Dimension 5 - Responsible Human Resource Development

Qualified and committed human resources - employees, but also agents - are the greatest asset for achieving the social goals, if they are valued by their employer or mandator, understand well their roles and responsibilities, and listened to their ideas about organizational improvements. Responsible treatment of employees (and also agents) is critical for providers to achieve their social, environmental, and financial goals. 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:

Standard 5A The provider creates a safe and equitable work environment.
Standard 5B The provider’s Human Resources Development system is designed to attract and maintain a qualified and motivated workforce.
Standard 5C The provider’s Human Resources Development system supports its social strategy.

Resources for Dimension 5

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

Creating a supportive, safe and equitable working environment requires providers to have the policies and procedures in place to guarantee a non-discriminatory and safe place to work, to remunerates staff appropriately, and to address their grievances. It complies or exceeds the national laws including on forced labor and child labor.

This standard has 3 essential practices:

Essential Practice 5.A.1: A written Human Resources policy is available to all employees that explains and protects their rights.
Essential Practice 5.A.2: Employee compensation is equitable and adequate.
Essential Practice 5.A.3: The provider has a safety and health management system.

Resources for Standard 5A

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

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 HR policy provides the foundation for such an environment. It 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). Providers should propose to each employee with an abridged version of the HR policy, highlighting the policies that affect employees most significantly and inform employees on policy changes in a timely way. Providers should decide on the format freely in line with their employee’s preferences.

Developing the HR policy

Providers should involve employees at different levels in the process for developing and/or reviewing the HR policy to enhance its quality and appropriateness and build staff awareness and commitment. Good practice is to form an employee committee that periodically discusses how to improve implementation of the policy. To meet this standard, providers should have a formal mechanism for consulting with employee representatives on HR decisions and policy development and to allow them to have direct access to executive managers.

Making employees aware of the HR policy and helping them understand it

The HR policy should be part of induction for new employees. All new employees should be aware of the policy and know to whom they can address any questions or concerns. 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. It is thus recommended to break down the policy into digestible pieces, use various delivery methods (group discussions and videos, for example), and test employee knowledge at various intervals. 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.

Field examples

FINCA Protects Staff with HR Policies

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

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

Providers should formalize working conditions and communicate on them transparently to employees. A written HR policy - compliant with national labor law - must include key elements related to working rules, conditions, and staff protection. It must be easily accessible to all employees: each employee should know that the policy exists, what its covers, and where to find the entire policy. Its effective dissemination to each employee is a basic indicator of operational management in human resources.

Scoring guidance

For each detail:

Score ‘yes’, if:
1. the provider complies fully with the rights and responsibilities for all employees related to the detail concerned,
2. the formal HR policy describes clearly the employees’ rights and responsibilities related to the detail concerned that are
3. understood well by the employees
Score ‘partially’, if (1) the provider complies largely with the rights and responsibilities for all employees related to the detail concerned with no major risks identified, but they are not included in the formal HR policy and/or not well understood by the employees. In other words: if the first requirement is mostly met, but not the second and/or third.
Score ‘no’, if (1) the provider does largely not comply with the rights and responsibilities for all employees related to the detail concerned with major risks identified, regardless of whether the second and third requirements are met.

Sources of information

HR Policy & Procedures Manual
Interview of HR manager
Interviews of employees at branch and head office level

Evidence to provide

Explain where the HR policy is available and give the chapter or page where the six 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.).
If the employees’ rights are not explicitly mentioned in the HR policy, an assessment of potential risk(s) (for the employees, but also for clients) of non-compliance with these rights is required.

Examples are:

For 5.A.1.1.1: 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: lack of annual performance appraisal with manager.
Also check compliance with 5.B.2.2 (if there is a grievance mechanism in place) whether there is a risk of non-compliance with these rights?
For 5.A.1.1.3: the provider must, at least, respect the country's law regarding these rights; if the law is not applicable to the provider, assess whether its commitment to respect this right is credible regarding its size and processes.
For 5.A.1.1.4: Definition: a whistleblower is someone who discloses a policy violation or wrongdoing that s/he has observed; check whether there is a risk of non-compliance, no independent channel to report to, procedures and channels that do 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: women field staff with male supervisor, work in isolation at the branch level, culture in the region/country
For 5.A.1.1.6: non-respect of local right of notice, cases of abusive dismissals

Field examples / Guidance for implementation

Guidance for USSEPM-ALIGNED HR

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

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

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. Provider must ensure to be at least in compliance with national labor regulations and should exceed them, if these are considered as too light.

5.A.1.2.3 Benefits/social protection: government benefits, accident and/or health insurance, live insurance, contributions to pensions/ retirement schemes. Fair treatment of employees come with reasonable benefits and social protection to ensure safe and motivating working conditions.

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 life 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

For each detail

Score ‘yes’, if:
1. the detail concerned meets or exceeds national labor regulations,
2. is fully complied with by the provider for all employees,
3. is described clearly in the formal HR policy, and
4. is understood well by the employees.
Score ‘partially’, if:
1. the detail concerned meets at least national labor regulations and
2. is largely complied with by the provider for all employees but is not included in the formal HR policy and/or not well understood by the employees. In other words: if the first two requirements are mostly met, but not the third and/or the fourth.

Detail 5.A.1.2.2: examples for the second requirement:
If employees get only access to the salary scale for their own level or if the provider has a transparent salary scale, but not based on market rates

Score ‘no’, if
1. the detail concerned does not meet national labor regulations and/or
2. is largely not complied with by the provider for all employees regardless of whether the third and fourth requirements are met.

Sources of information

Interviews with Operations manager and front-line staff
Branch/field observations and interview of clients
Description of fees in product factsheets or product policy & procedures manuals or product brochures

Evidence to provide

Professional judgement is required whether the provider should exceed national labor regulations regarding any of the six details if regulation is too limited or incomplete.
For 5.A.1.2.1 Competitive wages: Describe how salaries are fixed and revised and whether they are market-oriented compared to the provider’s peers.
For 5.A.1.2.2 Transparent salary scale: The salary scale is best defined internally by the wage range per job position and benchmarked to the provider’s peers. Employees should have access to the full salary scale (i.e. all the ranges of salary) regardless of their level of compensation.
For 5.A.1.2.3 Benefits/social protection: Describe all benefits for employees (e.g., government benefits, voluntary [not defined by law] 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 to access these benefits and conditions to use the provider’s financial services (e.g., loans, transfer services).
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.

Field examples / Guidance for implementation

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.]

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

Responsible providers must offer equal access to jobs, promotion and trainings is key to being a responsible organization. They should have a ‘non-discrimination policy’ which describes employee’s rights to fair and equal treatment regardless of the employee’s (1) age, (2) sex, (3) race/ethnicity/national extraction/social origin/caste, (4) religion, (5) health status, including HIV status, (6) disability, (7) sexual orientation; (8) political affiliation/opinion, (9) civil/marital status, and (10) participation in a trade union.

Scoring guidance

Score ‘yes’, if:
1. there is no single case of an employee being discriminated regarding any of the ten internationally recognized ‘Protected Categories’ over the past year,
2. the provider has a systematic process in place to comply with its ‘non-discrimination policy’ that is (a) formulated clearly with all ten ‘Protected Categories’ in the HR policy/ internal rules/ code of conduct, and (b) verified regularly by HR control and at least annual HR compliance audits, and
3. understood well by the employees.
Score ‘partially’, if one of the three requirements is not met fully. For instance, (i) there is no single case of an employee being discriminated regarding any of the at least seven ‘Protected Categories’ according to the provider’s ‘non-discrimination policy’ over the past year and/or (ii) the latter comprises at least seven (incl. gender, race/ethnic/social origin, religion, civil status) out of the ten ‘Protected Categories’ and/or (iii) the ‘non-discrimination policy’ is not - or not clearly - formulated in the HR policy/ internal rules/ code of conduct and/or (iv) some employees are not aware of it. The score is also ‘partially’, if the first requirement is met fully, but the second and/or third requirement is largely not met.
Score ‘no’, if there is one or more cases of employees being discriminated regarding any of the at least seven ‘Protected Categories’ covered by the provider’s ‘non-discrimination policy’ over the past year or the provider has no ‘non-discrimination policy’ or it has no process in place to comply with its ‘non-discrimination policy’.

