Guide d'audit et de mise en œuvre des Normes Universelles de Gestion de la Performance Sociale et Environnementale

Dimension 5 - Responsible Human Resource Development

Your staff are your greatest asset for achieving your social objectives. Actively value your staff, make sure they're clear on their roles and responsibilities, and listen to their ideas about how to improve your organization - and they will do excellent work for you. Responsible treatment of employees is critical to a successful institution. Employees have rights, and employees that are well-treated are more likely to treat clients responsibly.  

Dimension 5, which Cerise+SPTF co-developed with the International Labor Organization and the e-MFP Human Resources Action Group, has three standards.

Resources for Dimension 5

Standard 5A. The provider creates a safe and equitable work environment.

Creating a supportive, safe and equitable working environment means having the policies and procedures in place to guarantee that your institution is a non-discriminatory and safe place to work and that it remunerates staff appropriately and addresses their grievances. It complies or exceeds the national laws including on forced labor and child labor.

This standard has 3 essential practices:

Resources for Standard 5A

5.A.1 A written Human Resources policy is available to all employees that explains and protects their rights.

  • Employee rights to be included in Human Resources policy
  • Comply with national and international legal requirements on compulsory labor and minors
  • Developing the HR policy
  • Making employees aware of the policy and helping them understand it

In order to serve clients well, employees must work in an environment that supports and protects their rights and makes them feel valued. A well-developed Human Resources policy provides the foundation for such an environment.

Your institution’s Human Resources policy should be easily accessible to all employees, which means that each employee should know that the policy exists, what the contents include, and where to find the entire policy (e.g., on a shared computer drive). Provide an abridged version of the policy in hard copy, highlighting the policies that affect employees most significantly. Inform employees on changes to the policy in a timely way.

Developing the HR policy

Consider involving employees at different levels in the process for developing the HR policy. Engaging workers in developing the policy will enhance the quality and appropriateness of the policy, and it will build staff awareness and commitment. Consider establishing an employee committee that periodically discusses how to improve implementation of the policy. To meet this standard, you should have a formal mechanism for consulting with employee representatives on HR decisions and policy development. This mechanism should allow for the employee representatives to have direct access to executive managers.

Making employees aware of the policy and helping them understand it

The policy should be part of induction for new employees. All new employees should be aware of the policy, and they should know to whom they can address any questions or concerns they might have. Experience has shown that employees often do not retain much of the HR information shared during induction trainings, because the material is too technical or too overwhelming to be absorbed at one time. If you break down the policy into digestible pieces, use various delivery methods (group discussions and videos, for example), and test employee knowledge at various intervals, then trainees are more likely to understand the HR policy. Some providers discuss one part of the HR policy (e.g., how to report harassment in the workplace) as part of periodic employee meetings at branches and headquarters. Reviews like this help refresh and deepen employee understanding of the HR policy and may make it easier for your institution to enforce it.

Field examples

5.A.1.1 The provider’s Human Resource policy explains employees’ rights and responsibilities related to the following:

5.A.1.1.1 Work rules and disciplinary procedures
5.A.1.1.2 Grievance resolution
5.A.1.1.3 Collective bargaining agreements and freedom of association
5.A.1.1.4 Whistleblower safeguards
5.A.1.1.5 Anti-harassment safeguards
5.A.1.1.6 Conditions for dismissal and exit formalities

The financial service provider should formalize working conditions and communicate on them transparently to employees. A written Human Resources policy compliant with national law needs to be available to all employees.

The policy should be easily accessible to all employees: each employee should know that the policy exists, what its covers, and where to find the entire policy. The effective dissemination of the HR policy to each employee is a basic indicator of operational management in human resources.

The HR policy should include key elements related to working rules and conditions, as an indication of the efforts to provide transparent work conditions, staff protection and to comply with national law.

Scoring guidance

To score ‘yes’ for each detail, each right and responsibility should be formally described in the Human Resource policy, managed by the HR department, and understood by the staff.

The score is ‘partially’ for each detail if the rights and responsibilities are implemented in the practices with no major risks identified, but not formally cited in the Human Resource policy.

The score is ‘no’ if the rights and responsibilities are not formally cited in the Human Resource policy, and risk of non-compliance identified.

Sources of information
  • HR policy, HR Manual
  • HR manager  
  • Employees at branch level
Evidence to provide

Explain where the HR policy is available and give the chapter or page where the indicator details are covered. Include how and when the policy was distributed to staff (e.g. last year by email or each revised version is posted to the intranet, etc.).

DEFINITION: Whistleblower is someone who discloses a policy violation or wrongdoing that they have observed.

For 5.A.1.1.1

If the right is not explicitly mentioned in the HR policy, do you identify a risk of non-compliance with this right? Example: rules left to the subjective appreciation of a manager, disproportionate sanctions, no opportunity to defend itself in case of sanction...

For 5.A.1.1.2

If the right is not explicitly mentioned in the HR policy, check compliance with 5.B.2.2 (if there is a grievance mechanism in place). Do you identify a risk of non-compliance with this right? Example: lack of annual performance appraisal with manager, of open-door policy...

For 5.A.1.1.3

If the right is not explicitly mentioned in the HR policy, the provider must, at least, respect the country's law regarding that right; if the law is not applicable to the provider, assess whether its commitment to respect this right is credible regarding the size of the provider

For 5.A.1.1.4

If the right is not explicitly mentioned in the HR policy, do you identify a risk of non-compliance with this right? Example: no independent channel to report to, procedure and channels that does not ensure the confidentiality of the identity of the reporting person, absence of impartial person or department for following up the reports...

For 5.A.1.1.5

If the right is not explicitly mentioned in the HR policy, do you identify a risk of non-compliance with this right? Example: women field staff with male supervisor, work in isolation at the branch level, culture in the region/country…

For 5.A.1.1.6

If the right is not explicitly mentioned in the HR policy, do you identify a risk of non-compliance with this right? Example: non-respect of local right of notice, cases of abusive dismissals…

Field examples / Guidance for implementation
Resources for indicator 5.A.1.1

5.A.1.2 The provider meets or exceeds local regulations in the following areas:

5.A.1.2.1 Competitive wages
5.A.1.2.2 Transparent salary scale
5.A.1.2.3 Benefits/social protection
5.A.1.2.4 Limits on working hours and overtime hours
5.A.1.2.5 Overtime pay and paid leave
5.A.1.2.6 Maternity/paternity leave

The HR policy/ HR rules should include key elements related to wages and benefits, as an indication of the efforts to provide decent work conditions. The provider must ensure to be at least in compliance with national regulations and should exceed these local regulations if these are considered as too light.

5.A.1.2.3 Benefits/social protection

Fair treatment of employees come with reasonable benefits and social protection to ensure safe and motivating working conditions.

Benefits/ social protection: government benefits, accident and/or health insurance, live insurance, contributions to pensions/ retirement schemes.

5.A.1.2.4 Limits on working hours and overtime hours

Transparency and clear rules on working hours and compensation of overtime hours allow for fair working conditions, avoiding risks of tensions, un-due fatigue for the employees.

5.A.1.2.5 Overtime pay and paid leave

Employees deserve clear rules for rest to ensure smooth working, personal balance, long term commitment.

