By Tom O’Byrne*
It may be a topic in the news right now, but translating all the optimistic talk and the political promises into a set of clear priorities and action steps for HR leaders is still far from certain. And the reason for such a gap with this topic is clear: it is the country, the economy, the geography, the history and the religion that is Iran.
HR professionals headquartered in the Middle East are used to opening up new & emerging markets, and to tackling new challenges. But those same HR priorities and action steps in Iran hinge on a host of multiple and complex variables – not the least of which is the fact that sanctions are still in place and it’s no easy place to do business. HR thrives on data and predictability – and for now, the Iran story is currently short on both.
Even so, companies across the region are telling us they are keen to learn more about an economy that is among the top 25 globally, with its population approaching 90 million having an appetite for re-entering the regional and global economy after a generation of relative isolation.
To assist the business conversations that HR is having with business leaders around the world, Mercer Middle East arranged two forums for our clients to hear more. The half-day sessions were held in November in Dubai, with more than seventy participants over the two days. The attendance and interaction suggested that the appetite for information, trends and perspectives is clearly apparent – and it is not going to dissipate any time soon.
To lead the forums and guide the discussion, we were pleased to have three specialists with a unique and important local perspective to inform:
- Ardavan Mobasheri: founding principal of Corporate Economic Strategy Advisors LLC, former chief economist with the global insurance giant AIG, an adjunct professor in Economics and Finance with the City University of New York, and a finance sector professional for more than 25 years. Ardavan, who now advises international companies, was born in Tehran and educated in the US, where he lives today.
- Dr Amir Kordvani: the head of the Iran desk at the international law firm Clyde and Co., a former lecturer in law at the University of Melbourne in Australia with a PhD in international trade law from the same university, a published academic and, subsequently, a legal practitioner qualified in Australia, the UK and the Middle East. Amir was born in Iran, educated in England and Australia, and now lives in Abu Dhabi.
- Nuno Gomes: principal and head of Mercer’s Information Solutions business for the Middle East. A Portuguese national, Nuno has spent close to eight years in the region advising clients and leading part of the global Mercer business. The compensation & benefits data business is a critical piece of the advice that clients look for in the region, and Iran C&B trends are increasingly critical in that regard. Nuno lives in Dubai and leads a team that manages surveys across the Middle East.
As the first keynote speaker, Ardavan Mobasheri spent time placing the Iran economy and trajectory into perspective. It has, he said, a large, young and educated population – similar in size to Germany, and larger than France, Canada and Australia combined. It has a dynamic economy in line with those in Turkey, Malaysia, Indonesia and Egypt – and one larger than Sweden, South Africa, Argentina or Malaysia. It has an enviable diversified economy as well – built by necessity on local consumption but with 10% of the world’s proven oil reserves and either number one or number two (behind Russia) in the level of proven gas reserves. Its workforce, he noted, has become increasingly self-sufficient under the sanctions regime, and will be – like its political / economic leadership – expecting partnerships, local investments and internal production initiatives over remote foreign investment and hands-off business management. It was reinforced during the Q&A session: Iran wants any business partners to be local in every sense of the word.
So, from the macro, to the micro … what does the job market look like in Iran? What does its HR look like? What do today’s organizations and sectors use for benchmarks? And what might labor cost in this huge and emerging regional – indeed international – economy? The next presentation from Mercer’s IS Head in the Middle East, Nuno Gomes, highlighted some of the information gaps currently present in the labor market in Iran when it comes to recruitment, development and retention. Mercer’s C&B survey for Iran is still nascent and while sanctions restrict access to certain information sources and methodologies, the survey includes information on sectors and companies active in the market – 26 participating companies in total (dominated by the life sciences and consumer sectors, and close to two-thirds dominated by entities headquartered in Germany, Switzerland and France) with 2000 incumbents and 93 unique positions capable of being benchmarked.
The data showed a link between inflation and compensation movements – across the job segments, and particularly prevalent in the higher positions. Specifically, the data suggested a 23% increase in base pay year-on-year for the market overall (in 2015) and a similar substantial move (20%) envisaged for 2016. As context, Mr. Gomes pointed out that Iran pay sat more in line with Pakistan and well below Turkey, Saudi Arabia and the UAE job markets when it came to senior management and executive levels.
Mr Gomes also noted the Mercer Iran survey showed a clear uptick in hiring confidence in 2016 (from an April 2015 viewpoint) compared to the same period 12 months prior. Another interesting insight – and a point of considerable discussion – focused on the substantially higher proportion of base pay relative to other pay elements, when compared to other country and market practices across the Middle East. Differentiating benefits opportunities abound, said Mr. Gomes.
During the final session, Dr Amir Kordvani moved from the data and employment trends to the laws/rules we need to navigate in order to do business the right way – or to get started. He highlighted the practical dimensions to understanding employment in Iran from a legal perspective: tax, licensing, business structures and the existing labor law as it pertained to policies and practices. He proffered the options between local sponsorship and free-zones with the relevant tax incentives for each, and the prevalent behaviour for different types and shapes as it affected employment. Employment of foreign nationals and locals featured heavily as well, as did the issue of capacity-building during the Q&A from the audience. Employment terms and conditions, he said, were a key element to understand and consider as part of entering the Iranian labor market – and a keen understanding of the labor law and its nuances was needed as foreign entities considered the right way for each of them to enter.
The Iranian labor law, compensation and benefits trends, and skills and capabilities in the labor market dominated the Q&A session. Also prominent during the hour-long discussion were questions and issues about people:
- Attracting the right people with the right skills via the right C&B;
- Retaining key talent with something other than C&B as the market heated up
- Competitors looking to steal skilled and relevant talent with big C&B movements
- Understanding the rules and requirements around engaging Iranian nationals versus expats, and
- Learning more about the pay mix traditionally offered in Iran – especially as it applies to the options available to differentiate one employer from another.
The fact that an overwhelming number of participants recommended another gathering in 2016 – once the sanctions regime and the implications of changes became clearer – was a strong signal that information, data and professional networks remain critical to making information-based decisions. All materials presented and discussed with participants were shared afterwards; Mercer also committed to continue the Iran dialogue with and between its clients. And based on the discussions from the diverse sector mix represented at the forums (tourism, infrastructure, energy, pharma, manufacturing, retail, construction, professional services plus many others) the emerging reality upon which every forum participant appeared to agree was not about whether or not their company would want to engage with Iran if and when sanctions relief comes into effect. It was more a matter of how, where, and when.
*Tom O’Byrne heads Mercer’s Market Development team in the region. He attended the Iran forums.