Sources of information

HR Policy & Procedures Manual, code of conduct/code of ethics.
HR compliance audit reports, social audits or ratings, any HR assessments during the past year.
Interviews with HR manager and employees at branches.

Evidence to provide

Specify the chapter or page of the HR policy/code of conduct/internal rules where the information on non-discrimination is provided. Describe employees’ rights to fair and equal treatment regardless of the categories by providing examples on how it is managed (or not) for some key categories.
National labor laws and regulations regarding the non-discrimination of employees.

In some countries, discrimination linked to sexual orientation is not integrated into the law and will undoubtedly not be integrated by the provider. The indicator can be noted “partially” or no if the auditor wants to emphasize the rules at the international level, or it can be noted “yes” (if all other requirements apply) but specifying in the comments that this is not in line with international requirements.

Resources for indicator 5.A.1.3

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.

Indicator: SPI5 Entry/ SPI5 FULL

To ensure equal representation of men and women, providers need to analyze job position by gender to understand representation at the different positions (field staff, back office, middle management, senior management) and whether gender discrepancies exist at the different organizational levels. Where such discrepancies exist, providers should address the problem openly with employees and adjust recruitment/ promotions accordingly.

Scoring guidance

Score ‘yes’, if the provider
1. has a systemic process in place to collect and analyze regularly gender disaggregated employment data for discussion at senior management or board level at least annually and
2. makes adjustments, as needed.
Score ‘partially’, if the two requirements are not met fully. For instance, (i) gender disaggregated employment data are regularly collected and analyzed, but senior management or the board did not discuss them within the past 12 months or (ii) the provider made only insufficient adjustments to correct ‘unbalanced’ gender employment ratios over the past year.
Score ‘no’, if one or both requirements are largely not met. For instance, (i) there is no process in place to collect and analyze regularly gender disaggregated employment data and/or (ii) neither senior management nor the board took gender disaggregated employment data on their agenda over the past 12 months and/or (iii) no adjustments made to correct ‘unbalanced’ gender employment ratios over the past year.

Sources of information

Targets for gender-balanced positions and organizational levels set by senior management or the board, if available.
Minutes of meetings of the board and senior management.
Interviews with the HR managerAny HR reports on gender-balanced positions, if available.
HR compliance audit reports during the past year.

Resources for indicator 5.A.1.4

MicroLoan Foundation Gender-Disaggregated Report on Employees by Position

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.

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

In compliance with international standards for ‘decent work conditions’, providers should not (1) employ any person against his or her will, (2) employ any person under the minimum age for work established by national law, but not under 14 years in any case and (3) do business with enterprises that benefit from forced labor or child labor. These are fundamental elements to complying with international good practice. Providers should follow international law when national law fails to address these issues.

Scoring guidance

Score ‘yes’, if
1. there has been no single case of non-compliance with the above-listed ‘decent work conditions’ over the past year and
2. the provider has a systematic process in place to ensure compliance with the above-listed ‘decent work conditions’ that comprises (a) the formalization of the ‘decent work conditions’ in its HR policy, (b) their strict application at the recruitment process, and (c) their verification by HR control and at least annual HR compliance audits.
Score ‘partially’, if there has been no single case of non-compliance with the above-listed ‘decent work conditions’ over the past year, but the second requirement is only partly met. For instance, (i) the HR policy does not spell out clearly the ‘decent work conditions’ and/or (ii) insufficient attention is given to the ‘decent work conditions’ at the recruitment process and/or (iii) no HR compliance audit for the past year.
Score 'no', if one or both requirements are largely not met. For instance, (i) there have been one or more cases of non-compliance with the above-listed ‘decent work conditions’ over the past year or (ii) the provider has no process in place to ensure compliance with the ‘decent work conditions’.

Sources of information

HR Policy & Procedures Manual, code of conduct/code of ethics
Interviews with HR manager and executive management

Evidence to provide

National labor regulations on the above-listed ‘decent work conditions’.
Chapter or page of the HR policy that refers to the above-listed ‘decent work conditions’.
HR reports on recruitment processes.
HR compliance audit reports during the past year.

Resources for indicator 5.A.1.5

Guidance on Protection of Vulnerable Groups

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. Providers 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.

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

Providers should pay employees’ salaries that are sufficient to provide minimally satisfactory living conditions in the location where they live. Salaries should be based on market rates and at least comply with the national sector minimum wage.

Scoring guidance

Score ‘yes’, if
1. no employee has been paid below the sectoral minimum wage over the past year and
2. the provider has a systemic process in place to ensure that all employees are paid salaries based on market rates and never below the sectoral minimum wage
3. that is monitored for compliance at least annually.
Score ‘partially’, if the first requirement is met fully, but not the second and third. For instance, (i) some employees are paid below market rates (but not below sectoral minimum wage) over the past year or (ii) the provider has no regular process in place or (iii) compliance has not been monitored during the past 12 months.
Score ‘no’, if one or more employees have been paid below the sectoral minimum wage over the past year and/or the salaries of many employees are below market rates and/or the provider has no process in place to ensure that all employees are paid salaries based on market rates and never below the sectoral minimum wage.

Sources of information

HR Policy & Procedures Manual, internal salary scale per type of position.
Interviews with HR manager and some employees.
National sector minimum wage, if available.
Salary scales of the main competitors.

Evidence to provide

Specify how the provider sets and revises salaries per position and the related salary scales.
Check for sectoral/national minimum wage and compare with the lowest salaries paid by the provider.

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

Indicator: SPI5 FULL

Staff must receive a living wage as a base salary. Incentives such as bonus pay should never replace a living wage as base salary for staff as a key responsible HR practice. This should prevent staff from feeling pressured into unethical behaviors to meet their basic living standards.

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.

Scoring guidance

Score ‘yes’, if
1. all front-line employees have base salaries that meet a living wage over the past year and
2. the provider has a systemic process in place to ensure that the base salaries of all front-line employees reach at the minimum a living wage that
3. monitors compliance at least annually.
Score ‘partially’, if the three requirements are not met fully. For instance, (i) the base salaries of one or a few front-line employees do not meet a living wage over the past 12 months or (ii) the provider has no regular process in place or (iii) no monitoring of compliance during the past year.
Score ‘no’, if the first and/or second requirement is largely not met. For instance, (i) the base salaries of many front-line employees do not meet a living wage over the past 12 months or (ii) there is no process in place to ensure that the base salaries of all front-line employees reach as a minimum a living wage.

Sources of information

HR Policy & Procedures Manual, internal salary scale per type of position, including the staff incentive systems. Interviews with HR manager and some employees.
Any available information of ‘living wage’ in the country and notably for the cities/towns where branches are located.

Evidence to provide

Specify how the provider sets and revises salaries and incentives for front-line employees.
Check the share of incentives/fixed wages for the front-line employees who get the lowest salaries and compare them with the ‘living wage’ of the branch locations concerned.

Field examples / Guidance for implementation

Paying a Living Wage

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.

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

Providers should ensure equal pay for women and men by evaluating regularly whether salary discrepancies exist for all positions at each level and in all organizational units/departments. Where equal pay discrepancies exist, they should address the problem openly with employees and adjust salaries accordingly.

