www.pwc.com.na IPM Namibian Remuneration & Benefit Trends
Who is the Namibian People & Organisation team? Strat Reward & Rem Analysis with Payrolls & Tax - Leadership Systems - People Strategies - 5 yr. Strategic Bus Plans - HR Analytics - E-Learn, E-Perform, E-LMS - HR Models - Org Capability Diagnostics - Org Design validation Change & Culture 2
Agenda 1. Total Rewards Model 2. Remuneration Package Composition 3. Executive Remuneration 4. Market Benchmark 5. Benefits 3
Total Reward Rewards Model Big Picture Where does it all fit in? 4
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Remuneration & benefits defined Pay provided by an employer to an employee for services rendered Legally mandated: SSC / ECA Pay for time not worked: Annual / Sick leave Benefits Fixed Pay Variable Pay Retirement: Pension / Provident Health & Welfare: Medical aid / Disability Remuneration Short-term Incentive Pay Long-term Incentive Pay Programs to supplement cash; designed to protect employee and family from financial risks Source: World at Work : Global Remuneration Professional course content 6
Remuneration Package Composition Total Guaranteed Package; or not? 7
How is Total Guaranteed Package used in the market? Highly influenced by Union involvement Namibia Market Structure General/ Executives/ Unionised Management Staff Basic Salary 28% 56% Total Package 72% 44% Source: Remchannel Online Salary Survey 8
Total Guaranteed Package components & composition The items that are included in total guaranteed package are all payments and benefits of a fixed and regular nature and are capable of exact valuation. People are usually unconditionally entitled to such payments and benefits. Basic Cash Club Subscription Annual Bonus (Guaranteed) Holiday Accommodation Pension / Provident Fund Deferred Compensation Medical Aid Financial Counsel Housing Subsidy/Allowance Group Life Free Cheap Housing Overseas Travel Company Car Cheap Assets Car Allowance HOD Allowance Entertainment Allowance Market Premium Telephone Allowance Proto Team Allowance Other Cash Benefits (any other cash benefit or cash allowance, paid through the payroll, which is not already catered for above) Other Non-Cash Benefits (any other non-cash benefit which can be converted to a cash value and which is not already catered for above) Retirement Scheme 8% Medical Scheme 4% Typical Management TGP Distribution Car Allowance 7% Company Car 1% Other Cash Benefits 4% Housing Subsidy Allowance 13% Basic Cash 60% Guaranteed Bonus 3% Source: Remchannel Online Salary Survey 9
Executive Remuneration Is it transparent, fair & responsible? King III 10
Align executive pay with company purpose Aligning executive remuneration with the organisation s changing business model will assist in attracting and retaining the people it needs to take the organisation forward. With this in mind, we look at how organisations can develop a more sustainable and strategically coherent approach to pay and incentives: Engaging with stakeholders Aligning pay considerations with decisions over where and how you operate More realistic packages Fixed pay over the higher risk gamble of a bonus Variable pay loses value the longer people have to wait Rewarding the behaviour you want Forging a new career bargain Money may not be the chief motivator for the people you need Rebuilding trust Source: http://www.pwc.co.za/en/publications/non-executive-directors-report.jhtml 11
State-Owned Enterprises Governance Council Remuneration Framework State-owned Enterprises Governance Act, 2006 (Act No. 2 of 2006) No 174, as amended 31 Dec 2014 (No 261) Directives in relation to remuneration levels for chief executive officers and senior managers of state-owned enterprises and annual fees and sitting allowances for board members Bands for Total Guaranteed Pay per annum inclusive of inflation rate of 6% and excluding performance and incentive based pay in Namibian Dollars (CEO) Lower Quartile Median Upper Quartile 90th Percentile Tier 3 752 305.32 921702.86 1 332 450.74 1 624 797.68 Tier 2 478 843.34 583 662.50 838 821.46 1 046 428.82 Tier 1 425 270.94 504 682.96 704 684.82 851 617.78 Bands for Total Guaranteed Pay per annum inclusive of inflation rate of 6% and excluding performance and incentive based pay in Namibian Dollars (Senior Managers) Lower Quartile Tier 3 Tier 2 Tier 1 472 605.24 394 702.66 288 800.18 Median 562 693.58 472 966.70 343 570.38 Upper Quartile 751 827.26 649 435.50 458 218.92 90th Percentile 925 012.18 784 030.06 563 697.40 12
Market Benchmark Are your salaries externally competitive? 13