5.A.1.2.6 Maternity/paternity leave

Maternity leave allows for rest before the arrival of a child. Maternity and paternity leave allow  for the employees to have time to prepare and accompany the arrival of a child.

Scoring guidance

To score ‘yes’ for each detail, each area should be formally described in the Human Resource policy, managed by the HR department, and understood by the staff.

The score is ‘partially’ for each area if the rules and benefits are not formally cited in the Human Resource policy/ Internal rules or not fully understood by the staff but informally implemented.

To ensure compliance, during interviews, understand what is the limit of the local regulation and assess whether it is credible or if the provider should exceed local regulation.

For 5.A.1.2.2

Scoring guidance: If employees get only access to the salary scale for their own level, it is a ‘partially’.

If the provider has a transparent salary scale but not based on market rates and minimum wage, then the answer is ‘partially’.

Sources of information
  • Salary scale, HR policy, HR manual
  • HR manager
  • Employees
Evidence to provide

For 5.A.1.2.1 Competitive wages

Describe how wages are fixed, level compared to local market.

For 5.A.1.2.2 Transparent salary scale

It is difficult to compare salary levels from one country to the next or establish benchmarks for comparison. The salary scale can be defined internally and should present the wage range by job positions. Employees should have access to the full salary scale (i.e. all the ranges of salary) regardless of their level of compensation.

Comments column: Specify how salaries are established and revised.

For 5.A.1.2.3 Benefits/social protection

Describe the benefits available to employees (e.g., government benefits, accident and/or health insurance, contributions to pensions/ retirement schemes) and to whom these benefits apply (e.g., full-time employees, part-time employees). Describe all conditions employees must meet in order to access these benefits and conditions to use the provider’s financial services (e.g., loans, transfer services).

In terms of benefits, one can take into account any insurance which is not defined by country law and voluntarily paid by the provider.

For 5.A.1.2.4 Limits on working hours and overtime hours

Describe employee rights to reasonable working hours, including rights to overtime pay; the rate for overtime pay; how employees will be compensated for work on holidays; number of expected work hours per week; and to whom these apply.

For 5.A.1.2.5 Overtime pay and paid leave

Describe the rules, where they are defined and how they are applied.

For 5.A.1.2.6 Maternity/paternity leave

Describe the lengths and conditions to access maternity/paternity leave.

5.A.1.3 The provider’s non-discrimination policy towards employees covers all internationally recognized Protected Categories. [Note: Protected Categories are as follows: People over 40 years old; Sex; Race/ethnicity/national extraction/social origin/caste; Religion; Health status, including HIV status; Disability; Sexual orientation; Political affiliation/opinion; Civil/marital status; Participation in a trade union.]

Equal access to jobs, promotion and trainings is key to being a responsible organization. The provider should have a non discrimination policy which describes employee rights to fair and equal treatment regardless of the employee’s age, sex,  race/ethnicity/national extraction/social origin/caste; Religion; Health status, including HIV status; Disability; Sexual orientation; Political affiliation/opinion; Civil/marital status; Participation in a trade union.

Scoring guidance

To score ‘yes’ the non discrimination policy should be formally defined in the Human Resource policy/ internal rules/ code of conduct, with all categories included, managed by the HR department, and understood by the staff.

The score is ‘partially’ if the HR department can share evidence showing that there is no discrimination against some groups (gender balance or ethnic diversity in staff for example), and that field discussions show that it is communicated to staff, in recruitement, etc. but it is not formalized or does not include all categories.

Sources of information
  • HR policy, HR Manual, code of conduct/code of ethics
  • HR manager and Employees at branches
Evidence to provide

Specify the chapter or page of the HR policy where the information on non- discrimination is provided. Describe employee rights to fair and equal treatment regardless of the employee’s sex, race/ethnicity/national extraction/social origin, religion, HIV status, disability, sexual orientation, political affiliation/ opinion, and participation in a trade union by providing examples on how it is managed (or not) for some key categories.

5.A.1.4 The provider analyzes employee data by gender and job position to check that men and women are equally represented at different levels of the organization.

To ensure equal representation of men and women, the provider needs to analyze job position by gender to understand representation at the different positions (field staff, back office, middle management, senior management).

The provider should evaluate whether discrepancies exist in terms of representation at the different levels of the organization. Where such discrepancies exist, the provider should address the problem openly with employees and adjust recruitment/ promotions accordingly.

Scoring guidance

The score is ‘yes’ if the provider collects and analyzes data on position disaggregated by gender and if adjustments have been made if needed.

The score is ‘partially’ if data has only been analyzed once for a specific project and is not regularly (at least annually) checked, if data is collected but not discussed at senior management or board level.

Sources of information
  • HR manager
  • HR reports
  • Minutes of Board meetings

5.A.1.5 The provider operates in accordance with national law on forced labor and minimum age for employment, but in no case employs workers under 14 years old. If national law does not address forced labor, the provider complies with international law.

In compliance with international standards for decent work conditions, the provider should not employ any person against his or her will or any person under the minimum age for work established in law and should not do business with enterprises that benefit from forced labor or child labor. These are fundamental elements to complying with international good practice.

The international law part is in here for cases when the national law doesn't address these issues.

Scoring guidance

The auditor should verify that a system is in place to ensure compliance with international standards:  formalization in HR policy, verification by HR at recruitment, check by audit team.

A “Yes” means that the system is in place and implemented to guarantee compliance.

The score is ‘partially’ if the system is informal or only partially implemented (not verified by audit team for example).

Any observation of non compliance should be scored 'no'.

Sources of information
  • HR policy, HR Manual, code of conduct/code of ethics
  • HR manager
  • Executive management
Evidence to provide

Give the chapter or page of the HR policy that refers to how requirements regarding forced, compulsory or underage labor is described.

Resources for indicator 5.A.1.5

5.A.2 Employee compensation is equitable and adequate.

Fair compensation is the foundation for respectful treatment of employees and can ensure loyal and committed employees. Your institution should pay employees at a rate that is at least the national or local sector minimum wage, in line with market conditions, and adapted to job position whatever the gender of the employees.  

5.A.2.1 The provider pays salaries based on market rates and never below the sectoral minimum wage.

The provider should pay employees at a wage that is sufficient to provide minimally satisfactory living conditions for the employee in the location where s/he lives. This means compensation is based on market rates and  at least complies with the national or local sector minimum wage.

Scoring guidance

The answer is ‘partially’ if the wages are based on market rates but low as sectoral market rates are low or if they comply with the sectoral minimum wage but are below market rates.

Sources of information
  • HR policy, HR Manual, Salary scale
  • HR manager and Employees
Evidence to provide

Specify how salaries are established and revised. Check for sectoral/ national minimum wage and compare with lowest salaries in the organization.

5.A.2.2 Front-line employees’ base pay (before incentives) is at least a living wage.

Fair compensation is the foundation of any balanced incentive structure. Staff should receive a living wage as a base salary. Incentives such as bonus pay should never replace a living wage for staff, as under-compensation combined with high bonus pay may unintentionally incentivize fraud/theft, client mistreatment (e.g., bribing or overcharging clients), over-selling of products in order to reach performance targets, and other behavior that is harmful for clients.

