On 17 Jan 2018, the CHS Alliance co-hosted its second webinar to share the results of Project FAIR. On this occasion, we targeted organisations based in the Americas, through Humentum‘s membership and with some assistance from Birches. Dr Ishbel McWha-Hermann, from the University of Edinburgh Business School, presented the research findings. She was followed by Mascha Murphy, HR Manager Concern Worldwide, who shared the organisation’s reward policy. The webinar was very interactive, with 50 actively engaged participants. As a follow-up to the session, we have revisited some of the points raised by participants, addressed some of the unanswered questions, and briefly summarised the main findings of the research.

• Ishbel McWha-Hermann’s presentation
• Mascha Murphy’s presentation

Summary of the project

What is Project FAIR?

Focusing on the humanitarian and development sectors, Project FAIR, in line with the UN Sustainable Development Goals (especially Goal 8) and Commitment 8 of the Core Humanitarian Standard on Quality and Accountability, explores practical alternatives to the dual salary system to better meet employees’ needs by enabling organisations to maximise their contributions to decent work, sustainable livelihood and poverty eradication. It seeks to build an evidence base from existing practices that can be used by organisations wishing to make a change in their reward policies.

What is the dual salary system?

The term dual-salary describes the situation where, in low-income countries, skilled host country national employees and expatriate/international counterparts are rewarded on different pay and benefits scales.

What is wrong with the dual salary system?

There is a growing body of research that examines what kind of psychological impact disparities in remuneration have on employees. It has become evident, for example, that the dual salary system has a negative impact on some employees’ motivation, performance and retention, particularly concerning host country national staff. Research has also found that organisations play a key role in how pay disparities are perceived, and how they affect employees, above and beyond individual, country, or cultural differences. Organisations can, therefore, pay a key role in reversing the negative impact of dual salary systems.

What are organisations doing and how are they moving forward?

Sixteen reward and HR managers from 15 major INGOs were interviewed as part of the research. It was found that there were three kinds of systems in place. (1) Single-salary systems – all employees are paid across a single salary scale, but the approach to benefits and allowances varied; (2) Traditional dual-salary systems – different reward systems exist for national and international employees and (3)“Hybrid” systems – two reward systems are still in place, but with various approaches to reducing the gap between them (for both salary as well as benefits).

Most of the organisations that took part in the research have adopted an incremental approach to change, whereby the change process begins with the development of consistent and transparent reward system(s); at the second level organisations begin implementing a nationalisation strategy and aligning benefit packages, and thinking about their total reward package; and at the final level, (with consideration of mobility strategy) implementing a single-salary system. Important strategic decisions around mobility policy, nationalisation agenda, and total reward package were also highlighted as key to consider before implementing change. Importantly, the research found a general need for organisations to work together towards a sector-wide change in the approach to reward. This includes finding ways to share further data on what works and what doesn’t work.

Questions at the webinar

Could you elaborate more on the difference between the salary and benefit packages?

The national package is what we would call a package that is benchmarked nationally, per country. It would be benchmarked using the local pay data that, for example, Birches Group collects by undertaking salary surveys. The international or the global package is based on another scale that is looking at what international staff are paid in the sector. The HQ package actually could be called the national package because it’s based on the country where the HQ is located. E.g. if it’s based in London it, would be based on a UK scale. Typically, this is lower than the international package.

Were any of the organisations that you studied funded by USAID and if so, were those on grants or on contracts?

We didn’t ask specifically about who funded the organisations, possibly some of the bigger organisations do have USAID funding, but the details of that funding is not known to the project. One thing that did come up in the research was the restrictions that come with donor funding. Donor requirements and the signed contracts sometimes do not allow change to take place.

For organisations that were moving to a single system, what % of those were moving into a local system where they were basically localising international staff as opposed to internationalising local staff?

It’s more of the former, more organisations are shifting to reduce the international packages being offered, but there is a combination.

There was a quote on the slides mentioning the ‘E’ wall, what does that actually mean?

Basically ‘E’ stands for a pay grade, a level in their organisation, and means that everybody who is on grade E or higher, are all paid on an international scale, regardless of their location.

What is your understanding, are we going in different directions?

Everybody is moving towards a fairer system and probably having in mind a single system, but there are multiple paths to get there. It depends on organisational factors, for example on the size of the given organisation, where the employees are working and what kind of work they are doing.  There seems to be a big push to be more localised, to think more clearly about fairness and transparency of the adopted systems. We are moving more or less towards the same direction.

Is it correct to say that the issues of fairness rather concerns national vs. international scales and not the differences within those?

Yes, that seems to be the case. People are not comparing their salaries with the colleagues in other countries. National staff are questioning why international staff are earning so much more, when they may not understand the context as well (though our research suggests that there is some tolerance for difference, actual differences often exceed what is tolerable).

As an interested organization, what HR metrics do you recommend tracking? What metrics might you recommend for tracking that can be used by the whole sector as we are planning to move together?

The project hasn’t examined common metrics, but looking at engagement, satisfaction and motivation can be very helpful and can be a start. This could be a good goal for the future of Project FAIR.

How do you avoid the appearance where the intent might look like price-fixing?

This issue has been raised already, and it’s a really important point to keep in mind. Project FAIR is not saying how much employees should be paid; the aim is to agree on some key strategic underpinning decisions; ensuring transparency and consistency and maybe moving towards a single or a skilled based system, to try to avoid competing on pay in a way that might end up undermining the values of the sector.

In some salary survey data, I often see data reported as an international pay scale. Can you talk about how this scale is used? Would like to understand what might cause an organisation to match to this benchmark instead of a standard scale.

When organisations send staff internationally they traditionally send them on an international package, which includes pay benchmarked to global pay data, and different benefits and allowances to those given to national staff. Historically, those sent on international packages were from the headquarter country, or from other similar (higher-income) contexts, so the international pay scale was to attract skilled people to go into these roles, and to reflect the market from which they were being recruited. Times have changed now, though, for example, we see more regional-level and South-South recruitment, as well as increasing skills amongst national staff, bringing the relevance of these big packages into question.

What currency is used for pay in country programs, especially for those who have moved to a national system. And in general, are international staff and national staff in the dual systems paid on different currency?

From what we see and very generally, those on a single system are paid in local currency. Those on dual systems are generally paid in different currencies (local currency for national staff, and GBP/USD/Euro for international staff (a combination of local and GBP/USD/Euro), depending on the organisation).

A general comment

I agree that in order to make a success of this as a sector, we cannot move alone and some organisations will not want to move first, but they also will not want to be last, due to reputational risk, etc. However, given that the right reward model for the organisation will depend on the organisation’s mobility, reward strategy and values and perhaps organisational size and reach, it’s possible that the right solution will be different for organisations. Perhaps similar organisations could group together to find solutions that meet their specific needs.

How can my organisation be part of the next round of research?

If you are interested in being involved in any way, either through sharing what you are doing, through offering your insights and expertise, or through working with researchers to learn more about your own organisation