Practical steps in determining a pay structure Job Analysis The breakdown of a job into its constituent tasks and processes Job Documentation A result of job analysis; an analytical statement of tasks, processes, etc. The sequence as well as completeness of these steps are very important to establish a healthy pay structure Job Evaluation The systematic and objective ranking of jobs in terms of relative importance, value or difficulty Grading Structure A job worth hierarchy Remuneration Philosophy A set of beliefs which underpins the reward strategy of an organisation; it governs reward policies Market Positioning Determine organisation s position through grade & job benchmarks based on remuneration philosophy Base Pay Structure Assigning monetary values (pay) to the hierarchy of jobs consequent upon grading & market positioning Source: World at Work : Global Remuneration Professional course content 14
Advantages: Responsive to market Transparent Simple to administer Not time consuming Easy to explain Challenges: May be difficult to obtain survey data for some positions. May not be aligned with internal equity. Any market inequity are built in. 15
The drive behind annual increases There is a very close correlation between CPI and the annual increases granted. However the reality is that staff needs to consider the increases in the cost of living, the real increases not CPI. A variety of elements are considered to determine annual increases: Union negotiations; Individual & company performance; Reported pay adjustments Namibia National market: Executive & Management Actual reported % Increase 2015 Anticipated % increase 2016 Economic forecasts & affordability; Basic Salary 6.3 6.4 Historic increases; Total Package 6.3 6.9 Actual reported % Increase 2015 Anticipated % increase 2016 Basic Salary 7.3 7.3 Total Package 6.8 7 Industry comparisons; and Market benchmarks through salary surveys such as REMchannel Unionised & General Staff 16
Average comparisons to Namibia: South Africa 25% higher Botswana 20% lower Lesotho 5% higher Swaziland 10% lower Remuneration Trends 2015 SADC regional comparisons 2,500,000 2,000,000 1,500,000 South Africa: Economy 10 x larger Botswana: Comprehensive benefit structure Lesotho: Very steep pay curve Swaziland: Relative flat pay structure 1,000,000 500,000 Values are: Annual TGP N$ Unskilled/Defined Decision Semi-Skilled/Discretionary Skilled Technical/Academically Professionally Qualified/Mid M Senior Management Namibia South Africa Bostwana Lesotho Swaziland Expon. (Namibia) Expon. (South Africa) Expon. (Bostwana) Expon. (Lesotho) Expon. (Swaziland) Source: Remchannel Online Salary Survey 17
Remuneration Trends 2015 Namibia industry circle comparisons 1,200,000 Mining is clear leader on average 45% above Retail is lagging the market norm by about 50% Finance is just above the market by 5% 1,000,000 800,000 600,000 400,000 Influencing factors: Economic background Affordability Multi-Nationals 200,000 Values are: Annual TGP N$ Unskilled/Defined Decision Semi-Skilled/Discretionary Skilled Technical/Academically Professionally Qualified/Mid M Nam Nat Fin Serv Retail Mining Expon. (Nam Nat) Expon. (Fin Serv) Expon. (Retail ) Expon. (Mining) Source: Remchannel Online Salary Survey 18
Remuneration Trends 2015 Namibia Technical vs Support 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 Influencing Factors: Scarcity, Attraction, Location, Retention, Succession, Collective bargaining, Leadership, Outsourcing, Regional competition. 40% premium paid for technical 400,000 200,000 Values are: Annual TGP N$ Semi-Skilled/Discretionary Skilled Technical/Academically Professionally Qualified/Mid M Support Technical Expon. (Support) Expon. (Technical) Source: Remchannel Online Salary Survey Senior Management 19
Remuneration Trends 2015 Namibia per job discipline One generic pay scale may not accommodate all 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Values are:annual TGP N$ Professionally Qualified/Mid M Distri & Supply Education Fin, Risk & Comply HR IT Market & Sales Source: Remchannel Online Salary Survey SHEQ 20
Benefits The somewhat poorer cousin of Total Reward 21
Benefits The Total Guaranteed Package concept is firmly entrenched in organisations for years. The unintended consequence thereof however; reducing the perceived value & importance of benefits. Manager TGP comprises around 40% benefits, these typically include: retirement, medical, housing, vehicle, and in some instances, a guaranteed end-of-year bonus. Employees focus on TGP, they do not always consider the value of these benefits and the real costs or savings therein. I.e.: retirement funding at rates well below market costs, due to closed funds with significant negotiating power. A further contributor: Namibia does not have a comprehensive employee benefit guide to assist and regulate or at a minimum provide a checklist of typical benefits utilised in the market. This guide would provide the ability to benchmark the competitiveness of benefits such as leave, housing & travel allowances, retirement funding, medical coverage and communicate the market practices effectively to employees. Introducing Namibia s first National Employee Benefit Survey Publication end March 2016 22