Scoring guidance

If the “living wage” includes a variable part (bonus, incentives), the answer is ‘no’. (because in the event the loan officer does not reach his/her targets, s/he is not paid a living wage).

DEFINITION: A living wage is sufficient to provide minimally satisfactory living conditions in the location where the employee lives. This means that, based on the basic pay (excluding bonus pay), an employee can afford safe housing, sufficient food, clothing, and transportation necessary to perform their workplace and personal duties.

Sources of information
  • Salary scale, HR policy
  • HR manager
Evidence to provide

Specify how salaries and incentives are established and check the share of incentives/fixed wages for the employees who get the lowest salaries.

Field examples / Guidance for implementation

5.A.2.3 The provider analyzes salary data to check that men and women receive equal pay for equal work and have equal opportunities for pay increase/promotion.

The provider should evaluate whether discrepancies exist between the salaries of comparable male and female employees at each level/department of the organization. Where such discrepancies exist, the provider should address the problem openly with employees and adjust wages accordingly.

Scoring guidance

The score is ‘yes’ if the provider collects and analyzes data on wages, position, access to promotion etc. disaggregated by gender and if adjustments have been made if needed.

The score is ‘partially’ if data has only been analyzed once for a specific project and is not regularly (at least annually) checked, if only few elements are analyzed, if data is collected but not discussed at senior management or board level.

If the provider does not analyze the gap, check result on Gender Pay Gap calculation (Organization Information indicator) to provide opinion on equal pay for equal work between men and women. If Gender pay gap is high and no analysis/ discussion is done, the score is ‘0’.

Sources of information
  • HR manager
  • HR reports
  • Minutes of Board meetings
Evidence to provide

Describe the type of data that is analysed, disaggregated by gender. Share, if available, the gender pay gap calculation.

5.A.3 The provider has a safety and health management system.

At least annually, your institution should assess the health and safety risks that employees face while performing their job functions. Consider risks that exist both in the office and in the field, and assess risks by different employee characteristics, including gender and disability. Male and female employees have different health and safety needs, for example. Consider forming a joint management-worker safety committee to ensure that there are representatives from all types of employees—males/females, field workers/office staff, employees with special needs, et cetera. A workplace risk assessment is one of the key tools for improving occupational safety and health conditions at work. It plays an important role in protecting workers and businesses, as well as complying with the laws in many countries. It helps everyone focus on the risks that really matter in the workplace – the ones with the potential to cause real harm.

A risk assessment should be performed at least annually. This assessment is simply a careful examination of what, in the workplace, could cause harm to people. It should identify the hazard and the required control measures. When thinking about the risk assessment, remember:

  • a hazard is anything that may cause harm, such as electricity, an open drawer, demanding and stressful work, a motorbike, etc.;
  • the risk is the chance, high or low, that somebody could be harmed by these and other hazards, together with an indication of how serious the harm could be.

The key to risk assessments is not to overcomplicate the process. In many organizations, the risks are well known, and the necessary control measures are easy to apply. A risk assessment should not take too much time nor take up a lot of staff resources.

A risk assessment can be done by anyone in the organization—you do not have to be a safety and health expert. You can consider creating a two-person team composed of someone from head office and a branch-level employee, to take into account the different risks.

The International Labour Organization (ILO) recommends a five-step process for conducting a risk assessment:

  1. Identify the hazards. What are the workplace risks that could cause harm? This table, plus the SPTF’s online template offers examples of hazards common to microfinance service providers. It is not exhaustive. To consider other hazards to assess, you may want to:
    • consult other examples of risk assessment tools (see resources at the end of this section);
    • walk around the office and note items that might pose a risk;
    • talk to supervisors, staff, drivers, and cleaning contractors on their concerns and opinions about health and safety issues in the workplace;
    • and consult reports documenting past workplace accidents.
  2. For each hazard, identify who might be harmed and how.
  3. Note the existing controls in place to manage hazards, or what needs to be done to control the risk.
  4. Note who is responsible for putting the suggested risk control measures into practice, and by what date.
  5. Share the completed risk assessment with staff (if your institution is too big to share with all staff, share at least with senior management and middle managers).

Your institution should, at a minimum, provide employees with training to mitigate each of the risks that you identify. Training should be free of charge and available to all employees. This table provides examples of health/safety risks and corresponding training topics for employees.

In addition to training, your institution should provide employees with equipment to mitigate health and safety risks. The equipment  should  be  free  of  charge and equally distributed to male and female employees. It should also take into account gender differences (e.g., protective gear in women’s sizing). Examples of equipment include helmets and other safety gear for motorbike drivers and soap for employee washrooms.

Your  institution’s  HR  policy  should  include  procedures  for  following  up  on any incidents of on-the-job accidents, injuries, or diseases. The policy should include procedures for documenting an incident, reporting it to relevant people and institutions (e.g., board committee on employee issues, government), investigating  the reasons for  the incident,  and following  up with any  corrective measures. Include a line-item in your budget and staff time  for  supporting  the  risk  prevention  and handling activities  discussed  above.  Doing  so  will  help  ensure that your institution is not merely reacting to health and safety problems but anticipating and mitigating them. Doing so also sends a strong signal to employees that your institution prioritizes their wellbeing.

Example of incident procedure in action

A loan officer sustains injuries when his motorbike slips off the road, due to worn treads on the bike tires. The HR manager documents the accident and then submits the case to senior management. Management advises the employee to seek medical attention, which is covered by workplace insurance. Additionally, management determines that the institution will start inspecting all motorbike tires on a monthly basis and promptly replace worn tires.

Your institution should also compensate employees who miss work as a result of work-related injuries. If such compensation is not regulated by the labor laws in your country, develop a clear policy on the number of days that are paid when employees are on medical leave due to work-induced health problems. Such compensation might be included in an employee medical insurance product. The policy should state the maximum number of paid days off for medical leave. Also, this policy should state what happens if the employee finishes the maximum number of days and is still declared not able to work again due to the injuries (long- term disability).

5.A.3.1 The provider assesses the health and safety risks faced by its employees and audits its existing safety measures. Minimum frequency: annually.

A workplace risk assessment is one of the key tools for improving occupational safety and health conditions at work. It plays an important role in protecting workers and businesses, as well as complying with the laws in many countries. It helps everyone focus on the risks that really matter in the workplace – the ones with the potential to cause real harm. A risk assessment should be performed at least annually. This assessment is simply a careful examination of what, in the workplace, could cause harm to people. It should identify the hazard and the required control measures.

Scoring guidance

The score is ‘yes’ is assessment is done and reported every year.

The score is ‘partially’ if assessment is done less than once a year, or not complete on hazards or control measures to be analyzed.

Sources of information
  • HR policy, HR Manual, Health and safety risk report
  • HR manager, Employees and Exec Mgt
Evidence to provide

Specify last risk assessment and/or give examples of health and safety risk reports and actions taken.

5.A.3.2 The provider documents and reports to management all occupational accidents, injuries, and illnesses. The results are disaggregated by gender and by position: Minimum frequency: annually.