Scoring guidance

Score ‘yes’, if
1. there is no case of a gender pay gap during the past year and
2. the provider has a systemic process in place to collect and analyze regularly gender-disaggregated data on salaries & incentives and career opportunities for all positions and in all units/departments for discussion at senior management or board level at least annually, and
3. makes sufficient adjustments timely, as needed.
Score ‘partially’, if the three requirements are not met fully. For instance, (i) one or a few cases of gender pay gaps and unequal career opportunities over the past year or (ii) gender disaggregated salary & incentive and career opportunity data are regularly collected and analyzed, but senior management or the board did not discuss them over the past 12 months or (iii) the provider made only insufficient adjustments to correct gender pay gaps and unequal career opportunities over the past year.
Score ‘no’, if one or more of the three requirements are largely not met. For instance, (i) significant cases of unequal gender pay and career opportunities over the past year and/or (ii) there is no process in place to collect and analyze regularly gender-disaggregated data on salaries & incentives and career opportunities and/or (iii) the provider made no adjustments to correct significant gender pay gaps and unequal career opportunities over the past year.

Sources of information

HR Policy & Procedures Manual.
HR reports
Minutes of meetings of the board and senior management.
Interviews with HR manager and employees.
Sector information on gender pay gaps, if available.

Evidence to provide

Describe the type of gender-disaggregated data on salaries & incentives and career opportunities that is analyzed at which time intervals.
Share, if available, the gender pay gap calculation and the methodology for assessing gender-disaggregated career opportunities.

Resources for indicator 5.A.2.3

How to Analyze Your Gender Pay Gap An Employer’s Guide

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

Providers should assess at least annually the health and safety risks both in the office and in the field that employees face while performing their job functions. A workplace risk assessment by different employee characteristics, including gender and disability, is a key tool 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.

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 can be done by anyone in the organization—employees in charge do not have to be safety and health experts. Providers are advised to form a joint management-employee safety committee to ensure that there are representatives from all types of employees (males/females, field workers/office staff, employees with special needs, etc.) to help everyone focus on the risks at least annually that really matter in the workplace – the ones with the potential to cause real harm. It should identify the hazard and the required control measures:

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 International Labor Organization (ILO) recommends a five-step process for conducting a risk assessment:
Identify the hazards. What are the workplace risks that could cause harm? 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 offices and note items that might pose a risk;
- talk to supervisors, staff, drivers, and contractors on their concerns and opinions about health and safety issues in the workplace;
- and consult reports documenting past workplace accidents.
For each hazard, identify who might be harmed/ affected and how.
Note the existing controls in place to manage hazards, or what needs to be done to control the risk.
Note who is responsible for putting the suggested risk control measures into practice, and by what date.
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).

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

HR Policy & Procedures manuals should cover:

following up on any incidents of on-the-job accidents, injuries, or diseases;
procedures for documenting an incident, reporting it to relevant people and committees (e.g., board committee on employee issues, health institutions), investigating the reasons for the incident, and following up with any corrective measures.

Providers should have a line-item in their annual budget and staff time for supporting the risk prevention and handling activities. This sends a strong signal to employees that their employer their well-being.

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 advises the employee to seek medical attention (if needed, which is covered by workplace insurance) documents the accident, and then submits the case with the recommendation of inspecting all motorbike tires on a quarterly/bi-annally basis with prompt replacement of worn tires to her/his supervisor.

Providers should also compensate employees who miss work as a result of work-related injuries. If such compensation is not regulated by the national labor laws, they should 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.

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

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 labor 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 and should identify the hazard and the required control measures.

Scoring guidance

Score ‘yes’, if the provider has a systematic process in place to assess at least annually the health and safety risks
1. both in the office and in the field,
2. differentiated by gender, disability and other employees’ characteristics,
3. in a participatory process that includes female and male employees with office and field work functions
4. with an audit of the existing safety measures that is
5. summarized in a written annual report for the board, all employees, and other stakeholders and
6. the full process be documented in the HR Policy & Procedures manual or another HR document.
Score ‘partially’, if one or two of the six requirements are largely not met or most requirements are met only partly. For instance, (i) the assessment is done only every two years or (ii) it is not complete on hazards or control measures to be analyzed or (iii) it is done top-down by the HR manager without consulting different employees or (iv) the report is not widely disseminated or (v) there is no written documentation of this process.
Score ‘no’, if no such process is in place with three or more of the six requirements largely missing.

Sources of information

HR Policy & Procedures Manual.
Last two health and safety risk reports.
Interviews with HR manager, different employees (women and men with office and field functions), and CEO/deputy CEO.
Relevant parts of the national labor law and regulations.

Evidence to provide

Specify last risk assessment and/or give examples of health and safety risk reports.
Describe the health and safety risk mitigation actions taken over the past 12 months, including the staff training and the health and safety equipment.

Resources for indicator 5.A.3.1

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.

Indicator: SPI5 FULL

In addition to conducting employees’ health and safety risk assessment, providers should investigate and document any accidents, injuries or diseases related to work and analyze results by gender. This tracking is important, but few providers do it unless the national labor regulations require it. It is important to record and analyze these findings by gender and position to understand if some category of employees is disproportionately affected. The focus should be on ensuring safety at work and how providers take steps to create a safe work environment for all employees.

Scoring guidance

Score ‘yes’, if the provider
1. documents all work accidents/injuries/illnesses
2. disaggregated by gender and position and
3. reports it to senior management at least annually.
Score ‘partially’, if the three requirements are not met fully. For instance, (i) an incomplete documentation of work accidents/injuries/illnesses or (ii) work accidents/injuries/illnesses are not disaggregated by gender or position or (iii) the report is done just within two years.
Score ‘no’, if the three requirements are largely not met. For instance, (i) most work accidents/injuries/illnesses are not documented and/or (ii) not disaggregated by gender and position and/or (iii) not reported to senior management.

Sources of information

HR Policy & Procedures Manual.
Last two health and safety risk reports.
Interviews with HR manager, different employees (women and men with office and field functions), and CEO/deputy CEO.
Relevant parts of the national labor law and regulations.

Evidence to provide

Last two HR reports on work-related accidents, injuries and illnesses.
Describe how the HR reports are 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.

Indicator: ALINUS/ SPI5 Entry/ SPI5 FULL

Detail 5.A.3.3.3: SPI5 FULL

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

Detail 5.A.3.3.1

Score ‘yes’, if the provider
1. offers all necessary health & safety equipment free-of-charge to all employees,
2. trains at least annually all employees in the proper use of their health & safety equipment,
3. adapts physical accommodations, as needed, to safeguard the employees’ health and safety, and
4. the large majority of employees uses effectively their health & safety equipment.
Score ‘partially’, if a significant number of employees do not use effectively their health & safety equipment or the first three requirements are not met fully. For instance, (i) not all necessary health & safety equipment is offered to all employees or (ii) training in the proper use of the health & safety equipment is offered only once in two years or not to all employees or (iii) physical accommodations are not sufficiently adapted to safeguard the employees’ health and safety.
Score ‘no’, if most employees do not use effectively their health & safety equipment and/or do not have the most basic equipment and/or most requirements are largely not met. For instance, (i) the health & safety equipment for the employees is insufficient and/or in poor condition and/or (ii) most employees are not trained in the use of health & safety equipment and/or (iii) physical accommodations are not adapted to safeguard the employees’ health and safety.

Detail 5.A.3.3.2

Score ‘yes’, if the provider
1. has an updated written emergency/disaster response plan for all its offices,
2. trains management and employees at least annually on how to follow it, and
3. the large majority of employees understands it well.
Score ‘partially’, if the three requirements are not met fully. For instance, (i) there is just a written generic emergency/disaster response plan, but not adjusted to each office or (ii) training on the emergency/disaster response plan is offered only once in two years or not to all employees or (iii) a significant number of the employees do not understand it well.
Score ‘no’, if one of the three requirements are largely not met. For instance, (i) most employees do not understand the emergency/disaster response plan and/or (ii) there is no written emergency/disaster response plan and/or (iii) no training on the emergency/disaster response plan within the past two years.

