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“Studies That Help Understanding the Dynamics of Wages Are Lacking”

“Studies That Help Understanding the Dynamics of Wages Are Lacking”

Eugénia Pião, senior manager of consulting firm Ernst & Young, observed the behavior of national companies and uncovered the factors that, in her view, hinder the transformation of wages into effective instruments for promoting growth and competitiveness of the economy

To better understand the reality of the market, especially in the private sector, E&M listened to Ernst & Young (EY), in this interview with Eugénia Pião, senior manager of the consulting firm and with many skills.

She is a specialist with skills in areas including Human Resources management, Strategic Development of People and Business, Consulting and Change Management, Leadership Development, Team Integration Activities, Corporate Training and Diversity and Inclusion Speaking.

The expert introduces the notion of “emotional salary”, to explain that the solution to low salaries does not lie only in numbers, but in a stance that has yet to be adopted and that will require the awareness of companies and a study based on the national reality of these matters.

How is the remuneration policy dynamic carried out in low productivity economies, in the logic of how institutions work in Mozambique?

As a rule, salaries are defined by a fixed component, and in Mozambique the fixed component, whether in the public or private sector, is determined by the State. The State determines the minimum salaries, and while this functions as a law in the public sector, the private sector uses the same basis to define its strategic remuneration policy. This, on the one hand, is positive in the sense that it apparently generates some harmonization in wage practices, i.e. there is not much variation between the practices of the two sectors.

It may also be positive in those economies where the public sector pays better, and there are many of them. But in Mozambique, the opposite is true, because a state apparatus that has large expenditures only on wages becomes uncompetitive. And, by influencing the private sector to adopt the same practices, the same wage levels and the same benefit packages, it also makes the private sector less competitive.

Despite this inertial relationship, it can be seen that the private sector has a higher wage structure than the public sector. Being in the same country, with the same macroeconomic, skills and even productivity assumptions – which are taken into account when defining wages – what determines this difference?

There is indeed a great disparity between two people for the same jobs, where one person is paid in the private sector and the other in the public sector, without questioning professional merit, skills and training.

Take for example a doctor or a teacher: what they earn in the private sector may be double or triple what it is in the public sector. This circumstance becomes even worse when there is no regulation in this respect, which makes an analysis of market inflation, of the costs of basic necessities, and therefore fails to produce an alignment between salary increases and inflation indexes. Obviously this means that working people’s purchasing power is reduced and this naturally generates dissatisfaction in terms of motivation, but it also generates, in economic terms, a weak purchasing power, which means that the economy will also suffer.

EY, based on the reality of the companies and organisations it works with, has started to feel that, currently in Mozambique, the worker has the salary as his first remuneration practice, but not only: there is the ’emotional salary’ component that is often responsible for retaining talent, which happens more in the private sector.

“I will talk about EY’s experience: every time we go to a market to do a salary study we have a mission to train and raise awareness to the companies contacted to participate

In other words, in this sector, salary is taken as an important competitiveness factor. And we also have the other side, where people believe that when they make a career in the civil service they have stability, security, etc., but what security and stability are we talking about? It’s just a salary practice.

In terms of professional career and progression, there is nothing contemplated. In the civil service, career progression and the associated salary package are almost non-existent. Meritocracy is often based on length of service. In other words, those who have been in the job the longest get a progression, and with that comes equal pay.

As a renowned consultancy firm and in contact with various realities, EY knows the path that leads to a better definition of salary rules. What is lacking in Mozambique that is well done abroad?

Mozambican companies are not in the habit of commissioning local studies related to wages. They often buy studies from companies in South Africa and use them for the national market, which results in fallacies, because these studies do not describe the local reality and end up making companies orient themselves based on wrong data about remuneration and salary policy.

There are many companies in the market that carry out these studies and E&Y is one of them, but the difficulty we find is that companies in a given segment respond, participate and match the study of the company that orders it. In other words, companies similar to the one ordering the study usually refuse to participate, have difficulty in trusting and sharing data of a sensitive nature and we understand this.