In addition to conducting risk assessment, management should investigate and document any accidents, injuries or diseases, and analyze results by gender. Tracking work related accidents, injuries or diseases is important but few providers do it unless the national regulations require it. It is important to record and analyze these findings by gender and position to understand if one gender or position is disproportionately affected. The focus should be on ensuring safety at work and how the provider takes steps to create a safe work environment for all workers regardless of position or gender.

Scoring guidance

The score is ‘yes’ is reports on accident/injuries/illnesses is done and reported every year.

The score is ‘partially’ if report is done less than once a year, or not complete on accident or injuries and measures to be taken, or not disaggregated by gender and position.

Sources of information
  • HR policy, HR Manual, Health and safety risk report
  • HR manager, Employees and Exec Mgt
Evidence to provide

Safety report that is no more than 1 year old on all work-related accidents, injuries and illnesses disaggregated by gender and position.

5.A.3.3 The provider takes necessary measures to mitigate hazards.

5.A.3.3.1 The provider offers health and safety equipment, training and adapted physical accommodations.
5.A.3.3.2 The provider has an emergency/disaster response plan and trains management and employees on how to follow the plan. Minimum training frequency: annually.
5.A.3.3.3 The provider compensates employees who miss work due to work-related injuries.

Health and safety risk assessments should result in actions to mitigate risks identified and ensure a safe workplace for employees. Actions to prevent risks should be free of charge for the employees to ensure full protection for all.

Scoring guidance

The score is ‘yes’ for each detail if the provider can share concrete example of measures taken, an emergency/disaster response plan, the policies linked to absences linked to work-related injuries.

The score is ‘partially’ for each details if provision of equipment/trainings covers only partially the risks identified.

Sources of information
  • Health and safety report
  • HR management, branch employees
Evidence to provide

Detail the actions taken to prevent major risks identified.

Standard 5B. The provider’s Human Resource Development system is designed to attract and maintain a qualified and motivated workforce.

In order to do excellent work, staff need clarity on their remit, training to achieve this successfully, and a fair and transparent system for evaluating and incentivizing their performance. A staff-focused organization will take regular steps to understand whether staff are satisfied in their work, why they chose to leave your employment, and act when red flags arise in the course of this routine monitoring. It will also have a system to consult, to receive and respond to employee complaints and grievances.

Resources for Standard 5B

This standard has 2 essential practices:

5.B.1 The provider gives employees complete employment documentation and training to understand their job requirements.

  • Provide all employees with an employment contract
  • PROVIDE JOB-SPECIFIC TRAINING
  • Field examples
Provide all employees with an employment contract

As discussed in the guidance for Standard 5A, all employees should understand their rights and responsibilities in the workplace. In addition to providing employees with a clear HR policy, your institution should also provide each employee with a written (signed) job contract and a written description of his/her workplace duties. Review each employee’s description with him/her at the time of hiring and whenever the employee changes positions within the institution. Providing employees with clarity on his/her roles and responsibilities enables your institution to evaluate employee performance fairly.

The employment contract—typically provided on or before the first day of work— should specify the employee’s:

  • Earnings (salary and/or wages): Remuneration, in cash and in kind, that is to paid employees both for time worked and time not worked, such as annual vacation and other paid leave;
  • Benefits (social protection): The measures (e.g., health insurance, pensions) designed to protect employees against economic  and  social  distress caused by various contingencies (sickness, maternity, employment injury, unemployment, etc.);
  • Employment conditions: The terms of the worker’s employment with the institution, such as amount of working time, minimum wages, whether there is a probationary period before the person becomes a permanent employee, and location(s) where employee will work;
    • Job description/scope of work: The job title and responsibilities, including reporting line (see below);
    • Work rules and possible sanctions: List actions and activities that are prohibited. Confirm that the institution will investigate cases of reported misconduct (e.g., violations of the Code of Conduct; theft; harassment of a colleague); the different levels of disciplinary procedures that employees may face; and employee rights related to appealing disciplinary action; and
    • Performance evaluation and incentives: The performance metrics that the institution will use to evaluate the employee’s performance and an explanation of the institution’s incentive/reward system (see guidance for 5C3).

An employee’s job description is the foundation for how they will understand their role at your organization. It should include the nature of the work to be performed, key responsibilities and duties, and the competencies required. To create a job description, start by talking to the person who currently holds the job, and then add to their description by answering the question—what are our longer-term needs and objectives for this position? Think about any new SPM initiatives that you have or want to instate—what skills and competencies do your employees need? What new responsibilities will they have? (see 601 Examples of Employee Positions and Related SPM Duties for SPM-related job responsibilities). Elements of a Job Description provides additional detail on which components to include in your employees’ job descriptions.

In addition to a clear job description, each employee should understand the evaluation criteria that his/her manager will use to assess job performance. For example, FINCA (Azerbaijan) evaluates each new employee at three, six, and 12 months, and then semi-annually thereafter. The employee’s supervisor completes a form that lists the criteria against which the employee will be evaluated. The employee is then asked to sign their agreement to this statement: “I have reviewed the performance requirements listed in this form and agree that they are the standards by which I will be evaluated during the next performance period.” In this way, employees are clear on what the organization expects of them, and how they can achieve good performance.

PROVIDE JOB-SPECIFIC TRAINING

Your institution should equip each employee to perform his/her job functions successfully. This includes at least two types of training:

  • Orientation training: Train each employee at the beginning of employment and whenever the employee changes positions within the institution. Employee orientation should include at least the following topics: the institution’s mission, social goals, and Code of Conduct; the employee’s job duties, including social performance related duties;119 and the conditions of employment. Follow this training with an orientation period during which new employees receive on-the-job training and mentorship so that they master skills not easily taught in a classroom setting. Such hands-on training for staff is also beneficial to clients, because they can be negatively affected by under-trained staff.
  • Ongoing skills development: Facilitate professional development opportunities that respond to employees’ needs, as identified during regular performance reviews, as well as the priorities of your institution. As your goals and products change over time, consider what new skills your employees need (e.g., data collection, customer service, product sales). Additionally, when promoting employees to a higher level of responsibility or managerial authority, consider the need for job-specific training that prepares them for the new position as well as leadership and/or management training to improve the employee’s ability to guide, supervise, and motivate the performance of others.

Pay particular attention to providing training opportunities for employees without bias. Check that training is equally available for all types of employees, regardless of gender, level (management/staff), location (HQ/branches), and other relevant employee characteristics. Ensure that any training opportunity that is provided to employees is accessible/inclusive to employees with disabilities, including through the provision of reasonable accommodations.

Resources for 5.B.1

5.B.1.1 The provider communicates to employees their individual employment terms:

5.B.1.1.1 Base salary and opportunities for any other type of compensation (overtime, incentive pay)
5.B.1.1.2 Job description/scope of work
5.B.1.1.3 Performance evaluation process

Employees should understand their individual rights and responsibilities. The provider should provide a written contract indicating the salary level but also a description of their benefits and employment conditions. Performance evaluation process should be transparent to get employees committed and in line with the provider’s strategy.

Scoring guidance

For 5.B.1.1.1

The score is ‘yes’ if each employee is provided with a written contract, with details on salary and basis for overtime, incentives, etc.