Detail 5.A.3.3.3

Score ‘yes’, if the provider
1. compensates all employees who miss work due to work-related injuries (even if there are no such national labor regulations) and
2. at a minimum as stipulated by national labor law and regulations and
3. the large majority of the employees are aware of it.
Score ‘partially’, if the three requirements are not met fully. For instance, (i) there is just a written generic emergency/disaster response plan but not adjusted to each office or (ii) training on the emergency/disaster response plan is offered only once in two years or not to all employees or (iii) a significant number of the employees do not understand on how to follow it.
Score ‘no’, if one of the three requirements are largely not met. For instance, (i) most employees do not understand the emergency/disaster response plan and/or (ii) there is no written emergency/disaster response plan and/or (iii) no training on the emergency/disaster response within the past two years.

Sources of information

HR Policy & Procedures Manual.
Last two health and safety risk reports.
Interviews with HR manager, different employees (women and men with office and field functions), and CEO/deputy CEO.
Relevant parts of the national labor law and regulations.

Evidence to provide

List the related actions taken to prevent/reduce health and safety risks for employees.
Describe the trainings (frequency and methodology) for employees to prevent/mitigate major health and safety risks.
Outline the latest emergency/disaster response plan and whether and how it is adapted to each office.
Explain how and for how long the provider compensates employees who miss work due to work-related injuries.

Resources for indicator 5.A.3.3

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 takes 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:

Essential Practice 5.B.1: The provider gives employees complete employment documentation and training to understand their job requirements.
Essential Practice 5.B.2: The provider gives employees formal opportunities to communicate with management.

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

Provide all employees with an employment contract

In addition to all employees understanding their rights and responsibilities supported by a clear HR policy (refer to Standard 5A), providers should also provide each employee with a written (signed) employment contract and a written job description of his/her workplace duties. The job description should be reviewed with the employee at the time of hiring and whenever s/he changes positions to ensure clarity on his/her roles and responsibilities and to enable fair performance evaluations.

The employment contract (signed 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 pay 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 (sickness, maternity, employment injury, unemployment, retirement, etc.).
Employment conditions:
- The terms of the worker’s employment, such as working time, minimum wages, whether there is a probationary period before the person becomes a permanent employee, and the location where the employee will work;
- Job description/scope of work: The job title and responsibilities, including reporting line (see below);
- Work rules and possible sanctions: List of actions and activities that are prohibited and investigations that can be conducted for 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;
- Performance evaluation and incentives: The performance metrics that the institution will use to evaluate the employee’s performance and an explanation of the incentive/reward system (see guidance for 5C3).

Job descriptions should outline the nature of the work to be performed, key responsibilities and duties, and the competencies required. They need to be reviewed regularly to ensure their relevance as job functions are changing over time triggered by market and organizational changes, new technologies or also planned new SPM initiatives. Changing job functions may result in adapted key responsibilities and duties and call for new types of competencies required for the postholders. (see 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

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

Orientation training: Training at the beginning of employment and whenever the employee changes positions within the institution. Employee orientation should include at least the following topics: the provider’s mission, social goals, and Code of Conduct; the employee’s job duties, including social performance related duties; and the conditions of employment. Follow this training with on-the-job training and mentorship so that new employees master skills not easily taught in a classroom setting. Such initial 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 provider’s priorities. As goals and products change over time, consider what new skills 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 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 is accessible/inclusive to employees with disabilities, including through the provision of reasonable accommodations.

Resources for 5.B.1

SPM Essentials #5: Listening to Employees as a Business Strategy

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

Indicator: ESG Risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

Detail 5.B.1.1.3: SPI5 FULL

Employees should understand their individual rights and responsibilities. The provider should provide a written employment contract indicating the salary level, but also a description of their benefits and employment conditions. The performance evaluation process should be transparent to get employees committed and in line with the provider’s strategy. It should be combined with a career planning process and the identification of corresponding training opportunities (refer to 5.B.1.3).

Scoring guidance

Detail 5.B.1.1.1

Score ‘yes’, if:
1. each employee receives a written and mutually signed employment contract that outlines in clear language and necessary detail the complete salary package with the base salary, all performance-based incentives, all social benefits (like insurance coverages), and overtime pay and
2. most employees understand fully their employment contracts.
Score ‘partially’, if the two requirements are met only partly. For instance, (i) the employment contracts are not being mutually signed or (ii) they miss some of the above information that is communicated orally only or (iii) they are in legal language not well understood by many employees.
Score ‘no’, if one or both requirements are largely not met. For instance, (i) most/all employees do not receive a written and mutually signed employment contract and/or (ii) employees are not informed by all elements of their salary package in whatever format and/or (iii) most employees do not understand well their salary package.

Detail 5.B.1.1.2

Score ‘yes’, if:
1. each employee receives an individual, customized written job description that outlines in clear language and necessary detail the nature of the work to be performed, key responsibilities and duties, and the competencies required and
2. most employees understand fully their job description.
Score ‘partially’, if the two requirements are met only partly. For instance, (i) the job descriptions miss some of the above information that is communicated orally only or (ii) they are little customized or (iii) they are in vague/unclear language not well understood by many employees.
Score ‘no’, if one or both requirements are largely not met. For instance, (i) most/all employees do not receive a written job description, and/or (ii) the job descriptions are not customized and lack key information (like the competencies required), and/or (iii) most employees do not understand well their job description.

Detail 5.B.1.1.3

Score ‘yes’, if:
1. the provider has a systemic process in place of evaluating at least annually the performance of all employees,
2. each employee receives in writing an explanation of the performance evaluation process with his/her individual evaluation criteria and targets, and
3. most employees understand fully their performance evaluation process.
Score ‘partially’, if the three requirements are met only partly. For instance, (i) the performance of most, but not all, employees are evaluated annually or (ii) the performance evaluation process and/or the evaluation criteria and targets are not clearly communicated to most/all employees or (iii) many employees do not understand well their performance evaluation process.
Score ‘no’, if one or more requirements are largely not met. For instance, (i) the provider has no process in place of evaluating at least annually the performance of most/all employees, and/or (ii) the evaluation criteria and targets do not exist or are not communicated to the employees, and/or (iii) most employees do not understand well their performance evaluation process.

Sources of information

HR Policy & Procedures Manual.
Employment contracts for different staff categories and job descriptions for several positions.
Description of the performance evaluation process.
HR reports on the staff salary packages and performance evaluations over the past 12 months.
Interviews with HR manager and different employees (women and men with office and field functions).
Relevant parts of the national labor law and regulations.

Evidence to provide

Briefly describe key elements from employee files: employment contracts, job descriptions, performance evaluations.
Specify where what information is when provided to employees.

Resources for indicator 5.B.1.1

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

Indicator: SPI5 FULL

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. They should comprise both thematic/technical training, but also on-the-job coaching by senior staff. Apart from inception trainings, providers should offer training at least annually to ensure that staff understand and perform their work efficiently, feel comfortable in their position, are committed to their tasks, and capable of evolving in their job.

Scoring guidance

Score ‘yes’, if the provider has a systemic process in place to offer inception training to all new employees that comprises
1. an institutional orientation on the values, code-of-conduct, social goals, HR policies, client segments, products & services, etc. and
2. job-specific training and coaching to enable them in carrying out their work functions.
Score ‘partially’, if the two requirements are met only partly. For instance, (i) the institutional orientation does not cover adequately the above topics or (ii) the contents of job-specific training is quite general and not enough linked to job specificities or (iii) the on-the-job coaching is not functioning well or (iv) the induction training is offered to most, but not all, new employees.
Score ‘no’, if one or both requirements are largely not met. For instance, (i) there is no process in place to offer an inception training to most/all new employees, and/or (ii) the job-specific training for new employees does not prepare them sufficiently for their new job functions, and/or (iii) most new employees lack institutional understanding knowing little to nothing about the values, the code-of-conduct, etc.