Therefore, the companies that work with these analyses are bound by a code of ethics, deontology, confidentiality and professional secrecy. Therefore, we ourselves would be the first ones to suffer if we did not treat the data that is shared with us with due confidentiality.

So is the result of all this what we see? Lack of consistent policies, large pay gaps, low competitiveness of companies and the economy?

Yes. Companies and organisations end up not having a sense of how they position themselves in their own segment within the market, how competitive and competitive they are with their counterparts in terms of salary stature, and then they tend to compare functions that are not comparable to each other.

For example, the accountant in one company earns the same salary as the accountant in another company. But when we analyse the job description – most companies don’t even have their functions properly catalogued because they don’t have a qualifier – we end up comparing functions that are not comparable.

By this I mean that in one of the companies, the accountant can exercise the function of financial director and has decision-making autonomy, while the other does no more than classify some accounting documents. But both are paid the same salary. It is all these fallacies that end up imposing an error in remuneration practices in the market and, namely, between functions. What should happen is to delegate to qualified and accredited companies to do this sensitive work, and with the proper quality.

Where should the change start?

I will tell you about EY’s experience: every time we go to a market to do a salary study we have a mission of training and sensitising the companies contacted to participate. First, we have to raise awareness, explain the scope, the advantages, the trust they should have in the company, the objectives of the work, the benefits of doing salary surveys.

We must have the notion that, after one, two or even five years, the analysis logic of the study is still valid and the company can use it, using the values that were obtained.

So, if you want to correct salaries, based on studies of this type, you only need to add the inflation levels of the country in that year and a few factors. But that investment is something that will have a return in the medium and long term, which guarantees the company perfect sense of where it stands in its segment in the market and what are the factors of attraction and retention of talent.

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“The issue of emotional pay (with reduced costs), good organisational environment and employee well-being is very important for the health and very growth of the company”

As I said, unfortunately, there is no regulation that prevents the sale of data from other geographies that do not fit in Mozambique and that, supposedly, take here some adaptation, customization and a normalization of the data in our market, but that we know are hindering decision making in these companies.

Today we can see a growing modernisation of business activity that is the result of greater access to information on good business practices. I believe that, at the level of good practices in the definition of competitive wages, this notion already exists and has a tendency to grow. Or not?

Nowadays, also due to some teachings that multinationals and international organizations have brought to the market, but also due to the experience that many top managers of the companies we have in the country have already had in integrated projects of professionals abroad, we are already starting what is the trend in other countries.

Some foreign companies already attribute, besides the remunerable or financial salary, an emotional salary, which are the compensations that the employee feels he receives when working in a certain professional environment, in a certain organisational climate that provides him with well-being and some happiness.

You see, today this generation is different from the past, which prioritised what is called a ‘job for life’. This generation has the perspective of reconciling their professional career with their personal life. They are always looking to evolve, to acquire new professional experiences and skills, but always keeping up with their personal life.

Therefore, it is already common to see employees, and even candidates, who are willing, in financial terms, to receive a little less than what they received in a given organisation or position, because they know that if they go to another company or to another position, they will have a series of benefits and perks at social and personal levels that represent a gain for them.

In short, the public sector pays poorly, the private sector is already starting to realise the need to improve this issue, especially to retain talent, but the country lacks serious studies to guide the market in search of competitiveness… What will the trend be?

In some countries, there is already a position called Chief Happiness Officer, which is a figure that watches over happiness and good organizational climate.

Some companies prefer to have someone specialised in this area instead of increasing salary percentages because they see that, in fact, the issue of emotional salary, the good organisational environment and employee well-being is very important for the health and growth of the company itself, often at very low cost or even at no cost to the organisation.

For example, the managing director congratulating the employee on his birthday or giving him a day off, or, instead of giving one day of paternity leave, as is expected, giving two or three… This is something that has an impact. These are things that represent a lot for the self-esteem, recognition and appreciation that the employee feels and that, when it comes time to think about leaving the organisation, he takes into account.

Employees consider the way they are treated and considered, and if and when the company experiences some kind of crisis and cannot give a salary increase, or needs the employee to make an extra effort, the employee will not feel at a loss and will create a spirit of love for the shirt. This should be the trend.

E&M

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