For 5.B.1.1.2

The score is ‘yes’ if each employee receives an individual, customized job description

For 5.B.1.1.3

The score is ‘yes’ if each employee receives and understands the individual evaluation process

For each detail, the score is ‘partially’ if documentation is informal, only shared with some of the employees, formalized but not understood/ known by the employees

Sources of information
  • Contract
  • HR manager, Employees at branch
Evidence to provide

Verify employee files,contracts, job description, performance evaluation process.

Specify where / when information is provided to employees.

5.B.1.2 All new employees receive an orientation and job-specific training.

Inception/ orientation trainings allow new employees to assimilate the institutional culture and values, get comfortable in their new position and better understand expectations. Job-specific trainings allow employees to ensure they can deliver the expected outputs defined in their job description.

Scoring guidance

If an inception/orientation training or job-specific training is provided but all the contents remain very general and not linked to job specificities (for example, same training for loan officers and for managers, or same trainings for audit staff or marketing staff), the answer is ‘partially’.

If the trainings are only provided to some of the new employees, the answer is ‘partially’.

Sources of information
  • Training plans, training manuals
  • HR manager
Evidence to provide

Specify on-boarding process of new employees

5.B.1.3 The provider makes professional development opportunities available to employees at every level.

To keep the employees loyal and committed, it is important to give them perspectives with professional development opportunities. The provider should advertise job position internally and value the experience gained by its employees in proposing them new opportunities.

Scoring guidance

If the recruitment process starts by identifying internal resources and if the provider can share examples of professional development for employees from every level, the answer is ‘yes’.

If the process is informal, and some examples can be shared but not from every level, the answer is ‘partially’.

Sources of information
  • Training plans, training manuals
  • HR manager
Evidence to provide

Share examples of opportunities that have been proposed internally for employees of different levels.

5.B.1.4 Men and women receive equal opportunities for training and skill development.

To ensure that staff understand and perform their work efficiently, feel comfortable in their position, committed to their tasks, and capable of evolving in their job, the provider should offer training at least annually. Training employees is important for their qualifications, job performance, and commitment to the organization. In order for men and women to have the same opportunity for incentive pay and promotion, they must have equal opportunity and access to training and skill development.

This includes at least two types of training: 1) ongoing skills training (i.e., training that occurs during the course of the employment (not orientation) that builds skills necessary for their current position and 2) skills development training to facilitate employees' professional development opportunities, such as allowing them to respond to the employer's evolving needs by taking on a new role in the organization.

Scoring guidance

Training is sometimes provided for select employees only (such as managers) because it is considered too costly. Verify that trainings are provided to the majority of employees. The score is ‘partially’ if women and men have unequal access/participation. If some type of employees are not trained, the score is also  ‘partially’.

Sources of information
  • HR policy, Training modules, annual training plan
  • Employees, HR manager, training manager
Evidence to provide

Give examples of recent trainings attended by employees, and the connection with their job functions.

Explain how information is tracked for gender equality: a roster or report on the number of women vs men attending as a proportion of the number of persons of that gender holding the post, an overall tally that shows what % of women and what % of men employees had a training opportunity in the last year, etc.

5.B.2 The provider gives employees formal opportunities to communicate with management.

  • Consult with employee representatives on HR decisions
  • Create a Formal, Confidential Grievance Mechanism
  • Monitor Employee Satisfaction
Consult with employee representatives on HR decisions
Create a Formal, Confidential Grievance Mechanism

Your institution should provide a formal way for employees to voice grievances. This mechanism could be a dedicated phone number, email address, or note box. You should have at least one channel for voicing grievances confidentially, meaning that the employee identifies him/herself but is afforded the opportunity to have their name disassociated with the complaint during the resolution phase. For example, if an employee complains to an HR representative because her manager is violating the institution’s policy on overtime work, the problem would be investigated without the manager knowing the identity of the complaining employee.

Ensure that the grievance mechanism is effective for resolving problems, not just recording them. In order to make the mechanism work for employees, there should be a formal process for recording, addressing, and following up on complaints. Track the number of complaints submitted as well as the details of their resolution. Do not target “zero complaints”—as this is a sign that employees do not know about the mechanism or do not feel comfortable using it. Rather, aim to respond quickly and fairly to problems that arise.

Monitor Employee Satisfaction

Your institution should regularly analyze employee satisfaction. Your institution may choose either to conduct time-bound employee satisfaction research (e.g., a two-week review each year), or to collect satisfaction information on a continual basis. Regardless of the method used, your institution should aim to collect employee satisfaction data on at least a representative sample of employees— covering all types of employees, including those with disabilities—at least annually.

Using a formal method, such as interviews, written surveys, and/or focus groups, ask employees to comment on satisfaction with factors such as:

  • Employment terms, including contract duration and remuneration
  • Workload
  • Employee training
  • Career advancement opportunities
  • Physical resources/infrastructure/equipment
  • Communication, participation, and leadership from supervisors
  • Communication and teamwork from peers
  • Conflict resolution practices
  • Human Resources support services

To protect employees who may negatively critique the institution, give employees the option to respond anonymously to the satisfaction survey. Finally, when analyzing and reporting the results of satisfaction surveys, segment data by different employee characteristics, including gender, level (management/staff), and location (HQ/branch). Report results not only to management, but also to employees at all levels.

Resources for 5.B.2

5.B.2.1 The provider has a formal mechanism for consulting with employee representatives on HR decisions and policy development. The employee representatives have direct access to executive managers.

Field examples / Guidance for implementation

The provider consults employee representatives on matters of employee health and safety, compensation and benefits, working conditions, and issues raised by employees. The provider makes changes to its Human Resource Development system based on input from employee representatives. 

5.B.2.2 The provider has formal grievance mechanism that allows employees to raise workplace concerns in a confidential manner.

To ensure that any breach in decent working conditions is quickly identified, employees should have a formal channel to voice grievances, ensuring a confidential treatment of the information shared.

Scoring guidance

If there is informal ways to raise concerns, formal ways but not confidential, only anecdotical examples of grievance that have been raised by employees, the score is ‘partially’.

If there is no formal means to raise concerns in a confidential manner, the score is ‘no’.

Sources of information
  • HR policy
  • HR manager, Branch employees
Evidence to provide

Explain the channels available to employees to express grievances, and level of understanding/knowledge about them.

Field examples / Guidance for implementation
Resources for indicator 5.B.2.2

5.B.2.3 The provider surveys employees on satisfaction and concerns with employment conditions. Minimum frequency: annually.

The level of employees’ satisfaction can be a proxy for decent work conditions in the organization. Monitoring employee satisfaction can help ensure the smooth functioning of a team and sends a message that the senior management values employee feedback. The provider should conduct satisfaction surveys regularly, at least annually, on at least a representative sample of employees (i.e., the survey should cover all types of employees).

Scoring guidance

If an employee satisfaction survey has been done in the last 12 months and the results were not analyzed by gender or were not shared with employees, the answer is ‘partially’.

Sources of information
  • HR policy, Employee satisfaction survey and report
  • Employees, HR manager
Evidence to provide

Specify when was the last employee satisfaction survey, and what kind of analysis was done on results.

