Industrial Psychology Consultants (IPC) carried out a survey on payment of salaries in forex. The aim of the survey was to determine the prevalence of payment of salaries in hard currency and how companies are financing these practices.
A total of 83 HR practitioners from different organisations and economic sectors participated in this survey.Most participants were from the financial sector (19%) followed by mining sector (10%) and Non-Governmental Organisations (10%).
Employers are making adjustments to salaries to cushion their employees against the loss in value.
Our findings suggest that 37% of participating organisations are paying their employees in forex. When we analysed which sectors are predominantly paying salaries in USD we noted the following:
- Energy and Oil (33%),
- Financial Services (6%),
- IT & Telecommunications (29%),
- Manufacturing (33%),
- Medicine & Pharmaceuticals (33%),
- Mining (75%),
- Non-Governmental Organisations (100%),
- Professional Services (33%),
- Retail (25%) and Tourism & Hospitality (67%).
You can request for the detailed report to see the other sectors covered by the report.
Those organisations that are paying in USD are paying relatively the same percentage of basic salary to all levels of staff (junior staff to Executive staff). Our findings suggest that companies are paying between 5% – 100% of basic salaries in USD. Most companies are paying between 20% – 50%. Participants said they will generally be reviewing their salaries more frequently (quarterly).
Most organisations that reviewed their salaries this year said the major consideration is inflation (74%) followed by those that said company performance (39%) with exchange rate (19%) being the least. Very few companies have pegged their salaries to the exchange rate. Companies seem to be opting to pay in USD instead.
The general trend emerging is that organisation that export their products or receive international donor funds/ grants are paying their employees either partly or fully in forex.
Companies are only beginning to build meaningful cashflow in USD. Most organisations (46%) said they earn less than 25% of their total revenue in USD from local trading. 57% of the participants in this survey said they earn less than 25% of their total revenue in USD from exports and only 21% said they earn 100% revenue from exports.
Companies need to earn foreign currency for them to be able to pay salaries in forex. The call by some trade unions and employee representatives for employers to pay in forex will simply be impossible to meet if the employers do not earn foreign currency.
Employees need must be weary of their ability to pay, as well the sustainability of paying salaries in forex. We advise that if an employer wishes to pay salaries in forex but however realise that they cannot commit to regular monthly payment; paying discretionary once-off forex payments would be more feasible. However, before making any such payment, the employer must clearly communicate to employees that is a discretionary once-only payment – so as to manage expectations.
Regardless of the calls by Government for business to desist from the basing their prices against the United States Dollar, businesses seem to be increasing denominating or linking their budgets and prices to the USD. The implication is that the economy is increasingly re-dollarising. We are anticipating that this trend will increase as businesses seek to safeguard themselves against erosion of value through inflation. If this trends continues as we are anticipating, we are also likely to see more employers starting to pay either in hard currency or the RTGS equivalent. What is not yet clear is if employers will maintain the face value of previously denominated USD salaries of if they will make changes to these salaries.
Memory Nguwi is the Managing Consultant of Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. Phone 481946-48/481950/2900276/2900966 or email: firstname.lastname@example.org or visit our website at www.ipcconsultants.com