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Reward and the HR

Practitioner

Andrew Walker

Croner RewardApril 2009

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Subjects covered

Some background

The general landscape and some specific research

Where does reward fit in right now?

Q&A

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Croner Reward – An Overview

Founded 1972

Part of Wolters Kluwer (UK) Ltd since October 2001

Researchers, Publishers and Advisers

Publish 60 – 70 surveys each year

Undertake 100 – 120 Job Evaluation projects

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Reward services

SalarySearch

Research

Consulting

Surveys

Intellectual Asset

Online

E-commerce

Job EvaluationPay and GradingExecutive RemunerationOther ConsultingMRR

Overseas pay

Company Car

Benefits Research

Regional

National

Sector Specific

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The Landscape

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Important pressures on pay rises

Upward Pressures

Inflation

Company Performance

Recruitment Problems

Retention Problems

Industry Pay Pressure

Union Recognition

Skill shortages

Equal Pay

Downward Pressures

Inflation

Company Performance

Problems raising prices

Global Competition

Equal Pay

Economic climate

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The Landscape – Autumn 2008

Survey of 150 employers

Specifically asked about the landscape

Conducted in a 48 hour period in September 2008

A real snapshot of what employers think

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The Landscape

Based on their own experience, —83% said inflation was applying upward pressure to pay right now—36% told us that company performance was having a down ward

effect on pay—Roughly half felt that skill shortages were having an upward effect,

but the remaining 50% mostly saw this as having no impact currently—79% said that trade union activity was having no effect either way on

pay setting in their organisation

Thinking about what they have heard anecdotally,—92% thought inflation was affecting others by applying upward

pressure—44% thought that company performance was pushing pay settlements

down—67% thought that trade union activity was pushing pay levels up in

other organisations

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The Landscape

Asked about their last review—Reasonably even split between more, less, the same—Average 3.92%—Nearly half budgeted for the same as previous year

Asked about pressure on pay 42% said they are under pressure to give more, although 41% don’t know yet for sure

Asked about next pay review—44% would the same as last year—25% would give less—Average 3.85% predicted—Only 30% would give more in the next pay round

So despite all of the indicators, more of which pointed to upward pressure, most employers gave the same as or less than they did the previous year

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The Landscape - Now

Survey of same employers

Asked broadly the same questions about the landscape

Conducted in a 1 week period in April 2009

A new snapshot of what employers think

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The Landscape - Now

Based on their own experience, —43% still said inflation was applying upward pressure to pay right now—38% told us that company performance was having a downward effect

on pay—Roughly two thirds feel that skill shortages are having no impact on

pay levels currently—80% said that trade union activity was having no effect either way on

pay setting in their organisation —Close on 50% state that “general market forces” are applying

downward pressure

Thinking about what they have heard anecdotally,—Only 26% think inflation is affecting others by applying upward

pressure, down from 92% in September—Less than 60%% think company performance is pushing pay

settlements down—Around half think that trade union activity is pushing pay levels up in

other organisations, compared to nearly 70% last time

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The Landscape - Now

Asked about their last review—Still reasonably even split between more, less, the same, but with a

spike in the “less than” group—Average still at 3%, but that's down from 4% last time—Nearly half budgeted for the same as previous year

Nearly a quarter implemented a 'pay freeze' and 2% gave a pay cut.

50/50 split on paying bonuses.

Where there was a pay cut, it applied to all staff

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The Landscape - Now

Some new trends emerging—65% have implemented a recruitment freeze—Nearly 60% have cut jobs—A further 30% have stopped overtime and/or cut shifts

Looking forward—62% are planning to cut jobs further—Over 50% plan to stop overtime and /or cut shifts—The recruitment freeze remains in place for the 60% for the time

being

Challenges—66% claim that a drop in revenues is their biggest challenge right now—But a third say that they are at risk because their own customers have

gone out of business—Nearly a third say their biggest issue is to carry out a restructure or a

downsizing

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The Landscape - Now

“Approach was - if we want to be here tomorrow we need to bite the bullet now”

“I think some companies are using the climate to reduce salaries when there is no real need for them to do so.”