Standard 5C. The provider’s Human Resource Development system supports its social strategy.

From the moment they are hired—and even before, during recruitment, your institution should instill its values in new employees, and encourage these through routine training and balanced incentives. Use these resources to build commitment to your social objectives and responsible treatment of clients among staff.

This standard has 3 essential practices:

Resources for Standard 5C

5.C.1 During the recruitment and hiring process, the provider assesses each candidate’s commitment to achieving the provider’s social goals and serving its target clients.

CONSIDER SOCIAL PERFORMANCE WHEN HIRING EMPLOYEES

Your institution’s Human Resources function should prioritize recruitment of employees who fit your institution’s culture and values. It is imperative that you hire employees who are aligned with your mission and are enthusiastic about working with your target clients. Outline a list of personal qualities and work/educational experience that suggests commitment to your social goals. For example, you might desire candidates with a strong sense of responsibility for helping marginalized people, problem solving abilities, good teamwork skills, and integrity. Relevant experience might include work in communities with similar target clients, customer service responsibilities, travel to rural areas, ability to speak a local language, and experience working on a team.

If you are unsure which attributes and work experience make someone a good “fit” with your social mission, consider talking with field staff— managers, in particular—about the skills and personal characteristics that make someone a high-performing employee. For example, VisionFund International (VF) hires local people, since loan officers who come from the clients’ own communities are best able to identify, recruit, and work with VF’s target clients. Unlike many providers who place a lot of emphasis on an applicant’s formal education, VF has found that higher education is not among the top attributes that make a good loan officer. Instead, they value the following characteristics: numeracy and literacy sufficient to complete the loan assessment and application forms; knowledge and language of the local area; dedication, tenacity, and commitment to microfinance; interpersonal and sales skills; willingness and ability to work in the field; and commitment to VF values. (See Field Example 51, Standard 5b)

Identify social performance-related responsibilities for each position, and when hiring new employees, screen candidates for their ability to carry out those responsibilities. Table 15 provides examples of employee positions and their related SPM duties. Create a similar list for your institution, tailored to your specific social goals.

Finally, in addition to requiring employees to sign the institution’s Code of Ethics, consider developing a “commitment contract” which states that a job candidate will do his/her best to carry out the institution’s social goals.

Field examples

5.C.1.1 The provider assesses each candidate’s work and personal experience related to the provider’s target clients.

Building an institutional culture that is aligned with the social strategy starts with the hiring process. Recruitment procedures should screen candidates who fit the institution’s objectives to reach a specific target clientele. The employees, and in particular the front-line staff, should be able to understand the needs and preferences of the target clients, value their inclusion with the products and services proposed by the provider, support their integration as clients of the provider.

Scoring guidance

The score is ‘yes’ if the channels for recruitment integrate employees from the same region/culture of the target clients, if the assessment grid for recruitment specifically test work and personal experience related to target clients.

The score is ‘partially’ if the assessment is informally or anecdotally including discussions on work and personal experience related to target clients.

Sources of information
  • HR manual
  • Interview guide for recruitment
  • Interviews with HR
Evidence to provide

Specify the elements in the recruitment procedure that allow the provider to assess commitment and capacity to serve the target clients.

Field examples / Guidance for implementation

Depending on the provider’s social strategy, the provider may seek out candidates with relevant experience in communities with similar target clients, customer service responsibilities, willingness to travel to rural areas, and ability to speak a local language.

5.C.1.2 The provider assesses each candidate’s motivation to achieve the provider’s social goals.

Building an institutional culture that is aligned with the social strategy starts with the hiring process. Recruitment procedures should screen candidates who fit the institution’s culture and values.

Scoring guidance

The score is ‘yes’ if the assessment grid for recruitment specifically test motivation and alignment of values and visions, if the candidate is formally exposed to the provider’s social strategy during the recruitment process.

The score is ‘partially’ if the assessment is informally or anecdotally including discussions on the provider’s social strategy.

Sources of information
  • HR manual
  • Interview guide for recruitment
  • Interviews with HR
Evidence to provide

Specify the elements in the recruitment procedure that allow the provider to assess commitment to the social strategy.

5.C.1.3 The new employee training/probation period for client-facing employees includes an assessment of skills and commitment to serving the provider’s target clients.

Building an institutional culture that is aligned with the social strategy is based on the capacity of the front-line staff to serve the target clients. Integration procedures and capacity-building for new staff should check candidates capacities and commitment to dialogue, understand, reassure, and serve the specific target clientele.

Scoring guidance

The score is ‘yes’ if the inception training/ field experience/learning by doing first steps include a check/ discussion with manager on how the new employee is able to serve adequately the target clients.

The score is ‘partially’ if the assessment is informally or anecdotally including discussions on capacities of the new employees to serve the target clients.

Sources of information
  • HR manual
  • Interview guide for recruitment
  • Interviews with HR
Evidence to provide

Specify the elements in the integration procedure that allow the provider to assess commitment and skills of client-facing employees to serve the target clients.

5.C.1.4 All employees sign a document acknowledging that they will abide by the Code of Conduct.

Having a code of conduct alone is not enough to make the values “come alive”. HR policies like recruitment, evaluation and training should reflect the standards laid out in the code. All employees should know the Code of Conduct and declare their commitment to align with its rules by signing the Code of Conduct.

Scoring guidance

The score is ‘yes’ if the Code of Conduct is formally presented to employees and that all of them sign the Code.

The score is ‘partially’ if the Code is know by employees but not formally signed, or if the code is partially signed (not all employees), signed automatically without a formal discussion/ presentation of the Code which is then not well known/ understood by the employees.

Sources of information
  • HR manual / code of Conduct
  • Employee files
  • Interview with HR manager
  • Interview with branch staff
Evidence to provide

Check employee files (or employment contract) to verify if staff sign a document acknowledging that they have read, understood and agree to abide by the code of ethics.

Field examples / Guidance for implementation

The code of conduct should include confidentiality / privacy of client data

5.C.2 The provider trains all employees on its social goals and on client protection.

TRAIN AND EVALUATE EMPLOYEES ON SOCIAL PERFORMANCE

Using your existing employee evaluation methods, introduce an evaluation of employees’ social performance responsibilities. Choose criteria that correspond directly to your institution’s social goals. The Sample Employee SPM Responsibilities Table highlights example social goals for a loan officer and their related evaluation criteria. Each employee at your institution should have such a list of their responsibilities, and regular performance reviews should examine the employee’s success in fulfilling these responsibilities.

Be aware that employees who are accustomed to being evaluated only on financial performance responsibilities may resist this new form of evaluation. Before adding social performance criteria to your employee evaluations, ensure that employees have first been trained on the institution’s social strategy54 and their social performance responsibilities.

Train Employees to Protect Clients and Avoid Aggressive Sales Techniques

Train your employees on how to sell your products and services without pressuring clients. Aggressive sales techniques can be particularly damaging for low-income clients and those with limited financial capability, as they may be likely to buy products based more on sales pressure than on actual product “fit.”

