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Recently in Reward strategy Category
XpertHR spent the past two days at the informative CIPD Reward Conference, catching-up on all the latest developments in the reward field and listening to speakers share their experience of reward challenges such as how to reward in a time of austerity, how to link reward to the business strategy and how to ensure that linking pay to performance works.
With so much to take from the two days, we thought it would be useful to provide some additional resources around the themes covered on the two days. So here is a quick run-through of the sessions covered, and further reading on XpertHR.
Reward and the year ahead. The CIPD presented findings of their 2012 reward management survey. The key findings are presented in our blog post, while the full report can be downloaded here.
- XpertHR's pay forecast survey, conducted in February 2012, also looks at the pay prospects for the year ahead, while our reward priorities 2012 article looks at what reward professionals are focusing on this year.
Continue reading CIPD Reward Conference - additional XpertHR resources.
The latest annual Reward Management Survey from the CIPD suggests that employers' reward spend is not fully understood or appreciated by staff due to a lack of education and communication. The survey notes that more than one-third of companies plan to increase their spend on employee benefits this year, but Charles Cotton, rewards adviser at the CIPD, says that "if employees don't understand or value what they are getting, these employers are not likely to reap the competitive advantage they are seeking".
It found that just 17.8% of employers use total reward statements and only one in five offer financial education to help employees understand the value of their reward package.
The survey also hints at the pressure organisations' reward budgets are currently under:
- More than one-third of companies plan to increase their spend on employee benefits this year, and for more than half of these this is due to increases in benefits costs.
- Over the past year pay review outcomes have been driven by ability to pay, inflation and market rates.
- A large proportion of respondent organisations are aiming to pay at or above the median market rate in order to attract, retain and engage employees.
- There has been a slight increase in the use of more flexible performance-related bonuses against a slight decline in performance-related pay rises.
- Around half the organisations surveyed will need to make changes to their pension arrangements as a result of auto-enrolment.
The CIPD research complements the recent XpertHR article on communicating benefits [£], which noted that "when employees have a good understanding of what their organisation is offering them, this can make a real difference to their engagement and commitment levels."
There is definitely a consensus that in a time of restrained reward budgets, the first way to get the most out of your reward spend is to ensure employees know the value of what they are getting.
The CIPD's report is based on a survey of 455 organisations. The full report can be found on their website.
According to the latest XpertHR research, more than half of organisations use market-linked pay. What we don't know, however, is why organisations use market-linked pay, for what purpose, and how they go about it.
In order to answer these questions, and more, XpertHR is conducting a survey of market-linked pay.
We would be very grateful if you share your organisation's experiences in our confidential survey.
In return for completing the survey, we will provide you with a free copy of the research report.
The survey closes on Friday 2 March.
Today's High Court ruling that the government acted lawfully in breaking the link between public sector pension increases and the Retail Prices Index could have a significant long-term impact for pay setting.
The switch from RPI to the Consumer Price Index will most likely save the government a considerable sum of money since RPI has historically risen more rapidly than CPI, though it is by no means guaranteed that this will always be the case.
Continue reading Pension ruling could impact on pay rises.
Almost one in five (78%) reward professionals are concerned about "the ability of their organisation to manage reward risks", according to the Chartered Institute of Personnel and Development's (CIPD) annual Reward Risks survey (external website).
Operating in a volatile economy, reward practitioners and consultants are concerned by constrained budgets; communication of rewards is also a challenge.
In the CIPD's top 10 ranking, the concern that "employees don't appreciate value of total reward offering" took the top spot. This was followed by professionals being "unable to increase pay levels due to budget constraints" and "line managers having a poor understanding of reward".
Continue reading Despite risks, reward packages remain popular.
The key objectives of performance-related pay schemes - to improve performance at both individual and organisational level - are met only partially in most cases, according to the latest XpertHR research, and fewer than a quarter of schemes meet these objectives in full.