“It's mostly about sales If no one is buying companies will experience a very tough time.”

“The single most significant factor is really the uncertainty about how things are going to impact us. We provide international / expatriate health insurance, and so far seem to be riding the storm.”

“impact of NMW on our lower paid workers”

“No use of agency staff”

Possible actions

Pay freeze – simply stop giving pay rises

Pay pause – commit to current rise, but only when appropriate

Pay cut – Reduce pay for same hours

Reduce hours – cut overall paybill costs

Reduce or stop overtime

Cut shifts

Freeze recruitment

Redundancy

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So where does this take us in managing reward?

Two Questions

What is your biggest strategic reward challenge right now?

What is currently your biggest day to day reward issue?

Reward Strategy -A Simple Definition

“ A Reward Strategy is a means of using base pay and/or other forms of reward to promote positive behaviours and values which contribute to the achievement of the organisation’s corporate goals.”

Operational issues

Historically cumbersome pay structures

Inconsistent and badly designed

Designed to give control over progression, not flexibility

Not integrated into business

Lack of engagement

Often complex and poorly understood

Business issues

An HR/Personnel/Finance function

Paper driven

Too much discretion

Lacking transparency

Unequal

Opportunities and Challenges

The drivers of change?

What are the opportunities?

How big are the challenges?

How might these impact on reward systems and strategies?

What are the Drivers of Change ?

Technology

Thinking and approach

The world in which they and we operate

Legislative framework

Opportunities and Challenges

• Better performance

• More direct involvement

• Business integration

• Improved management

• A genuine ROI model

• Investment

• Acceptance/Acceptability

• Change management

• Equality

• Time and resource – in

house vs outsourced

Impact

A new way of working

More business focused

Flexible without being chaotic

Tighter without being constrained

Two Examples

Job Evaluation

Users wanted relevant, flexible tools

Transparency was crucial

Not a “black box”

Simplicity the watchword

Job Evaluation

Moves away from vast structures

Local system, local impact

But integrated, flexible, responsive

A business tool

Job Evaluation

Job Evaluation as a tool, not a God

Felt Fair, Consistent, Defensible

Linked to market benchmarking

Informed decision making

Equality

Job Evaluation

Technology allows for this

Thinking has enabled the process

As the world gets smaller, the links get bigger

Equality and transparency

Job Evaluation

PC based and online systems

Paperless Job Descriptions

Roles and competences

Tailored factors

Linked directly to personnel records and other systems

Not a reason not to do something

Where does this lead?

Tension between “off the shelf” and flexible systems

Pay systems that reflect reality

Enable companies to pay on contribution, not service

Better visibility on equality

Salary Surveys

Reflect the reality in the market (s)

Map to organisational shapes and structures

Have to cope with new and emerging skill sets, jobs and industries

Are dynamic and evolving

Whilst remaining consistent

Salary Surveys - Challenges

Job titles – new or just different

Benchmarks must be responsive

More “special” surveys

Sample sizes change

Data groupings alter

Participation model has to evolve

Environment

Less about base pay

Measuring the mix

Best practice – is there one ?

Technical design – broadbanding, competencies

How does it all fit together?

Equal pay issues

Technology

Allows for more immediate participation

Allows for faster processing

Gives more flexible/relevant outputs

Offers alternative delivery channels

Also gives rise to alternative sources

Face validity issues

Where does this lead?

Dilution in survey value

Time/cost/benefit

Smaller, more focused surveys

Spreadsheet, CD and Internet delivery

E-commerce – data as a commodity

Consider this

With flexibility comes responsibility

Have contingency plans

Do not be afraid to react to change

The Last Word

The drivers allow real change to take place

More flexibility?

More direct participation

Here to stay

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Question and Answer

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Reward

April 2009