Clearly define for your institution what “aggressive sales” look like and what you will do to monitor and sanction sales employees who practice aggressive sales. Examples of aggressive sales include:

  • Telling clients that there is a time limit on a specific offer (“you must sign today, because the price will go up tomorrow”);
  • Continuing to pursue a client who has clearly declined a product;
  • Discouraging or preventing clients from consulting with a trusted person;
  • Discouraging or preventing clients from reading product information, contract, etc.;
  • Arguing, being hostile, or condescending toward the client;
  • Intimidating or threatening the client (“if you don’t purchase life insurance, you are going to look like you don’t care about your family”); and
  • Requiring all group members to renew a loan, with no option for one of the members to opt out.

Employees need to be able to talk about the products in a way that clients understand. Train employees to ask the right questions so that they can point individual clients to the most appropriate products. They should be able to sell a product by highlighting how it will be useful for the client; the tactic should be to convince the client that the product is valuable, not to badger him/her into signing a contract. Also, train employees to respect the client’s right to refuse a product.

Sales techniques should be adapted to clients’ education and literacy levels, as well as to local market conditions. For example, clients who have never used an insurance product are vulnerable to aggressive sales, as they may have difficulty determining whether the product fits their needs, or they might believe that premium payments are refunded if claims are not made. Ensure that sales techniques—client recruitment, the sales pitch, and promotional materials—will not mislead clients about the benefits of a product.

Your institution is not responsible for training agents or third-party providers (e.g., mobile agents, insurance companies, money transfer companies) on aggressive sales, but you should check that such providers train their own representatives. Monitor your own employees as well as any third parties you are affiliated with. Routine monitoring should include checks on how employees sell products. Interview clients as well as staff.

Field examples and Resources

5.C.2.1 The provider trains all employees on its social goals and how their work contributes to achieving these goals and reinforces this on an ongoing basis.

Training imparts new skills, ensures a shared culture, and promotes commitment to the strategy. Larger and fast-growing institutions or those with high turnover (>20%) need more frequent training so that all new employees have a shared understanding of their roles and responsibilities, including carrying out the social strategy.

Training can be informal, including awareness raising, opportunities for discussion, but should be ongoing.

Scoring guidance

If a standardized generic training module for trainees and trainer exist, but there is no specific reference to the provider’s social strategy and goals, the answer is ‘no’.

For fast growing service providers, refresher trainings should be offered to most staff at least annually to ensure that these concepts are reinforced and new trends, policies, and practices related to social goals can be presented to existing staff. For slower growing institutions, every two years is reasonable.

Sources of information
  • Training plans, training material
  • Interviews with HR
  • Interviews with employees at HQ and branches
Evidence to provide

Refer to training plans, training materials, interviews with staff, and how social goals are integrated.

5.C.2.2 The provider trains employees on client protection, in line with their roles and responsibilities. The training covers at minimum the following topics:

5.C.2.2.1 Repayment capacity analysis and the credit approval process
5.C.2.2.2 How to avoid aggressive sales techniques, including how to respect clients’ rights to refuse products
5.C.2.2.3 How to explain pricing, terms and conditions to clients and how to verify client understanding
5.C.2.2.4 Debt collections practices and loan recovery procedures
5.C.2.2.5 Confidentiality and data sharing policies and fraud risks, including common frauds, fraud identification, and fraud reporting
5.C.2.2.6 How the complains mechanism works, how to resolve complaints against third party providers, and how to treat clients respectfully during the process

Having a code of conduct alone, or procedures for client protection, is not enough to make the values ”come alive”. HR policies like recruitment, evaluation and training should reflect the standards laid out in the code and in the client protection policies and procedures.

Scoring guidance

For each detail, the score is ‘yes’ if the provider has an effective and formal training program in place on the subject, provided to all concerned employees on a regular basis.

The score is ‘partially’, if the training is not fully covering the issue raised in the detail, if not all concerned employees are trained, if the training is not formalized, or if the training is not done regularly (at least every 2 years). If new credit staff are trained but there are no annual refreshers, the answer is ‘partially’. Annual refreshers may take the form of formal classroom trainings, on-line learning, or may occur during regular branch or regional meetings (as long as there is evidence that the client protection issues are addressed).

Sources of information
  • HR manual
  • Training materials
  • Employee files
  • List of trainings conducted in the last year
  • Credit manual
  • Group training material
  • Interview with HR manager
  • Interview with branch staff
  • Operations, branch managers, loan officers
Evidence to provide

Specify the elements in the HR policies/ training material that support the code of conduct and client protection policies (training modules, on-site refreshers, on-line learnings, etc.). Training material should be clearly point out the standard of conduct staff is expected to follow. Specify date of most recent trainings.

Specify when staff receive training (ex., induction training, on-the-job coaching, ad hoc sessions).

For 5.C.2.2.1

Applies to credit staff.

"repayment capacity analysis" involves building cash flow analysis, cross checking, and interviewing clients.

If due diligence is conducted by group members, groups are trained on how to conduct due diligence and relevant loan criteria.

For 5.C.2.2

With the training, staff understand and have the skills to implement policies and procedures related to fair and responsible treatment of clients and aligned with the code of conduct. Unacceptable behavior is highlighted. Training material should explicitly refer to aggressive sales. Role plays are particularly valuable in demonstrating what aggressive sales look like.

Specify which training modules address aggressive sales

The provider verifies that third parties (agent network managers, etc.) train their own representatives on fair and responsible treatment of clients. The training is aligned with the provider's code of conduct and spells out unacceptable behavior.

For 5.C.2.2.3

The provider trains all staff to communicate all information related to products, services and policies to clients in the local language and at an appropriate level given financial literacy limitations. For less literate clients, oral communication supplements written information

Example: FSP Y trains its loan officers to be able to read the contracts to clients with literacy and/or financial capability limitations, making the exchange a series of questions and answers so that the clients can ask questions and the loan officers can verify understanding.

FSP X has its customer service representatives, who handle disbursement, trained to verify client understanding of terms and conditions verbally during the disbursement process.

For 5.C.2.2.4

Training should include actions employees are expected to take and those they are prohibited from taking in case of default. This includes training on how to evaluate a client's willingness and ability to repay

Example: The field staff in collections is encouraged to refer to clients as “clients with late loans” instead of “delinquent clients” in order to avoid the negative connotations and disdain associated with this word.

For 5.C.2.2.5

Specify how staff are trained on privacy and data security policies (how to talk to clients about privacy and confidentiality, how to keep client information safe, how to keep IT passwords safe).

In order to inform your clients on data privacy, first make sure that your staff are well trained on the subject. Client data privacy should be part of staff induction training.

For 5.C.2.2.6

Verify the training materials (induction, refreshers, etc.) to make sure the complaints mechanism is described.  

For a complaints mechanism to be effective, employees must be aware of its existence and how to use it. Employees should know how the mechanism works and how to refer clients to the appropriate person/ mechanism. Complaints handling should be covered in induction training.

How the complains mechanism works is not just the channel to use to file a complaint but also how staff processes complaints

Field examples / Guidance for implementation
Resources for indicator 5.C.2.2

5.C.3 The provider evaluates and incentivizes employees based on social and financial criteria.

