NEW: US dollar salary trends

Memory Nguwi

THERE is no question that some organisations started paying their employees’ salaries denominated in US dollars some time ago.

This is mostly a reaction to the rate of inflation and the recent falling value of the Zimbabwe dollar.

Additionally, we have observed frequent salary reviews at the National Employment Council (NEC) level.

Even at that level, several industries have started to pay a portion of the wages in United States dollars.

In July we surveyed how organisations handled payment of salaries given the challenges of inflation and Zimbabwe dollar (ZWL) depreciation.

Sixty (60) organisations participated in the survey.

The respondents were human resources (HR) professionals.

Here are the key findings:

– 83 percent of the surveyed organisations pay a certain percentage of the salary in US dollars. This is a (13 percent) increase from the March 2022 survey.

– NGO, mining, transport and logistics sectors pay salaries largely in US dollars.

– A large percentage of top management is paid largely in US dollars.

– Many organisations are receiving US dollars 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 dollars has any productivity gains for the business.

The percentage of people who do not perceive any gains in productivity after paying wages in US dollars has decreased from the last survey. Those who have noticed the changes remain unchanged, while there is a 9 percent increase among those who are unsure.

We noted that 42 percent of the participating organisations indicated that staff turnover decreased when they started paying in US dollars.

There has been a 3 percent decrease in the organisations that indicated that staff turnover decreased when they started paying in US dollars from the previous survey in March.

We asked participants whether they had any problems paying employees in US dollars, 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 most often mentioned issues is that employees’ expectations rise as they seek more US dollar-linked benefits once a business begins paying in US dollars.

The private sector reported that business is seasonal, which has an impact on US dollar cashflows. Others mentioned issues with sustainability.

For those employers with no US dollar-linked salaries, the major challenges cited are: difficulties in budgeting for salaries due to ever-changing CBA rates, ZWL 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 largely paid in US dollars.

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 dollars and ZWL to remain competitive.
Our previous report’s conclusions remain valid.

Employers with some US dollar revenue continue to raise the share of salaries paid in US dollars 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 dollar local sales to pay wages in US dollars may face viability problems.

The euphoria around the rush to pay salaries in US dollars is likely to be short-lived for those that may have decided to take this route without a fool-proof strategy to sustain revenue inflows in US dollars.

In addition, we hope that those without sustainable US dollar income will not rush to make US dollar salaries contractual.

The best approach for this group is to peg salaries in US dollars but pay using the local currency at the prevailing rate.

Given how the local economic environment can affect US dollar sales, it would be too risky to rush to pay salaries in US dollars.

According to our research, employers who give a US dollar salary or a fraction of this can attract new and retain current employees.

*Memory Nguwi is an occupational psychologist, data scientist, speaker, & managing consultant- Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. Email: [email protected] or visit our websites – www.thehumancapitalhub.com / www.ipcconsultants.com