Memory Nguwi
The call for salary reviews is being heard across all sectors of the economy. The primary reason being cited is that the cost of living has gone up, and the Zimbabwe dollar has depreciated against the major anchor currency, the United States Dollar. It is evident from what people see in shops that the cost of living has gone up.
The dilemma for employers is always affordability and sustainability. If you adjust the salaries upwards, will you be able to afford to pay the salaries now and in the future? Not all employers would be able to adjust salaries to the levels employees would want without bankrupting the business.
It is important to note that not all employers are in the same situation. Others will be able to pay at levels employees want, and they can afford it. The problem is with those employers who can not genuinely afford to adjust salaries for various reasons.
I see employers with pricing power sustaining such adjustments, especially those in the private sector. Their pricing power would allow them to push the cost of any adjustment to the consumer without affecting the demand for the goods and services. Without pricing power, taking in a considerable salary adjustment could spell disaster for the organisation. However, most private-sector employers may not be able to do this. For those employers who can afford and sustain the adjustments, it is only fair that you help your employees with the cost of living adjustment.
Here are three things you may want to look at as you address your employees’ cost of living issues. Here I highlight things to do and things not to do.
If you can afford a cost of living adjustment, by all means, go ahead and give it. There are two approaches that we have seen on the market with regards to the cost of living adjustment:
Once off Cost of Living payment – Other employers give a once-off payment as a cost of living adjustment. Usually, such payment is offered covering a few months. This approach provides temporary relief to an employer without committing to an extended fixed amount that the employer may not afford.
Take this approach if you plan to adjust the salaries to match the cost of living permanently. If you have no permanent plan, the employees will come back probably more vicious, especially if the cost of living keeps going up.
Cost Living Allowance – Other employers opt for a cost of living allowance separate from the basic salary. This approach does not increase your other expenses related to the basic salary, such as a pension, leave liability, and overtime. The downside to this approach is that eventually, employers will incorporate the amount into the basic salary as employees start raising issues related to low pension contributions, overtime and other related payments.
Non-Monetary Incentives – I am not sure why people call these non-monetary incentives because they all cost the employer money. Even where you are giving your staff loans, it will cost the employer money unless funded by the bank. Employers with deep pockets can fund loans from their resources, but the best approach is to have long tenure loans financed by banks. They are better suited to manage the risks often associated with lending money. All the other items classified as non-monetary incentives are better handled by giving the employee their money and letting them utilise their earnings however they want. It is highly paternalistic for an employer to say they will provide airtime, lunch, wifi etc.
Grocery hampers – I am still surprised why an employer wants to offer employees grocery humpers. Unless you are getting this grocery at significantly discounted amounts, the employer has no advantage.
There are so many disadvantages to adopting this approach. It means the employer will have to hire someone specifically to handle the grocery distribution for employees. This could be at the Accountant or assistant accountant and add the human resources office to it. Give the employee their money and what they will do with their money is their problem.
Company Vehicles – Those employers on the total cost to the company covering company vehicles are probably facing some challenges. Very few employers will be able to align the vehicle allowance to the market conditions (running cost of the car).
The problem is that the employee will get Zimbabwe dollars under this scheme when we know that all vehicles in Zimbabwe are sold in foreign currency.
Reverting to fully expensed company vehicles is a big challenge as well. I do not see any company purchasing, for example, 100 vehicles for employees, given the foreign currency challenges and the cash required to do so.
If the employer manages to buy the vehicles by some chance, the running costs are so high that it could cripple the company if not well managed. For those companies that are on fully expensed company vehicles, our surveys show that they have been struggling to replace the vehicles when they are due for replacement, largely due to foreign currency shortage and cashflow challenges.
Pegging salaries in USD -The approach to pegging salaries in USD and pay at the interbank rate is fine. Those who may have chosen to peg salaries in USD and then pay at the alternative market may find this to be suicidal.
USD Salaries – Those who earn enough foreign currency to pay their staff in hard currency have no issues as we look at the market. We have seen most employees flocking to such organisations when opportunities arise.
The government can make life easy for employees and employers if we get to a situation where the currency is stable. In such an environment, collective bargaining negotiations are often concluded without incidence.
***Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. https://www.thehumancapitalhub.com email: mnguwi@ipcconsultants.com