New pay model overdue in Zim

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We have discussed in this column that remuneration structures in our labour market are very paternalistic in nature.

Report by Sam Hlabati

Organisations try to keep talent through shouldering financial obligations on behalf of their employees.

The extended scope of these benefits gets bigger as employees get higher into the organisational ranks. In a recent discussion, a close associate quipped that the ever-growing scope of benefits in our market will get to the extent of organisations paying for the executive employees domestic helper’s father’s cousin’s funeral costs. That may be stretching it a bit far, but who knows, some organisations may be getting closer to that situation.

These look-after-my-brother benefits, though always a part of the Zimbabwe remuneration structuring, got out of hand during the period of our economic crisis. As discussed previously, companies increased what I would call “life-comfort” benefits to serve as retention tools for the much-needed talent.

The endemic systemic problem with the status-quo of the numerous benefits is the very difficulty that the situation poses for benchmarking efforts.

It is impossible to compare these benefits in a real time perspective; thus making the comparisons at a particular point in time between different organisations difficult. Consider trying to compare the actual remuneration value of a vehicle benefit between two organisations.

Let us assume a situation where there exists a congruency of facts just to simplify the comparison exercise. Let us assume that two organisations give managerial employees company-purchased vehicles that are similar in terms of make, model, and year of manufacture. A further similarity could be that the company purchased-vehicle is transferred to the employee’s full ownership with zero residual value.

However, should the period that is required before the vehicle ownership is given to the employee differ between the two organisations, then the value of the benefit would differ between the organisations at a given time, even for vehicles that were purchased on the same day. The financially-wise and learned colleagues would certainly concur.

The problem of incomparability is not just a hassle for organisations that are seeking to get a view of the market benchmarks through salary surveys service providers. A number of survey reports that are disbursed in our local market are circumventing the complex problem of incomparability by fleecing off most of these benefits from the actual survey.

The tendency has been to concentrate on remuneration elements that have an easily ascribable cash value, such as basic pay, and benefits with standard flat amounts across a particular employee group in an organisation. For the complex benefits such as vehicles, these salary surveys scratch the surface by considering minimal disclosure that may just indicate the presence of the benefit or just the maximum purchase price.

Should you think again about the complexity of the vehicle benefits outlined already above, it becomes obvious that although half a loaf is better than nothing in terms of surveys, however, with the missing in-depth comparison, we are not facing a situation of less than a slice of bread. We cannot entirely put fault at the door of the survey service providers as they are working with what is available.

Nevertheless, organisations need to get access to comprehensive real time, as-at-the-moment remuneration packages of jobs in the labour market that are comparable to their own employees’ roles. Such information is not readily available in the market as most of the salary surveys are static; thus, they are done as at a particular date and are not updated until the next survey is conducted and manual computations are concluded.

Consumers of such static surveys and entities that disburse them to the market may present that data-aging argument; thus applying a change factor to the old data to estimate the present values.

Estimation has its problem of inclining towards “guestimation” (guess and estimation fused), which is compounded by the incomparable nature of benefits across organisations. A comprehensive real time survey, preferably one that is web-based and is regularly updated by the service provider, would be better value for money.

In a previous instalment, I lamented the unsustainable nature of the paternalistic employee benefits that characterise the remuneration package structuring in our market.

Some organisations have embarked on ambitious projects of implementing a Total Cost to Employer (TCOE) remuneration model. TCOE is a pay model that entails stating any employee’s remuneration in terms of all financial costs that are associated with the basic salary and all benefits; thus adding up the total costs of benefits such as medical aid, pension and group-life assurance – incorporating the employer and employee contributions.

As much as the conversion to TCOE has its hurdles, if an organisation bites the bullet, it can implement this aggregated pay structuring. However, the success of the TCOE will be at the risk of the labour market and economy dynamics.

The economy does not yet have adequate structures that would support individuals to survive with the requisite independence to cater for them.

Though the credit provisioning by the financial institutions is regaining momentum after almost a decade of non-existence, the availability of affordable funding is still out of reach of a sizeable number of remunerated employees.

It would be suicidal to compound costs for benefits such as company purchased cars into the guaranteed cash based package. The employee would have the cash benefit but no access to the vehicle. One of the key strategies to retain talent is to reward employees in a way that they perceive as fair. The perspective of fairness of reward for an employee is driven by comparison of one’s own package with that of others within the organisation.

Sam Hlabati specialises in human capital business strategies advisory services. You can contact him on samhlabati@gmail.com

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