Well, for forward-thinking organisations it will be a year to be bold and make a play. With a stagnant economy, the last few years have seen little movement on pay and reward with token, below inflation increases the norm. Lack of confidence in the economy has resulted in nervousness among business leaders to invest in their people. Employees have been equally nervous about ‘rocking the boat’ and changing jobs so the general lethargy on both sides has been well balanced. But, with higher than expected growth in the economy in 2013, confidence has begun to be restored, employees are dusting off their CVs and, depending on which opinion survey you’ve read, most of our workforce are going to be looking for pastures new. Business leaders will act responsibly and keep pay settlements low but the smart businesses will be acting strategically and creatively to reward their employee’s loyalty and retain key people.
A Year for Strong Statements
‘We’re a great organisation to work for because we’re ethical and good’.
Companies such as H&M have been very public with their move to provide employees and suppliers with a living wage. This is a strong statement to make about your intent and ethics and resonates well with the younger generation of ethically minded employees. When you aren’t able to increase pay, making your employees feel good about working for you has huge value. This is set to increase this year with the Living Wage Foundation stepping up its campaign and gaining in popularity.
‘We’re all in it together’
A message conveyed by many businesses recently with the increasing prevalence of universal benefits. Fewer businesses are keeping their tiered approach based on level and grading. Working environments with open plan offices, flat structures and greater autonomy will continue to provide the necessary challenge and job satisfaction that employees are looking for and again convey a similar message.
Ringing the Changes
We’ve seen a real shift in attitudes over the last couple of years with the increase of Gen Y employees within the workplace. They’ve brought with them a new set of demands and expectations that are driving new business practices: flexible working for all employees and not just new mums, sabbaticals that you don’t have to wait 10 years for, personal development and education that isn’t reliant on being directly relevant to your role and a focus on corporate social responsibility and volunteering.
Although driven by Gen Y they are the unspoken wishes of many employees and have been a refreshing and welcome addition to business culture. This trend will continue as it provides a great way for businesses to differentiate themselves and most of these changes are non-monetary – very attractive during these times.
I’ve talked about universal benefits but there is another approach to benefits that is set to increase and that’s ‘life-stage’ benefits. These are flexible benefits based on the stage of life of the employee – such as graduates, families or empty nesters. These benefits are contextual and relevant and so make them more valuable to the individual as well as reducing costs and wastage.
Loyalty Pay Back
With average pay settlements this year between 2.5 and 3%, rewarding loyalty during tough times is a challenge. A move from ‘across the board’ pay rises to more tactical ones aimed at retaining high performing and valuable employees is a trend we’re starting to see more of among our clients.
Following some high profile media stories last year, performance related pay will continue to be a strong theme for rewarding high performance this year. We’ll also continue to see metrics for results based on value rather than purely financial; for example customer feedback and service rather than just sales.
This month we see the introduction of the European Union’s cap on bankers’ bonuses. At the same time Barclays has launched role-based variable pay. It’s an interesting move and will mean bonuses are paid based on role and economic conditions but not on individual performance. With the term ‘bonus’ still associated with banking and fat cats, it may be that we see more companies adopting this approach to provide a publicly acceptable form of variable pay.
There’s no doubt that this will be an interesting year for reward. Working with businesses to help them rise to the challenge to stand out as employers will be exciting!