Typical benefits offered Leave Annual, Compassionate, Maternity, Sick, Study, Sabbatical, Relocation, Sport, Organisational Rights, Incentive, etc. Retirement & life insurance Retirement, Provident, Disability, Group life, Group accident, Dreaded disease, Funeral cover & Short-term insurance Medical aid Membership, Plan options, Company contribution, Post retirement cover & Annual check-ups Travel Car allowance, Use of company car, Eligibility, Quantum of benefit, Running & additional costs, Reimbursement & Subsidised transport. Subsistence & overseas travel Qualifying levels, daily rates, typical expenses covered, both local and oversees travel Housing & relocation Entitlement, Basis of calculation, Allowance, Loans, Subsidy, Collateral, Free or cheap housing, Relocation Circumstantial benefits Shift, Standby, Callout, Acting, Overtime, Other cash (tool, uniform, underground allowances) Source: South African Employee Benefits Guide 2013 23
Typical benefits offered Non cash benefits Educational assistance, Professional body membership, Media subscriptions, Club subscriptions, Cellular phone & contract, Free or cheap services, Company credit cards for entertainment, Canteen/ meal benefit, Home security, Gymnasium, Crèche/childcare, Parking, non-monetary recognition awards, Counselling, Organisational Initiatives Cash benefits Home office, Annual bonus, Staff loans, Market premiums, Deferred compensation General Hours of work, Training & development Employer value proposition Work Life Flexible working arrangement, Working from home, Time-off, Employee Assist Program, On-site facilities, Other initiatives Assignments/ Secondments Employees on assignment within Namibia Equal pay Equal work Policy and practise details Source: South African Employee Benefits Guide 2013 24
Interesting practises on leave Annual - Buying of additional leave. Study Compassionate Some granted per event and not per annum. Religious holiday - Other than public holidays Maternity - Additional Maternity leave @ % base pay or unpaid; - % pay ranges for different levels; - Moved to low risk work areas; - Benefits in TGP maintained by companies; - 20% of companies limit the number of pregnancies. Sick - 7% reported that sick leave can be accumulated - 46% allow newly appointed employees to utilise sick leave in advance - 42% provide additional sick leave for life threatening/dreaded diseases 1 day for the exam and 1 day for study prior to the exam, with 10/12 days maximum; - Limit to a field of study beneficial to the organisation; - Employee required to stay in service in lieu of the study leave/assistance received, equal to study period. Long/ Sabbatical - 20% provide to employees - Some form of restrictions related to the period granted and or a minimum service period; - Could either be paid, partially paid or unpaid. Relocation/ Moving - 52% provide between 1 and 4 days. Sport - 51% provide sport leave to their employees. Organisational rights - 39% provide to union representatives and shop stewards. Source: South African Employee Benefits Guide 2013 25
Reward responsibly... Elria van der Merwe Senior Manager: People & Organisation Tel: 061 284 1201 Mobile: 081 445 6559 E-mail: elria.van.der.merwe@na.pwc.com The information contained in this publication by Namibia is provided for discussion purposes only and is intended to provide the reader or his/her entity with general information of interest. The information is supplied on an as is basis and has not been compiled to meet the reader s or his/her entity s individual requirements. It is the reader s responsibility to satisfy him or her that the content meets the individual or his / her entity s requirements. The information should not be regarded as professional or legal advice or the official opinion of. No action should be taken on the strength of the information without obtaining professional advice. Although take all reasonable steps to ensure the quality and accuracy of the information, accuracy is not guaranteed., shall not be liable for any damage, loss or liability of any nature incurred directly or indirectly by whomever and resulting from any cause in connection with the information contained herein. 2015 PricewaterhouseCoopers ( ), the Namibian firm. All rights reserved. In this document, refers to PricewaterhouseCoopers in Namibia, which is a member firm of PricewaterhouseCoopers International Limited (IL), each member firm of which is a separate legal entity and does not act as an agent of IL