer pays a standard payment (HBC) to the DHA for every employee once a new HBC policy is introduced
  3. System will be enforced through a licensing system
  4. All employees covered by a corporate healthcare scheme by 12/31/08
  5. Employees not currently covered by an existing corporate health scheme must be provided with a HBC compliant scheme from 1/1/09
  6. Everyone covered by HBC compliant corporate healthcare scheme by 12/31/09
  7. Every employer is responsible for enrolling every employee with DHA
  8. This includes contractual responsibilities for dependents
  9. Every employee most register at a clinic before employer enrolls them with the DHA
  10. Employers to help employees register with a clinic

 Still have questions?

You are welcome to visit the DHA but I would rather you just ask me.

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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.

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Birches Group

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Employment Laws in China

Posted on May 4, 2009 by | 1 comment

mariblack3 Author:
Mariana Villa da Costa – Littler Mendelson

The Chinese labor environment has changed considerably over the past few years, to keep up with China’s shift towards capitalism and explosive economic growth.  The world’s attention is on China now, and in particular, the abuses of employees’ rights have caught the attention of the government and the international community, triggering new sets of laws that are being strictly enforced today.

Companies doing business in China must pay attention to these new laws and, in particular, HR practitioners need to understand the PRC’s employment laws to avoid conflicts in the country.

2008 PRC Employment Contract Law – A Very Liberal Piece of Legislation for Workers

The 2008 PRC Employment Contract Law (effective January 1, 2008) is a very generous law for workers, granting employees more protection than the old legislation.  For example, employers in China used to profit from using temporary workers; however, with the new law,  if employers keep using a temporary individual for more than one short-term contract period, this person would be viewed as a permanent employee, receiving all the benefits associated with permanent status.

 Even though employers had concerns about the legislation they knew it would be important to show more clarity in the employer – employee relationship.  This would, ultimately, send a message to the world about China’s willingness to adopt more transparent principles in support of positive employer-worker relations.

 Below are more details on provisions of the new law.

 2008 PRC Employment Contract Law – Mandatory Employment Contract

 This considerably new law does not replace 1995 Labor Law of the People’s Republic of China, but substitutes some of the chapters in individual employment contracts and also, details and adds other portions of the existing labor laws.

Before 2008, it was not very common for employees to have formal contracts with the Chinese companies, a  path to violations and abuses.  With this new law, a very detailed written employment contract is mandatory.  The contract must include details such as job description, working hours, and compensation, and it must be created during the first month of employment.

If the company fails to create the contract on time, then the employer is required to pay the worker twice his or her salary for every month that there is no contract.

More Protective Provisions

The law also has other interesting rules that increase the protection of employees in the workplace.  Some of them are:

  • Limitations of reasons for dismissal to serious issues such as incompetence or  rule breaking company rules
  • Determining that in mass layoffs some categories of employees are spared, such as sole family wage earners, and those who support a minor or an elderly person
  • Specifying actions and penalties for unlawful terminations
  • Prohibition of employers retaining employee’s documents and ID’s
  • Definition of what constitutes a fixed-term, an open and a specific contract
  • Stipulating grounds for termination that requires 30 days’ written notice or the payment of one month’s salary 

 Complying With the New Provisions:  Some Advice

Companies doing business in China are expected to comply with the new rules; therefore, it is important that HR practitioners bear in mind the following:

  • Use specialized legal counsel for interpretation of the new provisions
  • Establish a good relationship with the government authorities and with the trade unions
  • Complete the contracts in a timely manner and add all the specific provisions addressing the employee-employer relationship
  • Work along with the Chinese HR practioners to ensure a better understand of the cultural aspects
  • Create HR systems to manage the work relations
  • Carefully decide on termination of employees in China

 China, with its increasing economic power, has caused employers to focus more on operations there.  HR Professionals should pay careful attention to how business is conducted in China and especially, how labor and employee relations are managed.  Full compliance with the domestic laws will ultimately ensure the success of your operations in this fascinating land.

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