A swiftly changing and increasingly competitive economic environment is driving many Middle East organizations to review and revitalize their rewards and talent strategies, and the region’s oil and gas industry is not an exception.
A client in the oil and gas sector came to us expressing concerns about their ability to attract and retain employees in an intensely competitive environment. They needed a clear picture of their total rewards position as well as their pain points.
We conducted an analysis, which included insights based on our experience with other industry companies in Saudi Arabia, to provide benchmarks for the client’s needs. We compared their employees’ broad-based compensation and benefits against their peers and found that the company’s salary structure was behind that of their market competitors.
We approached the project with a unified, end-to-end combination of several custom analytics solutions:
- Salary benchmarking analysis: Including a benchmark analysis of the company’s current salary structure and employee pay against a peer group
- Executive compensation analysis: Competitive assessments of salary and annual incentives among the company’s top executives
- Benefits and HR policies benchmarking and analysis: Comprehensive picture of benefits and HR market practices to serve as a reference in revising the company’s existing benefits offering
- Salary budget planning practices: Data and insights from our salary budget planning surveys to supplement the analysis with timely, relevant market trends on actual and forecasted salary movements as a basis for revising the overall salary structure
Analysis of existing internal pay practices
The organization’s internal compensation practices were analyzed to assess their alignment with internal equity standards and identify any potential issues. This review included an evaluation of salary ranges and pinpointing the position of employee salaries within each range. We found that 95% of non-executive employee salaries fell within the ranges identified within the company’s practices, indicating that internal equity was stable.
We also computed the client’s internal medians to assess the correlation between their actual pay practices and their established salary structure. We found that their practices were approximately 10% lower than their salary structure, suggesting an underutilization of the structure. Optimizing the way the structure was applied could enhance pay competitiveness.
Analysis of the external market
Once the internal analysis was done, we assessed the organization against a peer group of oil and gas companies. We found that the client’s existing salary structure midpoints were below the peer group median. To remain competitive, the organization needed an increase of more than 10%.
We also measured employees’ actual pay against the peer group and found that the organization’s non-executive employees received almost 20% less than other employees in the market. Plus, that difference increased in upper salary grades.
We delved more deeply into the various levels and departments across the organization to identify bottlenecks around pay competitiveness. This found that core departments, where there’s a higher concentration of employees and key talents, were significantly affected by the misalignment with competitive pay in the market. This underscored the dysfunctional impact of the client’s salary structure, consequently leading to attraction and retention challenges for core jobs.
Conversely, our executive benchmarking analysis revealed that the client’s executive compensation packages were more closely aligned with the market. This alignment was imperative to maintain, given that executive roles typically wield a significant influence on the organization’s overall success.
When it came to benefits practices, the client’s offering was mostly aligned with market practices. However, there were areas of opportunity to improve their competitiveness:
- Long-service awards: The organization needed to consider increasing the policy based on length of service, with differentiation being reflected every few years of tenure.
- Health coverage: There was an opportunity to expand healthcare coverage by including retirees and their dependents as well as increasing the sub-limits of optical and dental coverage.
- Sign-on bonuses: The client could gain an edge in the market by offering sign-on welcome bonuses, as half of their peers were providing this benefit to new hires.
- Company car: The client could improve their competitiveness by offering a company car benefit to senior positions, including local managers.
Refining current practices
After the analysis was conducted, it was clear that a…
Read More: How one oil and gas company is refining its approach to pay