Sources of information

HR Policy & Procedures Manual.
Induction training plans and manuals.
HR reports on induction training sessions and training evaluations during the past 12 months.
Interviews with HR manager, Training manager, and different new employees (women and men with office and field functions).

Evidence to provide

Specify the on-boarding and induction training process of new employees.
Provide the list and contents of the induction trainings offered during the past 12 months.
Describe the on-the-job coaching process for new employees.
Give examples from interviews on how job-specific trainings prepared new employees for their job functions.

Resources for indicator 5.B.1.2

MicroLoan Foundation Loan Officer Induction Training Manual 2019

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

Indicator: SPI5 FULL

Providers should perceive their employees at all levels as their key asset and thus invest into their continuous career development opportunities and related skill development to keep them loyal and committed. They should engage in a joint career planning process as part of their regular performance evaluation process (refer to 5.B.1.1.3). They should advertise job positions internally and value the experience gained by their employees in proposing them new career opportunities.

Scoring guidance

Score ‘yes’, if the provider has a systematic process in place to offer professional development opportunities for employees from every level that includes:
1. annual training opportunities,
2. internal job advertisements, and
3. joint career planning combined with the regular performance evaluation process.
Score ‘partially’, if the one of the three requirements is largely not met. For instance, (i) professional development opportunities are offered to employees from some, but not all, levels or (ii) a joint career planning process is only informal and limited to some employees only or (iii) many jobs are also advertised externally.
Score ‘no’, if there is no process in place to offer professional development opportunities for employees from every level (as the provider perceives it as too costly) and/or two or all three elements of the requirement are missing.

Source of information

HR Policy & Procedures Manual.
Professional development opportunities with internal and external training courses and workshops over the past 12 months.
Internal and external job advertisements.
Interviews with HR manager, Training manager, and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Share examples of professional development opportunities that have been offered for employees of different levels.
Examples of joint career planning with the identification of training opportunities.

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

Indicator: SPI5 Entry/ SPI5 FULL

A gender non-discrimination policy (refer to 5.A.1.3) comprises not only equal pay and career opportunities but also equal opportunity and access to training and skill development (refer to 5.B.1.3). The latter includes at least two types of training:

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
skills development training to facilitate employees' professional development opportunities, such as allowing them to respond to the employer's evolving needs by taking on new and/or more senior positions.

Scoring guidance

Score ‘yes’, if:

1. the provider has a systematic process in place to offer training and skill development opportunities for employees from every level
2. with equal access for women and men.

Score ‘partially’, if one of the two requirements is met only partly. For instance, (i) some categories of employees (e.g. tellers) and/or employees at certain (e.g. lowest) levels made up mainly by women are offered no or comparably little training and skill development opportunities or (ii) there is limited unequal access/participation between women and men per type and/or level of position in terms of annual days for trainings and other professional development opportunities.
Score ‘no’, if there is significant unequal access for women and men to training and skill development opportunities.

Sources of information

HR Policy & Procedures Manual.
Last annual plan for, and report on, training and skill development, if available.
Interviews with the HR manager, the Training manager, and different employees (women and men with office and field functions), and at different levels.

Evidence to provide

List of internal and external training courses and skill development events offered to the employees over the past 12 months.
Explain how information is tracked for gender equality in accessing training and skill development opportunities: a roster or report on the number of women vs men attending as a proportion of men and women holding the post, an overall tally that shows what % of women and men employees had a training opportunity in the last year, etc.

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

Consultation on HR decisions and policy development

Providers should make sure Human Resources decisions and policy developments are aligned with employees’ needs and constraints. By defining and monitoring a formal mechanism for consulting with employees on HR decisions and policies, the provider can collect employees’ feedback and input to feed the development of such policies and make informed, relevant decisions in matters of HR management. The formal mechanism should also define how employees are represented by elected representatives who have direct access to executive managers and can raise issues.

Create a Formal, Confidential Grievance Mechanism

Providers should provide a formal way for employees to voice grievances. This mechanism could be a dedicated phone number, email address, or note box with at least one channel for voicing grievances confidentially. The latter means that the employee identifies him/herself, but is afforded the opportunity to have his/her name disassociated with the complaint during the resolution phase. For example, if an employee complains to an HR representative because his/her supervisor is violating the policy on overtime work, the problem would be investigated without the supervisor knowing the identity of the complaining employee. An effective grievance mechanism for resolving HR problems should comprise a formal process for recording, addressing, and following up on complaints. It tracks the number of complaints submitted as well as the details of their resolution. Targeting “zero complaints” would be a sign that employees do not know about the mechanism or do not feel comfortable using it. Providers should thus aim to respond quickly and fairly to HR problems that arise.

Monitor Employee Satisfaction

Providers should regularly analyze employee satisfaction by choosing 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. Important is to collect satisfaction data on at least a representative sample of employees (covering all types of employees) at least annually by 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 with peers
Conflict resolution practices
Human Resources support services

Employees should have the option to respond anonymously to the satisfaction survey. Results should be analyzed and reported by segmenting data by employee characteristics, including gender, level (management/staff), and location (HQ/branch). Reporting should be not only to management, but also to all 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.

Indicator: SPI5 Entry/ SPI5 FULL

Providers should offer their employees the opportunity for feedback on HR decisions and policy development to respect and learn from them which may foster the employees’ loyalty and commitment. A formal mechanism is recommended where employee representatives are given direct access to executive managers. The employee representatives should be trusted and preferably elected by all employees rather than be appointed by senior management or automatically determined by position, like the HR manager.

Scoring guidance

Score ‘yes’, if the provider has a systemic process in place to consult with employee representatives on HR decisions and policy development with:
1. formal and regular consultations on the review of the HR policy
2. between employee representatives and executive managers, and
3. the employee representatives chosen/approved by the employees.
Score ‘partially’, if one of the three requirements is largely not met. For instance, (i) the consultation process takes place, but more informally or (ii) is not regular with just one meeting during the past 12 months or (iii) senior management appoints the employee representatives (e.g. the HR manager) with limited consultation with the employees.
Score ‘no’, if senior management does not consult with employee representatives on HR decisions and policy development and/or two or all three elements of the requirements are largely not met.

Sources of information

HR Policy & Procedures Manual.
Agenda, minutes and documentation of the meetings with the employee representatives during the last 12 months.
Interviews with HR manager, the employee representatives, and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Description of the consultation process between senior management and employee representatives on HR decisions and policy development, including the election/appointment of the employee representatives.
Examples of the consultations on specific HR topics over the past 12 months and how they have influenced the evolution of the HR policy.

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.

Indicator: ESG risk/ ALINUS/ SPI5 Entry/ SPI5 FULL

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

Scoring guidance

Score ‘yes’, if the provider has a systemic process of conducting employee satisfaction surveys in place
1. at least annually
2. with relevant samples covering all categories of employees
3. where the results are analyzed by gender and other categories of employees, and (3) shared with all employees.
Score ‘partially’, if one of the four requirements is largely not met. For instance, (i) the last employee satisfaction survey was conducted between 12 to 24 months ago or (ii) the survey sample was too limited or did not well represent the different categories of employees or (iii) the results were analyzed by gender only, but not by other employee categories or (iv) the results were shared with a few employees only.
Score ‘no’, if there is no process in place to conduct employee satisfaction surveys or if three of the four requirements are largely not met.

Sources of information

HR Policy & Procedures Manual.
Methodology of the last employee satisfaction survey, including the sampling method.
Last two employee satisfaction survey reports.
Interviews with the HR manager, the employee representatives (if existing), and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Description of how the formal grievance mechanism is functioning.
Explain the channels available to employees to express grievances, and the level of understanding/knowledge about them.

