By: Gonzalo André Lavin Alfaro – Business Development Associate
The persistent issue of hyperinflation and currency devaluation in many countries has led consulting companies to adopt new strategies to retain their talent and remain competitive.
Here, we briefly cover various measures taken by leading management consulting firms to alleviate the pressures faced by their employees, including regular increases in base salaries and bonuses, one-off payments adjusted for inflation, and the option of pegging salaries to another currency.
Over the past year, Vencon Research has launched Pulse Surveys in heavily affected countries such as Argentina and Turkey to explore the actions taken by leading management consulting firms in response to the challenges of managing compensation in times of hyperinflation. Our analysis of the resulting data revealed that several responses were commonly considered by participating firms:
· The most common approach was to regularly (often quarterly or even monthly) review and increase Base Salary in order to align income with a depreciating currency.
· This was followed by regularly (again, often quarterly or even monthly) increasing bonuses and/or other variable income.
· Other firms opted to offer "one-off" payments adjusted for inflation. These seem to be offered semi-annually.
· It is noteworthy to mention that only a few firms considered pegging salaries to another currency with an equivalent value, such as the US dollar, to be an acceptable alternative. This option was most commonly considered by large, internationally-based, pure strategy firms. Nonetheless, given that there is little expectation of significant improvement in the short term in many of the countries mentioned, this may be an option that is considered more widely in the near future.
Summaries of our inflation-related surveys for Argentina and Turkey are available on our website here:
Should you want to us to present and further discuss our findings and/or want us to assist you with a review of your strategies to deal with hyperinflation, please do not hesitate to reach out to me at Vencon Research.