Warren Heaps

Partner

Birches Group LLC (New York)

• Introductions

• Brief Overview of Latin America & Caribbean Region

• Presentation on Brazil

• Open Discussion

• Warren Heaps – Partner, Birches Group (New York)

• Renato Rovina – RewardsLab (Brazil)

• Warren is a Partner with Birches Group LLC in New York.

• He manages Business Development and private sector

outreach, as well as several client relationships.

• Prior to Birches Group, he spent 20 years at Colgate-Palmolive

in various benefits, compensation, HR generalist and global

mobility roles, including HR Generalist for Latin America from

1992-1995.

• From 2001-2004, he was the President of the Latin America

Compensation and Benefits Forum (FMCGs)

• Early in his career, he worked for TPF&C (now Willis Towers

Watson)

• He holds a degree in mathematics from CUNY-Lehman

College

• Contact information:

warren.heaps@birchesgroup.com +1-646-837-5586

www.birchesgroup.com

Renato Rovina

Renato is a senior HR professional with over 18 years of experience. Currently providing consulting services to local and international companies, he is the former head of Human Resources at IRB Brasil RE, Brazil's largest reinsurer. Prior to joining IRB, he led the compensation, benefits, employee mobility and HR MIS functions for Banco Itaú BBA. Renato has also worked for other leading organizations such as Vale, Aon Hewitt and Mercer, where he started his career.

As part of his international experience, Renato has lived and worked in San Juan, Puerto Rico, Miami and Coral Gables, Florida, Stamford, Connecticut and São Paulo and Rio de Janeiro, Brazil.

Renato received a Bachelor's degree in Business Administration by PUC-Sao Paulo, and his MBA from IMBEC-Rio de Janeiro, Brazil. He has attended a management program at the Massachusetts Institute of Technology - MIT and a leadership development program at IMD, Switzerland. He served as a member of World at Work's Global Advisory Council for three years.

Contact informationrenato.rovina@rewardslab.com.br +55 (21) 99850-8667

5

• Growth has slowed

• Inflation has increased

• Conditions in Argentina and Venezuela have been especially

challenging

• Overall growth is

projected to be

1.3% in 2016

• In addition to Argentina

and Venezuela, Brazil is

forecasted at -4.0%

• Middle class has been

growing (now 35%) but

there is still a large

inequality and widespread

poverty in the region

• Commodity prices have

dropped

• Region must focus more

on export markets for

recovery

Source: World Trade Resources, World Bank Group

• Inflation is estimated at

5.8% for the region

(excludes Argentina &

Venezuela)

• Brazil and Colombia

facing higher inflation

• Chile and Mexico stable

• Pressure on wages

• We recommend always

to consider cost of labor,

not cost of living, in

wage setting

Source: World Trade Resources, World Bank Group

Country Professionals Support Staff

Argentina 26.16% 23.96%

Brazil 8.21 7.57

Chile 1.0 1.12

Colombia 6.29 7.15

Mexico Not available

Venezuela 32.48 31.04

• Birches Group surveys cover all of the Latin America region (except

Mexico)

• We capture both incumbent average data and salary range information

• At each percentile, we can show the going rate as well as the range in

the market (we call this the Market Footprint)

• The next chart shows data across the region for one job at the 50th

percentile

This presentation is informational only. It does not constitute legal or professional advice. The authors do not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained in it.

Focus on BrazilHow to adapt to the current Economy

CONTEXT: THE PERFECT STORM

01

16

Overview on Brazil – “A Perfect Storm”

Political Turmoil

Inflation

Decrease in GDP

Record Unemployment

17

3.14

4.46

5.90

4.31

5.91

6.50

5.84 5.916.41

10.67

7.25

5.07

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 F 2017 F

Inflation

Inflation for 2016 to be out of Central Bank’s ‘target range’ (up to 6,5%) after hitting a double-digit mark in 2015.

Inflation Rate

Source: IBGE – Brazilian Institute of Geography and Statistics; 2016 and 2017 Forecast: Boletim Focus Sept. 26, 2016; (Central Bank report based on analysts projections)

%

18

Gross Domestic Product

7.5

3.9

1.9

3

0.1

-3.8-3.14

1.3

-6

-4

-2

0

2

4

6

8

10

2010 2011 2012 2013 2014 2015 2016 F 2017 F

GDP is expected to contract by 3,14%, resulting in two consecutive decreases (2015 and 2016).

% of GDP Growth/Reduction vs previous year

Worst result in 25 years

Two consecutive contractions

- 1st time since 1930

%

Source: IBGE – Brazilian Institute of Geography and Statistics; 2016 and 2017 Forecast: Boletim Focus Sept. 26, 2016; (Central Bank report based on analysts projections) 19

Unemployment

9.5

10.2

10.911.2 11.2 11.3

11.611.8

6

7

8

9

10

11

12

13

January February March April May June July August

Source: IBGE – Brazilian Institute of Geography and Statistics; Sep/2016; trimester data

Unemployment hits highest percentage (11,8%) since 2012 (around 12 million workers affected)

% of Unemployed Workers - 2016%

20

REFLECTION ON HUMAN RESOURCES

POLICIES AND PRACTICES

02

21

Collective Bargaining

8.2 7.8

5.5

9.8 9.5 9.69.8 9.5 9.6

-1.6 -1.7

-4-6

-4

-2

0

2

4

6

8

10

12

August/2015 July/2016 August/2016

Average Increase

Median Increase

Inflation Index

Average - Actual Gain

Median - Actual Gain

Source: FIPE – Fundação Instituto de Pesquisas Econômicas [salarios.org.br]

Employers negotiating increases below the inflation reference index (typically INPC – National Consumer Price Index)

%

22

How HR is navigating the storm

Amplified communication with employees

Support in headcount reduction as payroll remains flat or grows below inflation

Streamline of organizational structure [less levels] and review of cost structures (punctual change of more senior employees)

Review of performance management programs – more direct link with performance and focus on top performers [especially for top executives]

Review of benefit plans (mostly focusing on healthcare plans) and introduction of cost-sharing mechanisms to reduce costs

Improvement of Governance processes due to reputation and corruption risks

23

Employment Protection Program

Government-sponsored “Programa de Proteção aoEmprego (PPE)” – Employment Protection Program (Law 13.189/2015)

According to the government, over 60,000 job posts were preserved in around 100 companies its first year

Reduction in the number of hours worked and salaries for a determined period of time

Specific criteria must be met

Unions need to be involved in the agreement

Reference of companies that are using/used the PPE: Volkswagen, Ford, Mercedes-Benz 24

Government Initiatives / Legislation

New payroll reporting requirements (eSocial) –

effective 2018

Major reforms pending:

Labor law reform

State Pension System (INSS) reform

Review to outsourcing laws

25

DOING BUSINESS IN BRAZIL

03

26

HR Professionals new to the environment

Understand local market data for total compensation competitiveness

Review of “stock” of labor liabilities [court cases] to identify potential flaws to current HR practices

Audit of current job levels/descriptions vs. actual duties performed by employees

27

THANK YOU

28

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Survey Country

Partner Office

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using our Community™ system

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New for 2016:• Bermuda• Belize• Curaçao• Grenada• Marshall Islands• Micronesia• Palau

In 2017:• Cayman Islands• French Polynesia• Turks & Caicos• Vanuatu