Field examples / Guidance for implementation

Guidance for Grievance Mechanisms

Resources for indicator 5.B.2.2

FINCA Peru Grievance Mechanism

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

Indicator: SPI5 FULL

The level of employees’ satisfaction can be a proxy for “decent work conditions”. Monitoring employee satisfaction can help ensure the smooth functioning of a team and sends a message that senior management values employee feedback. Providers should conduct employee satisfaction surveys regularly, at least annually, on at least a representative sample of employees (i.e., the survey should cover all types of employees) and the results should be broken down by gender, office/field functions, seniority/age, etc.

Scoring guidance

Score ‘yes’, if the provider has a systemic process of conducting employee satisfaction surveys in place
1. at least annually
2. with relevant samples covering all categories of employees (3) where the results are analyzed by gender and other categories of employees, and
3. shared with all employees.
Score ‘partially’, if one of the four requirements is largely not met. For instance, (i) the last employee satisfaction survey was conducted between 12 to 24 months ago or (ii) the survey sample was too limited or did not well represent the different categories of employees or (iii) the results were analyzed by gender only, but not by other employee categories or (iv) the results were shared with a few employees only.
Score ‘no’, if there is no process in place to conduct employee satisfaction surveys or if three of the four requirements are largely not met.

Sources of information

HR Policy & Procedures Manual.
Methodology of the last employee satisfaction survey, including the sampling method.
Last two employee satisfaction survey reports.
Interviews with the HR manager, the employee representatives (if existing), and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Specify when the last employee satisfaction survey was conducted and with which sampling method.
Describe whether the results were analyzed per gender and other key categories of employees and how they were disseminated to the employees.

Field examples / Guidance for implementation

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

The effective implementation of the social strategy (refer to 1A) requires the full commitment of the board (refer to 2A), senior management (refer to 2B), and all employees, notably the client-facing staff who are directly serving the target clientele. Therefore, providers should instill their values in new employees from the moment they are hired - and even before, during recruitment - and encourage these through regular training and balanced performance incentives. The HR development system has thus the three fundamental functions in supporting the social strategy:

recruitment of people who are inclined/motivated to serve the target clientele;
their regular practical training on how to achieve their social targets and to adopt ‘good’ client protection practices and avoid ‘bad’ ones; and
offering them ‘balanced’ performance incentives where next to quantitative business targets also the compliance with good client protection practices and the Code of Conduct are rewarded (and the non-compliance sanctioned).

This standard has 3 essential practices:

Essential Practice 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.
Essential Practice 5.C.2: The provider trains all employees on its social goals and on client protection.
Essential Practice 5.C.3: The provider evaluates and incentivizes employees based on social and financial criteria.

Resources for Standard 5C

SPM Essentials #5: Listening to Employees as a Business Strategy

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

Providers should prioritize recruitment of employees who fit your culture and values and are aligned with their mission and social goals. This requires identification of personal qualities, relevant work experience and educational background that suggests commitment to the social goals as well as the social performance-related responsibilities for each position (refer to this table with examples of Employee Positions and Related SPM Duties). For example, good field staff candidates might have a strong sense of responsibility for helping vulnerable people, problem solving abilities, good teamwork skills, and integrity. Candidates need to be screened for their ability to carry out their performance-related responsibilities. Relevant experience might include work in communities with similar target clients, customer service responsibilities, travel to rural areas, ability to speak the local language(s), etc. In the case of good candidates for accounting positions, they need to have strong financial literacy, diligence and affinity with numbers, computer skills, and integrity.

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 its 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.

In addition to requiring employees to sign the Code of Conduct (Ethics), providers should develop a “commitment contract” which states that a job candidate will do his/her best to carry out their social goals.

Field examples

VisionFund International Recruits Local Loan Officers Using Outreach Events

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

Indicator: SPI5 Entry/ SPI5 FULL

Building an institutional culture that is aligned with the social strategy starts with the hiring process. Recruitment procedures should screen candidates who are aligned with the institutional 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, and support their integration as clients.

Scoring guidance

Score ‘yes’, if the provider has a systemic recruitment process in place that
1. encourages candidates from the same region/culture of the target clients to apply,
2. assesses each candidate’s work experience and personal qualities related to the target clientele, and
3. the recruitment assessment grid captures specifically test work and personal experience related to target clients.
Score ‘partially’, if the three requirements are met only partly. For instance, (i) there is little encouragement for candidates from the same area/culture of the target clients or (ii) or the assessment criteria for work experience and personal qualities have little relevance to the target clientele (iii) the recruitment gives limited weight to test work and personal experience related to target clients.
Score ‘no’, if there is no systemic recruitment process or two of the three requirements are largely not met. For instance, (i) no effort is undertaken to encourage candidates from the same area/culture of the target clients and/or (ii) the assessment process of the candidates is informally or anecdotally and/or (iii) the recruitment does not consider test work and personal experience related to target clients.

Sources of information

HR Policy & Procedures Manual.
Recruitment interview guides and tests.
Interviews with HR manager, HR staff in charge of recruitment, and different newly recruited employees (women and men with office and field functions).

Evidence to provide

Specify the key selection criteria for candidates that are related to the target clientele.
Elements in the recruitment procedure that 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.

Indicator: SPI5 FULL

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

Score ‘yes’, if the provider has a systemic recruitment process in place that
1. exposes each candidate to its social strategy and goals,
2. tests each candidate’s motivation in achieving the social goals, and
3. the test result forms an important criterion for the selection process.
Score ‘partially’, if the three requirements are met only partly. For instance, (i) little information about the social strategy and goals is provided to the candidates or (ii) the testing of the candidates’ motivation in achieving the social goals is rather shallow or (iii) the test result is not an important selection criterion.
Score ‘no’; if the provider has no systematic recruitment process that tests each candidate’s motivation in achieving the social goals or does largely not meet two or all three requirements.

Sources of information

HR Policy & Procedures Manual.
Recruitment interview guides and tests.
Interviews with HR manager, HR staff in charge of recruitment, and different newly recruited employees (women and men with office and field functions).

Evidence to provide

Specify the key selection criteria for candidates that are related to their motivation to achieve the social goals.
Describe how candidates are tested about their motivation to achieve the social goals.

Resources for indicator 5.C.1.2

Examples of Employee Positions and Related SPM Duties

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.

Indicator: SPI5 FULL

Building an institutional culture that is aligned with the social strategy is based on the capacity of the client-facing staff to serve well the target clients. Integration procedures and induction training for new client-facing staff should check and strengthen their capacities in:

understanding well client needs and priorities,
communicating clearly and respectfully with all clients, and
be committed to excellent client service whereby complying fully with ‘good’ client protection practices and the Code of Conduct.

Scoring guidance

Score ‘yes’, if the provider has a systemic inception training process for client-facing employees in place that comprises:

1. on-the-job learning in serving target clients,
2. coaching support from a senior staff or manager, and
3. an assessment of how the new employee is able to serve adequately the target clients.

Score ‘partially’, if the three requirements are met only partly. For instance, (i) on-the-job learning is limited as the new recruits must assist senior staff rather than serving directly clients or (ii) senior staff or managers have limited time for coaching the new recruits or (iii) the assessment how the new recruits are able to serve adequately the target clients is mostly informal.
Score ‘no’, if there is no inception training process for client-facing employees in place or two of the three requirements are largely not met.

Sources of information

HR Policy & Procedures Manual.
Inception training guidelines for front-line employees.
Interviews with HR manager, HR staff in charge of recruitment, and different newly recruited client-facing employees (women and men).

Evidence to provide

Specify the elements in the integration procedure that allow 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.

Indicator: SPI5 Entry/ SPI5 FULL/ CP FULL/ Progress CP indicator

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 and declare their commitment to align with its rules by signing it.

