Ten Tips to Retain Staff in Emerging Markets

• The Find: With inflation affecting emerging markets across the globe, you’ll need to take measures to ensure you retain staff through the current economic crisis.
• The Source: An article by consultancy Watson Wyatt entitled “Strategic Rewards in an Inflationary Environment“

The Takeaway: Inflation is accelerating in China, and in India prices for many household basics are up ten percent on last year. The Russian government has missed its inflation targets and Brazil has seen its usually low rate of inflation begin to inch upwards. If you manage employees in these or other emerging markets, now is the time to reconsider their compensation to ensure you retain key talent through this crisis. Watson Wyatt offers ten suggestions:

1. Relax payroll restrictions. Multinational companies accustomed to restricting payroll increases to single digits will need to look at exceptions.
2. Keep compensation levels in line with inflation. Companies don’t want to “pay for inflation.” But multinational companies that resist raising compensation levels to account for double-digit inflation will fall behind competitors — and may find the most talented and engaged employees jumping ship.
3. Look beyond formal inflation indexes. Central banks sometimes understate true inflation rates, and government controls on the price of services can also skew official inflation figures. From a strategic rewards standpoint, matching the official index may not satisfy employees.
4.  Watch the market. Monitor the market closely to identify or even anticipate the actions of industry competitors on compensation and strategic rewards.
5.  Get inventive with alternative retention tools. Smart companies consider indirect ways to sweeten a valued employee’s total rewards package. In Argentina, some companies offer top-performing employees discounted loans, improving retention and providing relief to those struggling with debts. Companies should implement only those alternative retention tools that are highly valued by employees and administratively and financially feasible.
6. Consider multiple salary adjustments per year. As long as inflation stays below ten percent, companies may safely maintain a yearly schedule of salary adjustments. Once inflation reaches double digits, organizations should consider multiple increases per year.
7. Build in the cost of benefit increases. Even companies that think they are well prepared to deal with salary inflation sometimes forget to account for cost increases in benefits or liabilities. In Brazil, for example, termination benefits are defined as a percentage of salary. When salaries rise across the board due to inflation, companies must increase the amounts budgeted to pay for retirement and other benefits.
8. Intensify employee communication programs. Employees living in an inflationary environment often latch onto the most visible evidence of inflation — for example, a 50 percent rise in the cost of milk — to demand a commensurate salary increase. Companies should respond with a two-pronged communication strategy. First, show employees the value of their total rewards package. Second, provide context and transparency by comparing the total compensation package with industry averages and the broad-based inflation rate.
9. Be prepared for “the day after.” Even after inflation has diminished, companies may face continued pressure for raises to compensate for a perceived loss of purchasing power. Companies should push back on groundless claims while making sure that past increases have in fact kept pace with competitive market rates.
10. Seek competitive advantage. Industrial companies with few employees may have significant flexibility on the strategic rewards front during an inflationary period,… service-based companies with many employees may need to devise creative strategies to retain top performers until the inflationary period has passed.

For more insight, including a case study on countering inflation in South America by Patricio Zapata, regional head of reward for Latin America and the Caribbean at British American Tobacco (BAT), check out the complete article.

The Question: How challenging has your company found it to find and retain quality staff in emerging markets?

(Image of graph by kevinzhengli, CC 2.0)