Memoy Nguwi THERE is no question that some organisations started paying their employees salaries denominated in US dollars quite some time ago.
This is mostly a reaction to the rate of inflation and the falling value of the Zimbabwean dollar. Additionally, we have observed frequent salary reviews at the National Employment Council level. Even at that level, several industries have started to pay a portion of the wages in United States dollars.
We surveyed how organisations handled payment of salaries given the challenges of inflation and Zimbabwean dollar depreciation. Sixty organisations participated in the survey. The respondents were HR professionals. Here are the key findings:
83% of the surveyed organisations pay a certain percentage of the salary in US$. This is a (13%) increase from the March 2022 survey.
NGO, mining and tansport and Logistics sectors pay salaries largely in US$.
A large percentage of top management is paid largely in US$.
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Many organisations are receiving US$ local sales enabling them to pay staff in US dollars.
The highest staff cost to income/revenue is in the following sectors: transport and logistics, banking and telecommunications.
We asked the respondents if paying staff in US$ has any productivity gains for the business. The percentage of people who do not perceive any gains in productivity after paying wages in US$ has decreased from the last survey.
Those who have noticed the changes remain unchanged, while there is a 9% increase among those who are unsure.
We noted that 42% of the participating organisations indicated that staff turnover decreased when they started paying in US$ There has been a 3% decrease in the organisations that indicated that staff turnover declined when they started paying in US$ from the previous survey in March.
We asked participants whether they had any problems paying employees in US$, and here is what they said: The most serious difficulty for people in the NGO sector is that funding from donors is frequently disbursed late, hurting worker salaries.
One of the often mentioned issues is that employees’ expectations rise as they seek more US$-linked benefits once a business begins paying in US$.
The private sector reported that business is seasonal, which has an impact on US$ cash flows. Others mentioned issues with sustainability.
For those employers with no US$-linked salaries, the major challenges cited are: Difficulties in budgeting for salaries due to ever-changing CBA rates, RTGS instability resulting in constant requests for salary reviews, staff turnover, theft and side marketing and difficulty in attracting the right skill levels and experienced staff in the industry.
They also noted that employees face challenges paying rentals and school fees, which are all paid largely in US$.
We asked the HR professionals responding to this survey if they had any recommendations on how the country can deal with the current instability affecting how employees are remunerated.
Here is what they said: They recommended that employers split the payment of salaries as partly US$ and ZW$ to remain competitive.
Our previous report’s conclusions remain valid. Employers with some US$ revenue continue to raise the share of salaries paid in US$ to protect employees from the rising cost of living and the depreciation of the Zimbabwe dollar.
This tendency will likely continue if the economy does not achieve inflation and exchange rate stability.
Logically, firms that rely heavily on exports pay their employees in US dollars. Even for this group, sustaining such wages is critical when adjusting salaries. It is also clear that firms that rely heavily on US$ local sales to pay wages in US$ may face viability problems.
The euphoria around the rush to pay salaries in US$ is likely to be short-lived for those that may have decided to take this route without a full-proof strategy to sustain revenue inflows in US$.
In addition, we hope that those without sustainable US$ income will not rush to make US$ salaries contractual. The best approach for this group is to peg salaries in US$ but pay using the local currency at the prevailing rate.
Given how the local economic environment can affect US$ sales, it would be too risky to rush to pay salaries in USD.
According to our research, employers who give a US$ salary or a fraction of this can attract new and retain current employees.
- Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: mnguwi@ipcconsultants.com or visit ipcconsultants.com.