Scoring guidance

Score ‘yes’, if the provider has a systemic process in place to ensure that all employees comply with its Code of Conduct by:
1. having formulated it in a clear language that is comprehensible for all employees,
2. offering practical training on how to follow it to all new employees and annual refresher trainings for all employees,
3. requesting all employee to sign it (best when also signing the employment contract), and
4. controlling compliance regularly as part of employee performance evaluations and branch audits.
Score ‘partially’, if one or two of the four requirements are met only partly. For instance, (i) the Code is vaguely or incompletely formulated or (ii) training on the Code is not practical enough to guide well the employees on how to comply with it or (iii) not all employees sign the Code or they sign their employment contract only where they declare to abide by the Code or (iv) the employee performance evaluations do not cover explicitly the compliance with the Code.
Score ‘no’, if there is no process in place to ensure compliance with the Code or most/all employees do not sign the Code or most employees do not understand well the Code or are not even aware of it.

Sources of information

HR Policy & Procedures manual / Code of Conduct
Sample of employee files
Interviews with HR manager and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Analyze the Code of Conduct whether it is clearly formulated and complete.
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 Conduct.
Describe the training materials on the Code of Conduct and the frequency of training.

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 and client protection

Responsible providers must ensure that all their employees - and notably all client-facing employees – do not ‘harm’ any client by complying fully with the client protection standards. The providers with a social strategy must, in addition, ensure that all their employees achieve their social goals and targets so that clients do ‘benefit’ from using the products and services offered. This requires that the HR development system performs the following three essential functions:

offer induction and subsequent regular practical training on how to (i) adopt ‘good’ client protection practices (and avoid ‘bad’ ones) and (ii) achieve the social goals and targets;
evaluate all employees’ (notably all client-facing employees) (i) compliance with client protection and (ii) achievements of their social targets as part of their regular performance evaluation (jointly with their business/financial targets);
reward high levels of (i) client protection compliance and meeting social targets as well as sanction (i) non-compliance with client protection and (ii) non-achievement of social targets (refer to EP 5.C.3).

The above requires the identification of the expected staff behaviors regarding client protection and the specific social performance functions of each employee. The former should be defined in the Client Protection Policy spelling out ‘acceptable’ and ‘non-acceptable’ client protection practices and partly in the Code of Conduct. The specific social performance functions per type of position (e.g. loan officer, teller, branch manager, etc.) should be defined in the respective job descriptions. The identified (good and bad) client protection practices and the specific social performance functions together with the social goals form the contents for the practical induction and refresher trainings for all employees on client protection and social performance management. They should be the basis for choosing criteria for the regular performance evaluations of all employees so that employees are evaluated in a ‘balanced’ way on their compliance with client protection and meeting their social targets next to their business/financial targets. This may be initially challenging, if the employees are accustomed of being evaluated only on business/financial performance targets. It is important that employees have first been trained on the social strategy and their social performance responsibilities.

Train Employees to Protect Clients and Avoid Aggressive Sales Techniques

Providers should train their client-facing employees on how to sell 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.” Providers should thus clearly define what “aggressive sales” look like in their particular socio-cultural context and how to monitor and sanction employees who practice “aggressive” sales techniques, like:

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 towards 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”).
Requiring all group members to renew a loan, with no option for one of the members to opt out.

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. Providers must ensure that sales techniques—client recruitment, the sales pitch, and promotional materials—will not mislead clients about the benefits of a product. They must train their client-facing employees on how to:

talk about the products in a way that clients understand,
ask the right questions so that they can point individual clients to the most appropriate products,
sell a product by highlighting how it will be useful for the client instead of badgering him/her into signing a contract, and
to respect the client’s right to refuse a product.

Providers should ensure that their agents or third-party providers (e.g., mobile agents, insurance companies, money transfer companies) comply with good client protection practices, including on the use of “responsible” sales techniques. This starts with the careful selection of agents or third-party providers who respect client protection standards (and thus train their staff on how to comply with them) followed by related contractual obligations of third-party providers to comply with client protection standards and eventually joint staff trainings on client protection and compliance audits.

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.

Indicator: SPI5 FULL

Training imparts new skills, ensures a shared culture, and promotes commitment to the social strategy. Larger and fast-growing providers or those with high staff turnover (>20%) need more frequent training so that all new employees have a shared understanding of their roles and responsibilities, including their social performance functions and social targets. Refresher trainings on the social goals and targets should be offered to all employees at least annually to ensure that the social performance concepts are reinforced, and new trends, policies, and practices related to social goals are presented and discussed

Scoring guidance

Score ‘yes’, if the provider has a systemic social performance training process in place in terms of
1. induction training for all new employees on the provider’s social strategy and goals and the employees’ specific social performance functions and targets and
2. at least annual refresher trainings for all employees
3. both with a hands-on training methodology focusing on practical case studies and role games so that
4. most/all employees understand well the topics.
Score ‘partially’, if one or more of the four requirements are met only partly. For instance, (i) the induction training and the refresher trainings cover insufficiently the employees’ specific social performance functions and targets or (ii) the training methodology focuses on lectures with little active involvement of the trainees or (iii) many employees have little understanding on the topics.
Score ‘no’, if there is no social performance training process in place and/or two or more of the four requirements are largely not met.

Sources of information

HR Policy & Procedures manual / Code of Conduct
Induction and refresher trainings conducted during the past 12 months and training materials on the social strategy, social goals, and the social performance functions and social targets of staff.
HR reports on induction and refresher trainings on the above topics and training evaluations during the past 12 months.
Interviews with HR manager, Training manager, and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Refer to inception and refresher trainings and training evaluations on the above topics during the past 12 months.
Describe the training methodologies and training materials for trainers and trainees.
Refer to the level of understanding on the above topics from the sample staff interviews.

Resources for indicator 5.C.2.1

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

Indicator: ALINUS/ SPI5 Entry/ SPI5 FULL/ CP Commit/ CP Full

Indicator: ALINUS/ SPI5 Entry/ SPI5 FULL/ CP Commit/ CP Full

Details 5.C.2.2.1/ 5.C.2.2.3/ 5.C.2.2.4: Progress CP indicators

The HR policies on recruitment, employee performance evaluation, and employee training should reflect the client protection standards laid out in the Code of Conduct and in the client protection policies and procedures. Trainings may take the form of formal classroom trainings, on-line learning, on-the-job coaching (notably during the probation period) or may occur during regular branch/regional meetings (as long as there is evidence that client protection issues are addressed).

Scoring guidance

Score ‘yes’, if the provider has a systemic client protection training process in place in terms of
1. induction training for all new employees on client protection and on how to comply with ‘good’ client protection practices and
2. at least annual refresher trainings for all employees
3. both with a hands-on training methodology focusing on practical case studies and role games so that
4. most/all employees understand well client protections.
Score ‘partially’, if one or more of the four requirements are met only partly. For instance, (i) the induction training and the refresher trainings cover insufficiently the ‘accepted’ and ‘non-acceptable’ client protection practices for the employees or (ii) the training methodology focuses on lectures with little active involvement of the trainees or (iii) many employees have little understanding on client protection.
Score ‘no’, if there is no client protection training process in place and/or two or more of the four requirements are largely not met.

Sources of information

HR Policy & Procedures manual / Code of Conduct
Induction and refresher training plans and training material on the social strategy, social goals, and the social performance functions and social targets of staff.
HR reports on induction and refresher trainings on client protection and training evaluations during the past 12 months.
Employee files
Interview with HR manager, Training manager, and different employees (women and men with office and field functions) and at different levels.