When asked about the effect on the performance of employees, survey respondents reported that performance-related pay schemes had the greatest positive effect on staff that were already high performers, with only a small improvement, or no effect, on average and poor performers. A couple of respondents even felt that the scheme had the effect of worsening the performance of these groups.
More than six in 10 respondents had encountered the problem of pay awards in their scheme being too small to motivate staff.
Among the surveyed organisations that do not use performance-related pay, company tradition and culture are often cited as the reasons, while other employers prefer to use bonus schemes to reward staff.
The findings are based on a survey of 152 organisations, of which just over half (51.3%) operate performance-related pay schemes for some or all of their employees. The research report is available to XpertHR subscribers, and the full data can be accesssed by XpertHR Benchmarking subscribers.
When asked about the effect on the performance of employees, survey respondents reported that performance-related pay schemes had the greatest positive effect on staff that were already high performers, with only a small improvement, or no effect, on average and poor performers. A couple of respondents even felt that the scheme had the effect of worsening the performance of these groups.
More than six in 10 respondents had encountered the problem of pay awards in their scheme being too small to motivate staff.
Among the surveyed organisations that do not use performance-related pay, company tradition and culture are often cited as the reasons, while other employers prefer to use bonus schemes to reward staff.
The findings are based on a survey of 152 organisations, of which just over half (51.3%) operate performance-related pay schemes for some or all of their employees. The research report is available to XpertHR subscribers, and the full data can be accesssed by XpertHR Benchmarking subscribers.
Yesterday I was at the CIPD's annual reward conference. After an entertaining opening session on the economy from Dennis Turner, chief economist at HSBC, the day moved on to one of its key themes - how to use reward to attract and retain talent.
Gilly King, head of HR at Manchester City Football Club, explained how continuing to pay top money to buy in the top players is not sustainable for the club, so it is now investing in its academy to develop top footballers from as early as age six. Deborah Rees from Innecto Reward Consulting used the football analogy to describe three different types of workers, and suggested different reward approaches for each:
- Academy - high potential employees. Not all of this group will remain with you, so best to focus on more short-term reward, perhaps milestone/project based.
- Reserves - those with some experience. Link their reward to their achievements - bonuses should align with what you are asking them to deliver. Maximise your return on investment by moving them to areas of the business where they could be used best.
- First team - executives or heads of departments. Reward for this group should be longer-term focused, and largely linked to company performance.
Continue reading Tailor your reward package to retain top talent, says CIPD conference.
The average FTSE 100 CEO total pay is worth 145 times the average worker's salary, but this could rise to 214 times by 2020, according to the interim report of the High Pay Commission.
The report highlights the speed at which incomes at the highest end of the distribution are increasing. Between 1996/7 and 2007/8, the top 0.1% of earners saw their incomes grow by 64.2%. But those at the 50th percentile experienced only a 7.2% increase. If this pace of growth continues, the top 0.1% will be earning around £900,000 by 2020, whereas someone on the 50th percentile will see an increase from £17,100 to £18,700 a year.
The High Pay Commission, "an independent inquiry into high pay and boardroom pay across the public and private sectors in the UK", will run for one year from November 2010. The interim report looks at the current debate on pay; the final report (due to be published in the autumn) will present detailed policy proposals.
Continue reading Action needed to stop runaway executive salaries.
Last week I attended the Osney Media Reward and Benefits 2011 event. One of themes I took from the day was the challenge employers are facing when it comes to communicating with employees about reward. Several of the speakers shared their experiences about what works best for them - but as they work in different businesses, their approaches necessarily have some differences.
The first point to note is to make sure you know what your message is. Richard Beeby, group reward manager at Comet, said that they had been honest to their employees that their pay levels have been affected by a two-year pay freeze. Comet's approach was to highlight that reward is more than just base pay, and actually when they looked at their whole reward package they found they were the second highest payer in their sector.
Continue reading Communicating reward - what works?.
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