(KYIV POST)- Attractive compensation packages, not just salary increases, are being used more regularly by medium- and large-sized foreign and domestic businesses in Ukraine to offset soaring inflation and tight competition for qualified employees, according to a new survey.
The Ukraine Compensation and Benefits Survey 2007/2008, an annual survey of business practices conducted by Big Four auditor Ernst & Young for the past six years, reported base salaries increased an average 17 percent between August 2006 and July 2007, or 5 percent more than expected.
Meanwhile, 83 percent of companies also paid annual bonuses, the most popular type of variable compensation employed.
The survey evaluated general compensation levels for more than 200 positions, the structure of compensation packages and the human resources (HR) policies of the 124 companies surveyed.
In 2008, salary increase rate is planned at 16 percent compared to 12 percent in 2007, but are likely to be exceeded again by 4 to 5 percent, according to the report.
About 83 percent of companies adjust employee salaries once a year.
The study indicates that 79 percent of companies pay salaries in hryvnias , and 95 percent used bank accounts as the sole mode of transferring salary to employees, compared to 71 and 92 percent respectively in 2006.
An increased focus on retention rather than recruitment was reported, with more companies (47 percent compared with 40 percent in 2006) planning to keep the current headcount of employees, and less companies noting the importance of recruiting new personnel (67 percent compared with 75 percent in 2006).
Additionally, the establishment of a formal performance evaluation system became a regular feature of HR practices in Ukraine, with 74 percent of companies implementing systems in 2007.
Middle and senior management receive nearly 80 percent of assessments in these systems.
"The growing demand for professionals encourage employees to frequently switch jobs," said Olga Gorbanovskaya , head of Ernst & Young's Human Capital Group in Ukraine.
But it also "makes companies pay closer attention to their compensation packages and human resource policies if they are to attract a qualified workforce," she added.
Ernst & Young's survey paints a brighter picture for Ukraine's workers than the Annual Worldwide Pay survey published Nov. 26 by Mercer Consulting Company, which estimated pay increases at 10 percent in 2007 - far from matching inflation and among the lowest rates in Europe.
Ukraine's inflation rate last year stood at about 17 percent.
Companies increase salaries "in an effort to match the pace of inflation, but enhanced spending in turn forces the market to adjust to the growing consumer power of the population," Gorbanovskaya said. "Thus this cycle starts again."