Tinaye Agere
Memory Nguwi
We recently surveyed Zimbabwean organisations on United States dollar payment practices.
Our goal was to gain an insight into the prevalence of payment of salaries in US dollars. We also sought to find out how these payments were divided, between the US dollar and the Zimbabwe dollar (ZWL).
In addition, we wanted to understand how the organisations were funding the US dollar salaries.
Our survey results may surprise you. They shed light on Zimbabwean organisations’ challenges and opportunities.
The economic situation in Zimbabwe has had a significant impact on salaries.
The country’s high inflation rates have eroded the purchasing power of the local currency, making it difficult for employers to maintain the real value of employee salaries.
As a result, many workers in the country have experienced a decline in their standard of living as their salaries have not kept pace with the rising cost of living.
This has been particularly challenging for those on lower incomes, who struggle to afford necessities such as food, housing and healthcare.
Eighty-five human resources executives from different organisations and economic sectors participated in this survey.
Based on the findings, it is clear that the majority of Zimbabwean companies (76 percent) peg their salaries in US dollars.
This suggests that there is preference for using the US dollar as a currency for salary payments, which could be due to its perceived stability compared to the ZWL.
However, it is worth noting that almost half of the companies that peg their salaries in the US dollar (46 percent) do not have contractual obligations to do so. This could indicate some flexibility regarding currency choice for salary payments, and companies may be open to exploring other options.
Regarding how companies pay US dollar salaries, the survey found that 56 percent of firms pay them in ZWL using the interbank rate. This suggests companies are taking advantage of the official exchange rate to control payroll costs.
However, it is interesting to note that a significant proportion of companies (27 percent) use the parallel market rate, instead. This could indicate that some companies are willing to pay a premium to attract and retain critical staff.
The survey also found that 56 percent of participating companies pay salaries using the US dollar and ZWL. This indicates that companies desire flexibility in terms of currency choice, possibly due to fluctuations in exchange rates or other economic factors.
Another issue highlighted by the survey is the shortage of the US dollar, which affects access to salaries and creates cash flow problems.
Some employees still demand more in the US dollar, even when cash flows do not allow it.
Respondents also mentioned that salaries are still low in the US dollar despite this demand.
The economic environment is continuously changing, which makes it difficult to match US dollar salaries with the basic standard of living.
Respondents noted that Zimbabwe’s US dollar inflation still pressures employers to review salaries in the US dollar.
The responses from the survey indicate that employers in Zimbabwe face several challenges when not paying salaries in the US dollar.
One of the most common challenges is higher staff turnover and increased demand for more frequent salary reviews.
Employees are generally disgruntled and demand higher pay every month due to the erosion of the value of the ZWL on the parallel market.
These findings suggest that Zimbabwean companies are navigating a complex economic environment regarding salary payments.
Executives and board members may want to consider exploring different currency options for salary payments and keeping an eye on exchange rate fluctuations to ensure they are making informed decisions about their payment strategies.
Conclusion
Organisations operating in Zimbabwe face unique challenges when paying their employees.
Many have turned to paying salaries in the US dollar to mitigate the effects of inflation and currency devaluation. However, this approach is not without its risks.
* Memory Nguwi is an occupational psychologist, data scientist, speaker and
managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. Email: [email protected] or visit our websites: https://www.thehumancapitalhub.com and www.ipcconsultants.com
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