ERNST & YOUNG PRESENTS UKRAINE COMPENSATION AND BENEFITS SURVEY 2008/2009

Ernst & Young
December 9, 2008

KYIV, DECEMBER 9, 2008 – Ernst & Young’s Human Capital team presents Ukraine Compensation & Benefits Survey 2008/2009. The Survey provides information on general (fixed and variable) compensation levels for more than 200 positions, structure of compensation packages, and HR policies. This Survey is conducted annually for the last seven years and the number of surveyed companies grew to 138 by now.

Industry sectors that received biggest representation in the current edition of the Survey are: Banking sector with 18% of all participants, FMCG with 18%, Chemical & Pharma – 15% and Trade – 12% of all participants. The majority of the companies participating in the current survey (around 74%) are foreign companies operating in Ukraine. The number of Ukrainian owned companies grew to 12%; the share of joint venture companies is 14%.
“In 2008 the Ukrainian market was significantly influenced by such factors as high inflation rate, unstable currency exchange rates, and unfavorable conditions on the world commodities markets. Therefore, HR agenda included primarily questions of salary reviews caused by inflation and exchange rates fluctuation,” says Olga Gorbanovskaya Head of Human Capital group with Ernst & Young Ukraine.

Salary increase in 2008 on average constituted 21-23%, against planned 15%. This year the participants planned salary increase at the level of 17% (which is slightly more than 15% in 2007). Olga Gorbanovskaya adds that an apparent change is observed recently due to the crisis: “According to the recent November’s research on the Downturn impact on businesses in Ukraine, 34-38% of companies plan to postpone the further planned salary growth in view of unstable economic situation. Further, 9-14% of companies are going to decrease the level of salary growth planned for the next year (on average by 13-14%). Besides that, 6% participants of our November’s research will cut salaries within the next 6 months (on average by 20%). Other companies (almost the half of the participants) confirmed that they do not plan to cut salaries and will keep the further planned salary increase unchanged.”

The Survey data shows that the majority of companies determining compensation policies in 2008 were guided by the level of inflation (64% of all companies-participants compared to 56% in 2007). At the same time, most companies continue to follow with insight general industry information about labor market (81% of all participants). Notwithstanding the influence of inflation rate and market demands, establishing of a formal evaluation systems at a company became a regular feature of HR practices in Ukraine: 87% of the companies-participants used formal performance evaluation system in 2008 (in 2007 – only 74% used it).

With regard to the specific types of variable pay, annual bonus was again indicated as the most popular form of employee compensation (by 88% of participants). Quarterly bonus was reported as a distant second form of a typical variable pay (by 38% of participants) with 34% of companies-participants using monthly bonuses, mainly to reward performance of their lower categories of employees.

In 2008, there has been a change in the training policy, in particular in the proportion of the internal versus external trainings: the share of the internal trainings has increased quite significantly throughout the year; more so, in November 2008 about 28% of the companies-participants of our Survey dedicated to the downturn impact on businesses in Ukraine indicated their plans to further change training location (continue to switch from the external trainings to the internal ones). 

In 2008 we observed change of focus from strategic to operational issues. Due to the high turnover ratio, attention is mainly paid to compensation & benefits, performance evaluation and management, as well as training and development of personnel.

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