Experts explain productivity-pay gap

Credit: Pavel Lisitchin | RIAN

Many economists believe that employee compensations in Russia are too low in relation to their labor productivity. Although specific figures are not available, it can be safely said that the gap is significant, tax expert Nikolai Yepikhin, director of the Uproshchyonka (‘simplified taxation system’) website told Invest Foresight.

According to a study by the HeadHunter recruiting portal, there is a gap between productivity and employee compensations is more than half of Russian companies. It should be understood that most employers assign salaries based on market average rather than on employee productivity.

“If the average monthly pay in a particular market segment is RUR 40K ($625), the employer is not going to pay anyone substantially more. On the other hand, they are unlikely to pay much less, as they may lose valuable staff,” the expert explains. “However, the fact is that most Russians work hard and meet high quality standards, but are paid far less than they deserve. Salaries in similar positions in Western Europe and the US are 3–6 times higher, and it is not the fault of employees or individual employers, but of the economic system as a whole.”

Labor productivity, productivity according to KPI and production by the hour are different concepts, explains Mark Sherman, managing partner at the B&C communication agency. Labor productivity is most easily calculated by the amount of manufactured products and performance of a certain number of technical operations – that is, labor productivity at a production facility can be calculated based on a company’s tasks. This approach is most commonly used for calculating salaries for operating personnel, while effectiveness, economic efficiency and the use of KPI indicators are more frequently used for measuring a management team’s performance as regards any activity related to sales, search for customers, and demand. 

“Plan performance, which is the main criterion for calculating monthly income, is most commonly used for both operating personnel and managers. A regular worker who manufactures a certain amount of products per shift receives the full salary. The monthly pay of a manager whose task is to sell manufactured products depends on sales volume,” the specialist explains. “And only those who work by the hour such as concierges and duty operators do not depend on economic indicators. A company may have different categories of workers, with different salary accounting systems in effect,” he said.

Fairness is a highly subjective thing. People are always inclined to think that they receive insufficient pay, Mark Sherman emphasizes. One thing is clear though: a company that takes efforts to improve its economic indicators always has a well-design motivation system for all personnel categories.

In addition, there are non-financial methods of motivation, as well as HR and PR teams which work to develop organizational climate. The best indicator of salary accounting objectivity is low staff turnover, the expert believes.      

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