Managing Compensation in Zambia during Turbulent Times

Managing Compensation in Zambia during Turbulent Times

Employers in Zambia are facing challenges to remain competitive during the turbulent economic conditions that have emerged since July, 2015.  During the last 12 months, the Zambian Kwacha has lost 45% of its value versus the US dollar, while copper prices (the most important commodity for the country) have plunged globally.  Inflation has also been high, around 23% on an annualized basis.

Zambia Fx Rate

 

During the same period, what actually happened in the labor market?  Data from the Birches Group multisector survey shows the following pay movement, compared to inflation:

Zambia Market Movement

As you can see, employers moved salaries up around 17%, close to but not equal to inflation.  This is typical, as employers try to keep a cap on fixed costs during the crisis, while still needing to retain and motivate staff.

How Should Employers Respond?

Employers need to respond to their employees when asked, “What will the company do for me?” under these volatile economic conditions.

In March, 2016, Birches Group conducted a Pulse survey of Zambian employers to assess their response to the crisis.  Here is what we found:

  • Local currency payments.  All but one of the employers surveyed reported they are continuing to pay local employees in local currency.  This is consistent with good compensation management practice.
  • Extraordinary adjustments.  Forty-five percent of employers surveyed indicated they had granted an out-of-cycle, extraordinary pay increase, averaging 17.3%, in the last six months; an additional nine percent expect to grant an extraordinary increase in the next six months.
  • Temporary allowances.  Eighteen percent granted a temporary adjustment to help compensate staff for increases in the cost of basic goods.

Best Practice

Interim adjustments, temporary pay increases and other ad-hoc steps are good steps to address employee concerns, but may not be the most effective way to manage compensation in a market-driven way.

Birches Group recommends a policy-based approach to managing staff salaries during volatile economic periods.  A “Special Measures Policy” which outlines the triggering conditions which must be present in the market, and the specific actions an employer will take when such triggers are reached, is the most effective way to address employee concerns while still maintaining a market-driven pay philosophy.  Together with frequent reviews of market trends, a Special Measures Policy serves both employers and employees well.

The Birches Group Solution

The Birches Group survey in Zambia is updated three times annually, in April, July and October.  Subscribers gain access for 12 months, allowing continuous monitoring of market movement.  Our Trends™ tool can also be utilized to help estimate market movement based on actual historical market data.

For more information about Birches Group surveys, please contact us.

posted on August 15, 2016 / Africa, Blog, Featured, Surveys