Taking a Look at Global Pay & Allowances
Taking a Look at Global Pay & Allowances
Annually, Humentum conducts a survey focused on US expatriate and Third Country National (TCN) compensation and allowances. In 2017, 74 organizations participated in the survey: 88% were international non-profits and 9% were corporations, with a representative budget mix across all sizes (25% under $25 million, 37% between $25-99 million, and 38% greater than $100 million).
What did this year’s benchmarking reveal? Here are some highlights on compensation approaches, cost reduction strategies, standardization, and equity with insights from member organization WaterAid, who decided to place equity at the heart of its rewards approach.
Comp Strategies: When it comes to paying international assignees, there is no consistent philosophy or salary pay scale for expats/TCNs. Organizations continue to be divided between maintaining equity among their HQ and international assignees or at least among their international hires (i.e., US expats, international TCNs, and intraregional TCNs). Organizations reported that they primarily pay their US expatriates and international TCNs based on a US salary or an international structure (distinct from a HQ structure). An international pay structure is pegged between HQ and local scales. For regional positions, the average variances between headquarters and international pay scale salaries is 9%. For country positions, the average differential of 10%. For intraregional TCNs, the use of a regional/local salary structure is more frequent (22%).
Salaries: The salary survey is valuable in dispelling some preconceived assumptions. The survey analysis revealed that larger budgets and staff size were not always synonymous with higher average salaries; nor were salaries for unstable economic and political countries synonymous with higher salaries. While salaries remained relatively close to 2016 levels, salaries for the Regional Program Director/Manager position increased on average by 13%, the Senior Regional Development/ Fundraising position on average by 10%, and the Country Finance/Senior Director salary increased by 12%. Three country-based positions’ salaries decreased by an overall average of more than 10% from last year: Deputy Head of Office, Program Position-Coordinator Level, and Monitoring & Evaluation Coordinator. The reasoning behind the double-digit increases and decreases is not surveyed, but we do find that staffing changes, market adjustments, and some new survey participants can contribute to these oscillations.
Currency Fluctuations: Addressing currency fluctuations was a topic of discussion for numerous NGOs. Approximately 20% indicated that to address this issue, they review cost of labor/salary market data, while 44% either have no formal policy or address on a case-by-case basis.
Discussions and recorded webinars on the topic of currency fluctuations can be found on Humentum’s Member Community. Guidance shared by our members within this forum includes that organizations should not watch devaluation rates or inflation rates, but rather the cost of labor which does not move at the same rate.
Cost reduction strategies: While the costs of international employees’ allowance packages and equity across international staff categories continue to be of concern to organizations, the survey showed that organizations continue to provide costly allowances to US expats, international TCNs, intraregional TCNs, and sometimes to Host Country Nationals (HCNs), including housing and dependent education. Adding cost sharing or cost control provisions continues to gain traction, especially for many high-cost allowances/benefits. For example, more organizations are reporting sharing the cost of housing at post with their international assignees. The proportion of organizations that reported paying the full cost of housing dropped from between 24% to 37%—depending on staff category—in 2016, to between 11% and 29% in 2017. Another possible approach to reducing costs is localization, but consistent with last year’s findings, only a tiny number of NGOs are currently using this approach. Consistently, under 20% of organizations are even considering localization as a strategy to reduce costs (14% in 2017, 10% in 2016, 16% in 2015).
Duty of Care: In a year with continued global unrest, expanding terrorism, and humanitarian disasters, organizations continue to update and refresh their duty of care protocols. The survey showed that increasingly organizations are putting in place policies, procedures, insurance, and safety and security training to fulfill their duty of care obligation. (See our blog from earlier this year on Advancing Staff Care in 2017).
Standardization & Equity: In terms of benefits, organizations are looking to both standardize and be more equitable across their US expat and TCN employees. This has been a slow process, but one benefit that has become more equitable is retirement. While almost universal for US expats, a larger proportion are offering this to international TCNs (87%) and intraregional TCNs (82%). Some benefits are being extended to include HCN staff as well. The most common benefits offered are: international travel medical/emergency evacuation insurance (50%), life insurance (42%) and accidental death & dismemberment insurance (37%).
Rewards Equity: Walking the Talk: An Interview with WaterAid
We have noted the desire by organizations to harmonize salary scales and reduce stark variations in benefits, but there has been limited movement to do so. Pay differences created by different pay scales between local and international staff with similar skills, experience, and job function often result in lower staff morale, lower engagement, and higher turnover. Regional and local employees question the disparity in pay, and words such as “discrimination” and “hypocrisy” are tossed around. These practices stand in stark contrast to the desire of NGOs to build local capacity and address issues of inequity. One organization has done more than talk. It has been close to ten years since WaterAid, a UK-based charity, proactively decided to move from offering the typical international assignment compensation and benefit package to expats and TCNs and rather provide what might be termed a local plus package. Why? The CEO and HR team recognized that equity and inclusion were part of their organization’s core value, and so it was difficult to justify two people doing similar work while one was on an expat package and one on a local package.
Recently, we asked Sarah Redshaw, head of international people management at WaterAid, “What were the challenges in making that shift from the traditional rewards package as well as challenges in recruiting when competing for talent that sees higher salaries elsewhere?”
“At the time, WaterAid had only 10 to 15 international staff, and their packages were not changed,” Sarah shared with us. “When contracts ended and new staff were hired, it was difficult in the beginning. WaterAid increased its focus in recruiting national staff into what had been international staff roles.” She noted that they still do recruit international staff and must compete for talent with organizations such as Save the Children, Oxfam, and the World Bank. But as she also noted, “We are now a bigger organization with a great reputation; earlier we were small and unknown. We excite people on who we are and what we do.”
So how does WaterAid construct their salary structure for international assignees? Sarah shared that their salary structure is a blend of local and international salaries. She noted that the base salary is derived from Birches Group NGO Local Pay data for local national staff, and it is blended with international data. The weighting is only 25% international data. Sarah described how benefits are decided. Benefits are benchmarked in country every year and are in line with common practice. A relocation package is provided with certain support for the first three years including education and housing. WaterAid’s ethos is that after three years as an international assignee, the team member is rewarded similarly to national staff. International staff are paid in local currency, follow local office policies, and comply with local employment law. The goal is for international staff to build local capacity rather than stay themselves for a long period.
When asked if she had seen much change in the sector since WaterAid took this step, Sarah noted, “There has been lots of interest, even when we started, but not much movement.”
Project Fair Report (Fairness in Aid Remuneration)
US-based NGOs are not the only ones discussing pay equity and standardization. Project Fair, an ESRC-funded international collaboration between the CHS Alliance, Birches Group, the University of Edinburgh and Massey University, undertook an exploration of practical pathways for reward fairness in international NGOs. Thirteen organizations were interviewed: seven were headquartered in the UK, three in Africa, two in Europe/Scandinavia and one in Asia. Their recent report revealed there is no one best way to structure rewards but there is overall interest to explore practical alternatives to the dual salary system and enable the INGO sector to maximize its contributions to decent work, sustainable livelihood and poverty eradication.
Given that the #1 challenge organizations reported in our survey, as it related to international assignees, was in the area of compensation/benefits/allowances, and acknowledging the call to action from Project Fair to develop more equitable, transparent pay systems, it appears that the time for new approaches to be adopted by our community has arrived.