Balancing wages and competitiveness

Following a series of salary disputes in telecoms sectors across the region, this post offers some thoughts on two frequently opposing considerations: wages and competitiveness.

http://www.flickr.com/photos/classblog/Over the last few weeks, there have been regular news reports of employee discontent in a few of the telecoms companies across the Caribbean region. Two of the organisations consistently featured are the Bahamas Telecommunications Company (BTC), a subsidiary of Cable & Wireless in the Bahamas, and LIME in Barbados, where the contention in both instances is regarding pay. The unions are asking for salary increases, but the companies are prepared to offer considerably less.

In Barbados, negotiations between the union and the LIME have ground to a halt, and the Minister is planning to intervene. In the Bahamas, the union has threatened industrial action, and last week it revealed that a salary review conducted by PriceWaterhouseCoppers indicated that

… over 90% of BTC’s line staff in our bargaining unit are underpaid, based on the 75th percentile, when compared with similar companies nationally and regionally…(Source: The Nassau Guardian).

Although it is hoped that these pay disputes can somehow be resolved to the mutual benefit of all parties, below are a few thoughts pertinent to both sides, which most of us employed in the ICT/telecom industry, and even the wider working community, may appreciate.

Economic pressures and decreasing purchasing power

In many large and established companies, there is usually a provision for an increment to employee salaries to be made annually to offset the effects of inflation. While the payment of annual increments might be the case with many telecom/ICT companies in the region, persons are still experiencing difficulty making ends meet, or maintaining their current lifestyles.

Moreover, virtually all Caribbean countries experienced an economic slump over the last few years, which caused a contraction of most markets. Growth ground to a halt; and when coupled with the on-going recession in the United States, along with the weaker US Dollar (o which many of our currencies are pegged); the result has been a marked decrease in purchasing power, which has a direct impact on the cost of goods and services locally.

Hence, the increment, although welcomed, might not necessarily accommodate the changes in the cost of living – to purchase groceries, a gallon/litre of petrol, electricity, etc. – all of which are affected by the state of both our national economy, and that of our major trading partners.

The changing focus on competitiveness

Competition in the telecoms sector, and across most other industries, demands that companies, among other things, increase productivity, improve efficiencies, and manage costs. From a human resource perspective, transitioning to operate in that environment has often required organisational restructuring, redundancies and other options for employee disengagement.

A key argument being made by the union in the Bahamas, to rebut claims by the BTC that it cannot afford the percentage increase being asked for, has been the substantial increase the BTC’s profitability, as reported in Cable & Wireless Communications plc’s half yearly report, and the saving being realised through the BTC’s voluntary separation programme, which has reduced employee numbers. However, the views expressed by the BTC have focussed on the need for the company to become more responsive:

… to survive and thrive in an ever more competitive market.

The operating structure must remain “nimble and agile enough to address the customers’ needs at all times; employees must be engaged in a “consistent and productive way empowering them to shape the business and address customer demands efficiently” and the company must be performance driven…  (Source: The Nassau Guardian)

It is also important to note that in highly competitive environments and from a compensation standpoint, salaries across an industry tend to become more consistent. Outside of senior management positions, significant variations become rare.  However, differences might exist in the perks offered, such as allowances and benefits, and even performance-related pay arrangements.

Unchanged employee expectations?

Using a regional player as an example, historically, Cable & Wireless – when it operated as a monopoly in most of the countries in the region – was considered a choice employer, as it offered considerably higher compensation packages, relative to other companies across a number of sectors. However, the introduction of competition and regulation meant the company has had to become more streamlined and efficient. But to what extent have employee and public perceptions and expectations changed to reflect the company’s current situation?

[For those who have not done so as yet, please participate in our on-going IT/tech salary survey: 10 questions, 5 minutes ]

There might still be the belief that working in any area in the technology/ICT space is highly lucrative. While this might be the case, depending on the actual field/specialty, competition is changing industry dynamics and company imperatives, which inevitably affects remuneration. We are in no way suggesting that employees should not be properly compensated, but we may also need to recognise that what it means to be “properly compensated”, at least from the employers’ standpoint, might be changing.

A final note…

It is also important to highlight that the cheaper cost of labour in the Caribbean, in comparison to developed countries, has been a key driver of foreign investment, which is a critical input to many regional economies. With increasing salaries, operating costs increase, which means that many countries will become less competitive within the region, and even further afield.

Image courtesy of Digitalnative, flickr.

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4 Comments

  • Good read, Mich. It is important to understand the situation from both the employer and the employee standpoints. There are repercussions, positive and negative, of having a higher salary payout; hence the intricate-however-difficult balance needs to sought. It’s all good that we in Jamaica can boast up to 60% lower employee costs in the BPO sector – which puts us on the map as a competitive location – but to what end, and to whose demise? This also leads to the point that for countries like Jamaica, where boasting (much) lower employee costs seems to be creating more wealth for the employer and less purchasing power for the employee, we need to argue our competitveness from alternative standpoints; whether it’s our talented/trainable and available labour pool, cultural affinity to the US, telecoms infrastructure, work/play value proposition etc.

    • Hi Stephen, You make excellent points, but regarding the BPO sector, Jamaica as a country cannot expect that call centre operations, where high school graduates are suitably qualified to work, to pay top notch salaries. Often, outsourcing companies are being guided by local pay scales when setting their own rates, hence employees will most likely not be getting top salaries, rather, they would be more aligned to national pay scales.

      Also, some of the strides Jamaica and other countries in the region have made in the outsourcing industry stem from the fact that costs, especially salaries, in places like India and the Philippines, have begun to increase. Hence it is almost inevitable as our sectors mature (not just wrt outsourcing), our costs will also begin to increase, and other countries will emerge as attractive destinations for certain kinds of business. However, as you rightly noted, I think it is important for our countries to strategise to move into higher value services, since other countries will eventually be able to do certain things cheaper than we can.

  • The Issue of Tech Salaries in the Jamaica is one that may be steeped in the fact that most IT pros are not verse in communicating the value their service provides to their employers and clients in hard figures.

    • Craig,
      That is an excellent point! Most of us – not just in the tech field – do not the appreciate the value of what we do. Also, traditionally, unless you were an “Engineer”, most associated positions would be considered along the lines of “Technician”, which would be seen as something less – involving a trades school, and no formal university training. However, while things have changed considerably over the years – every area has become its own specialty, requiring its own training – the mind set has not changed…

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