Let us use this salary review period to correct our remuneration systems

The biggest challenge facing Zimbabwean organisations today is to manage wages and salaries against the worsening economic environment. This is the time for the country, industry and individual organisations to rethink their remuneration systems .

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The major problems which I have alluded to in my previous articles\narethat wages and salaries are based on grade (all jobs), NEC\nnegotiated, market related and are not performance based. Over and above these\nchallenges,99.99% of the\nremuneration is fixed and guaranteed for most Zimbabwean organisations – in bad\ntimes and good times you are forced to pay the same amount in salaries and\nwages. A lot of the remuneration items are hidden and not properly accounted\nfor in staff costs.When I have helped companies to move to the total cost to\ncompany model, many organisations are shocked at the true amounts they are\npaying their staff. Another challenge is that very few organisations rarely pay\nfor extra value created and that is another danger sign.

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The current wage system entirely based on collective bargaining is rigid and does not allow employers to take into consideration different company circumstances: positive or negative. Wages and salaries are set on the basis of performance next door (same industry). Over and above this Zimbabwean collective bargaining agreements are permanent: in good and bad times we use the same model. The current wage setting system presupposes a stable and improving economic conditions as it does not take into consideration deteriorating economic conditions. Since the current system is so rigid, a majority of employers have surrendered wage setting to National Employment Councils.The wages and salaries in Zimbabwe are supported by a plethora of benefits and allowances that do not make business sense in the current business environment. The above conditions have led to a significant escalation of wage costs – the consequences are evident everywhere (delayed salary payments).

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So what are the consequences of all of the above?Unemployment,which is a\nresult of excessively high wages especially if not supported by productivity. Zimbabwe\nis emerging as an interesting case study. Faced with this situation, employers\nare likely to retain only those employees, whose productivity justifies higher\nwage levels and laying off the remainder. Employers have the option to replace\nlabour with physical capital and technological innovations when labour\nproductivity is too low like in the case of Zimbabwe. On retrenchment,unfortunately,\nit is always concentrated among lower skilled workers who do not have the\neducation and experience to justify higher wages. With rigid collective\nbargaining agreements we are likely to see more companies switching from labour\n(manual processes) to automated processesin theproduction process.

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The proponents of minimum wages argue that minimum wage increases are\nmore likely to deliver income gains to low-skilled workers during good times\nand but have dire consequencesin bad times. They argue that minimum wages may\nstimulate macroeconomic growth. My challenge with this argument is that this a\nluxury for those living in good times – economically. Minimum wages as a way to\nfight poverty can bedone by those with extra resources but does not work in our\ncurrent situation.

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The business context in Zimbabwe is changing. Government, businesses and\nindividuals need to face reality and adjust. Revenue is cyclical over time and\nwages grow exponentially over time. This is a natural phenomenon that we cannot\nreverse. Employers and labour choose to fight instead of collaboration,\nunfortunately it seems both sides are losing dismally.

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Here is what I recommend as\nthe way forward:

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1. Restructure your wage system and make the remuneration system flexible and competitive. You get better\nincentives in good times and you get job security in bad times. The system must\nbe flexible to accommodate both good and bad times without threatening the existence\nof the business or the job security of the employee.
2. Link wages to productivity as it is the only way\nto sustain higher wages. Government has learnt the hard way.
3. Have the right company representatives in the NEC\nexecutive. This could change the fortunes of the industry overnight. Many\nemployers miss an excellent opportunity to shape the labour trends in their\nsector by assigning powerless human resources officers to sit in the NEC\nexecutive.
4. Renegotiate\nCollective Bargaining Agreements –reconfigure wages adjustments in line with\nproductivity and cost of living. Look at reality and face the reality as you go\nthrough the process.
5. Exempt SMEs from paying minimum wages – set a\nminimum revenue threshold they need to exceed to qualify for NEC Minimum Wage.\nThis will promote their competitiveness and growth.
6. Government must exempt low wage earners from paying\nPayee. Imagine an exemption of $500 and what it will do to product & service\ndemand.
7. Government must reduce tax on all performance related\npay for lower level staff or tax performance based pay at half the current\nrates.
8. Negotiate for once off payments at NEC as an interim\nmeasure. This will ensure sustainability as the once off payments do not add to\nfixed costs. The modalities can be worked out for each NEC. In the same negotiations,\nmake sure the Collective Bargaining Agreements run for period of no more than\nthree years to accommodate economic cycles.
9. Reconfigure NEC Pay Structures –Let us change from\nminimum wage to “Going Rate.” Create significant pay progression from one grade\nto the other. Create and widen pay ranges.
10. Create an affordability matrix based on factors that\nmatter to your industry. Those doing more will pay more and those not doing\nwell will pay less.

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The quick wins you need\nto implement in the context of your business are as follows:Stop paying non –\nperformance related bonuses (13^th cheque), hiring freeze, cheaper hires,\nearly retirement, freeze promotions and reduce non- statutory benefits.

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The wage system is one of\nthe many problems facing Zimbabwean organisations. However the\ngreatest threat to Zimbabwean industries in not wage escalation. The greatest\nthreat is leadership incapacity across many levels. Due to the exodus of\ntalented people during the hyperinflation period, a number of organisations\nmoved people into roles when they were not ready. As result whatever savings\nyou will generate from salary cuts will be consumed by a greedy few.

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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.linkedin.com/in/memorynguwi/  Phone 481946-48/481950/2900276/2900966 or email: mnguwi@ipcconsultants.com or visit our website at www.ipcconsultants.com