Evidence to provide

Specify the elements in the HR policies and training materials that are related to the Code of Conduct and client protection policies (training modules, on-site refreshers, on-line learnings, etc.). Training materials should clearly point out the standard of conduct staff is expected to follow.
Specify when new and existing staff receive training over the last 12 months (ex., induction training, on-the-job coaching, ad hoc sessions).
Describe the training methodologies and training materials for trainers and trainees.
Refer to the level of understanding on client protection from the sample staff interviews

Field examples / Guidance for implementation

For 5.C.2.2.1: Applies to loan officers, field executives supervising several loan officers, branch head of credit, branch manager, head office specialists on lending and loan workout management, and internal auditors.
“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: Applies to all client-facing staff, notably those with sales functions, and internal auditors.
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.
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: Applies to all client-facing staff, notably loan officers and those with sales functions, and internal auditors.
The provider trains all client-facing 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.
Examples: Provider Y trains its loan officers to be able to read out slowly the product 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: Applies to loan officers, field executives supervising several loan officers, branch head of credit, branch manager, head office specialists on lending and loan workout management, and internal auditors.
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: Applies to all employees.
Providers must train all new and existing employees on (I) its confidentiality and data sharing policies, (2) fraud risks, identification, and reporting, and (3) on how to communicate with clients on data 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).

For 5.C.2.2.6: Applies to all client-facing employees and internal auditors.
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

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 (and also agent, notably if the agents are contracted directly by the provider) performance communicate an important message to staff and clients about what providers value. If providers claim to have social goals, but incentivize financial performance exclusively, employees have no choice but to deprioritize social performance. For example, it is safe to assume that a “zero tolerance for arrears” incentive policy will lead some loan officers to use unacceptable collections practices. A manager will spend time mentoring staff, only if this is part of his/her KPIs. To design and implement an employee performance management system that includes social and financial goals, providers must first define the behaviors and achievements they want to promote. This depends on their social goals, like respectful treatment of clients, good product fit, and accurate data collection. For example, do they simply want field agents to recover the maximum number of overdue loans possible, or is respectful treatment of delinquent clients also a goal? Do they 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 clients buying 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 is also accurate?

A good staff (and also agent) incentive system will:

Balance social and financial goals. Integrate “social” variables into the incentive system without exceeding the recommended five variables that keeps the system manageable and uncomplicated(refer to Examples of Social Variables for Incentivizing Employees in the resources section). The weights 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 condition (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, the desired customer treatment can be emphasized 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 always below 50%, though 20 to 30% is a better limit for preventing poor practices such as aggressive sales or recovery tactics. Field officer caseloads limits are important to avoid clients suffering under staff with too-high caseloads (see Guidelines for Caseload Limits). A cap on disbursement/sales incentives is recommended to reduce the incidence of overly aggressive sales practices. For example, a provider 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. Providers should track variables and metrics in the MIS or other reliable system that is perceived as transparent and fair by employees.
Set attainable goals. providers should aim to set conditions that qualify at least 70% of employees for rewards. Especially when introducing new variables or weights into the incentive system, providers should target more employees achieving the reward rather than fewer. Over time, they will be able to gauge whether attainable goals were established and the incentive structure can be adjusted 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 so that both would be working towards the same goal of customer retention.

Providers should invest time in communicating to employees the rationale behind any changes of the incentive system and how it works. They should prepare an organization-wide training before implementing a significantly changed system or if many employees do not fully understand the current one. Such training should be complemented with short, simple employee guides that explain the policies and provide sample calculations.

Senior management and Internal Audit/Risk Management should review annually the incentive system. They 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 senior 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.

NOTE: 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).

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.

Indicator: ALINUS/ SPI5 Entry/ SPI5 FULL/ CP Commit/ CP Full

Detail 5.C.3.1.1: Advanced CP indicators

In order to signal the importance of the Code of conduct, social goals, and client protection, employees (and agents who are directly contracted by the provider) 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

Score ‘yes’, if the provider has a systemic employee (and also agent) performance evaluation and incentive process in place that
1. evaluates at least annually the
  - [Detail 5.C.3.1.1] client protection compliance with criteria like adherence to the Code of Conduct, treating clients respectfully and without discrimination, achieving high portfolio quality, etc.
  - [Detail 5.C.3.1.2] social performance with criteria like ability to recruit target clients, quality of non-financial services provided, quality of data collection, etc.,
2. offers incentives accordingly in line with the results of the performance evaluation,
3. is reviewed annually by senior management and Internal Audit/Risk Management, and
4. the consistent implementation being checked by HR control and HR compliance audits.
Score ‘partially’, if the four requirements are met only partly. For instance, (i) the evaluation criteria are too vaguely defined for
- - [Detail 5.C.3.1.1] client protection compliance
  - [Detail 5.C.3.1.2] social performance,
    or (ii) the incentive system is (still) largely focused on business/financial criteria or (iii) the performance evaluation and incentive systems are review only every two years or (iv) the HR control is more ad hoc and HR compliance audits capture insufficiently the employees’ (and agents’)
  - [Detail 5.C.3.1.1] client protection compliance
  - [Detail 5.C.3.1.2] social performance.
Score ‘no’, if there is no employee (and agent) performance evaluation and incentive process in place and/or two or more of the four requirements are largely not met.

Sources of information

HR Policy & Procedures manual / Code of Conduct / Client Protection Policy
Staff performance evaluation criteria related to client protection compliance and social performance.
Criteria of incentive systems per main type of position (notably loan officer, field executive supervising several loan officers, client adviser, branch manager) related to client protection compliance and social performance.
Employee files
Interviews with HR manager, Operations Manager, different employees (women and men with office and field functions) and at different levels, and agents (who are directly contracted by the provider).

Evidence to provide

Describe the performance evaluation criteria related to compliance with client protection (like adherence to the Code of Conduct or living the provider’s values) and social performance (like meeting social performance targets) per main type of position and explain their weights in the overall performance evaluation.
Specify the main points of the staff incentives policy and the incentive system per main type of position
Explain how and when the staff performance evaluation and incentive systems were last reviewed.
Describe the HR control process and the contents HR compliance audits related to client protection compliance and social performance as part of the staff performance evaluation and incentive systems.

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

ESAF Rewards Staff for Achieving SPM Targets

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.

Indicator: SPI5 FULL/ CP Full

Market conditions evolve, with competition, regulation, political and economic fluctuations. Providers must revise targets and incentives with changing market and internal (employee growth, new products, etc.) conditions to keep them appropriate and realistic. For example, if a provider incentivizes loan officers with PAR30 <5% and productivity targets of 250 individual loan clients with a sectoral average of 100 individual loan clients per loan officer, then the incentive scheme might be pushing loan officers 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 and/or the provider.

Scoring guidance

Score ‘yes’, if the provider has a systemic incentive review process in place that
1. checks for (actual and potential) negative consequences for clients like aggressive sales, client mistreatment, fraud, etc.
2. and employees as reflected by high staff turnover
3. at least annually and
4. takes remedial actions to address negative consequences identified.
Score ‘partially’, if the four requirements are met only partly. For instance, (i) the review is quite shallow without any client research undertaken or (ii) it focuses on the employees with little attention given to the clients or (iii) the last review was conducted two years ago or (iv) too limited and/or too late remedial actions were undertaken to address negative consequences.
Score ‘no’, if there is no process of reviewing the incentive system and/or two or more of the four requirements are largely not met.

Sources of information

HR Policy & Procedures manual.
Incentives policy and incentive systems per main type of position (notably loan officer, field executive supervising several loan officers, client adviser, branch manager).
Latest client research that reveals negative consequences like latest client satisfaction surveys, client exit interviews, etc.
Latest two employee satisfaction surveys.
Interviews with HR manager, Operations manager, and different employees (women and men with office and field functions) and at different levels, and agents (who are directly contracted by the provider).

Evidence to provide

Specify how and when the incentive systems per main type of position were last reviewed and whether they are reviewed regularly or on an ad hoc basis.
Describe the negative consequences identified for client and employees, if any, and what actions were undertaken to address them.