Incentivize balanced performance

The indicators used to measure and reward employee performance communicate an important message to staff and clients about what your institution values. If your organization claims to have social goals but incentivizes financial performance exclusively, employees have no choice but to deprioritize social performance. For example, it is safe the assume that a “zero tolerance for arrears” incentive policy will lead some loan officers to use unacceptable collections practices. And you cannot expect that a manager will spend time mentoring staff and cultivating new leaders if this is not part of his/her KPIs.

To design and implement an employee performance management system that includes social and financial goals, first consider: What are the behaviors and achievements that we want to promote? For example, do you simply want field agents to recover the maximum number of overdue loans possible, or is respectful treatment of delinquent clients also a goal? Do you want employees to sell as many microinsurance policies as they can, or do you also care that an insurance policy is the right fit for the customer who buys it? Is it good enough for a field agent to simply fill out a client’s social data profile, or is it important that the information also be accurate? Think carefully about your social goals—such as respectful treatment of clients, good product fit, and accurate data collection—so that you are clear on what behaviors your rewards system should encourage.

A good incentive system will:

  • Balance social and financial goals. Integrate “social” variables into your incentive system without exceeding the recommended five variables that keeps the system manageable and uncomplicated. You can find Examples of Social Variables for Incentivizing Employees in the resources section. The weights55 assigned to social and productivity variables should be balanced to make sure the same importance is given to social and financial performance. In some cases, the importance of a social goal can be stressed by placing it as a condition56 (rather than a variable) in the incentive system. For example, a loan officer’s rewards may be conditional upon having a certain percentage of target clients (e.g., women, rural farmers) in his/her caseload. Additionally, you could emphasize desired customer treatment by excluding employees who are being sanctioned for mistreating clients.
  • Incentivize good treatment of clients. It is important that the variable proportion of a field officer’s salary be reasonable—never more than 50 percent, though 20 to 30 percent is often a better limit for preventing poor practices such as aggressive sales or recovery tactics. Set limits for field officer caseloads, so that clients do not suffer under staff with too-high caseloads (see Guidelines for Caseload Limits). Also consider setting a cap on disbursement/sales incentives to reduce the incidence of overly aggressive sales practices. For example, one FSP decided that anything disbursed over and above 120% of the disbursement target is not accounted for in the incentive calculation.
  • Be simple and straight-forward. Incentive calculations should be simple and transparent for each employee group; a good rule of thumb is that any employee should be able to calculate his/her own incentives. Variables—the key indicators that combine to evaluate an employee’s performance against pre-defined targets—should not exceed five for each employee group. Track variables and metrics in your MIS or other reliable system that is perceived as transparent and fair by employees.
  • Set attainable goals. Aim to set conditions that qualify at least 70 percent of employees for rewards. Especially when introducing new variables or weights into your incentive system, err on the side of more employees achieving the reward, rather than fewer. Over time, you will be able to gauge whether you have established attainable goals and can adjust the incentive structure accordingly.
  • Promote equality among employees. While some providers choose only to apply incentives to certain positions, experience shows that a comprehensive incentive system that covers the majority of job positions at the institution— or at least the field positions—creates a greater sense of equality among employees. Additionally, while junior and senior staff may have different KPIs based on their responsibilities, the indicators should all be aligned to the same end goals. For example, a branch manager might be incentivized by a client drop-out target, while a customer service representative at that branch would work toward resolving a target number of customer inquiries—and both would be working toward the same goal of customer retention.

Once you have created your incentive system, invest time in communicating to employees the rationale behind the system and how it works. Prepare an organization-wide training before implementing a new system, or if you believe employees do not fully understand the current one. Complement training with short, simple employee guides that explain the policies and provide sample calculations.

Finally, each year, your institution should review the incentive system. This task should fall to senior management and Internal Audit/Risk Management. These staff should examine any new system after three to six months and then annually thereafter. The role of Internal Audit is to monitor the factors presented in the Factors to Consider During Internal Audit of Your Staff Incentive System Table and report to management. Senior management should use this information, in addition to market information, to ask the essential questions presented in the Essential Questions to Answer When Reviewing Your Staff Incentive System Table. The ultimate goal is to ensure that the incentive system is not creating unintended negative consequences for clients.

55 Generally, a single variable should carry a weight between 10 and 35%. Weights lower than 10% are not motivational, and those above 35% create lopsided behaviors (i.e., neglect for other variables).

56 Conditions are certain minimum levels of performance that staff are required to meet in order to be eligible for their rewards

Resources
Field Examples

5.C.3.1 Employee performance appraisals and incentives include client protection or social performance criteria.

5.C.3.1.1 The performance evaluation includes client protection criteria, such as portfolio quality and customer service, including treating clients respectfully and without discrimination.
5.C.3.1.2 The performance evaluation includes social performance criteria, such as ability to recruit target clients, quality of data collection, quality of non-financial services provided, and client retention.

In order to signal the importance of the code of conduct, social objectives and client protection, employees should be evaluated and incentivized on social performance criteria. Incentives, in particular, can have a powerful impact on performance and send a strong message about the importance of what is being incentivized.

Scoring guidance

The score is ‘Yes’ if employee and agent performance evaluations include, for detail 5.C.3.1.1,  reviews of adherence to the code of conduct, ethical behavior, the quality of interaction with customers, and for detail 5.C.3.1.2, review of achievement of specific social goals, and are incentivized accordingly.

The score is ‘partially’ for each detail if criteria for client protection or social performance are reviewed but not linked to incentives systems (bonus, formal recognition).

Sources of information
  • HR manual
  • Employee files
  • Performance evaluation template
  • Incentives policy
  • Interview with HR manager
  • Interview with branch staff, operations manager and loan officers
Evidence to provide

Check the performance evaluation form to see if adherence to the Code or living the provider values and social goals is included in the performance evaluation.

Specify the main points of the incentives policy.

Field examples / Guidance for implementation

The provider should measure the criteria to check achievement by each employee through internal audit check, analysis of client outcome data, review of complaints data, etc.

Resources for indicator 5.C.3.1

5.C.3.2 The provider reviews incentive schemes to check for negative consequences such as fraud, customer mistreatment, aggressive sales, over-indebtedness, or high employee turnover.

Market conditions evolve, with competition, regulation, political and economic fluctuations. Changing conditions both in the market and inside an institution (employee growth, new products, etc.) create a need to revise targets and incentives, to keep them appropriate and realistic.

For example, if a provider incentivizes loan officers with PAR30 <5% and productivity targets of 250 clients per LO, when the average for the  sector in that country is 100 clients per LO, then the incentive scheme might be pushing LO to issue less-than-high quality loans.

Incentive schemes should be revised annually. This should include a review for unintended social consequences. Incentive systems can sometimes lead to unintended consequences, encouraging employees to act in a way that has negative effects on clients or the provider.

Scoring guidance

If there is no review of incentive schemes at all or the review does not take into account unintended social consequences in mind., then the answer is ‘no’.

Sources of information
  • Incentives policy
  • Interviews with HR
  • Interviews with operations manager
Evidence to provide

Specify when the incentives schemes were last reviewed and whether they are reviewed regularly or on an ad hoc basis. Explain how it has been revised if negative consequences have been observed.