Salary reviews & employee engagement
Many people around the table face the challenge of tight budgets resulting in pay freezes, low salary increases or small or no bonus pay outs. Typically salary increases around the table seemed to be around the 3% mark. There are very few organisations that consistently pay above market rate and many pay below this so the challenge for them is around how to deliver creative solutions.
Graeme Mooney at United Utilities commented: “The creative use of a small budget is where reward professionals have an opportunity to step in and show how our thought processes and solutions can move us away from how we might have operated in the past.”
There was significant discussion amongst the delegates about the method by which pay awards might be delivered, specifically in respect of consolidated versus unconsolidated approaches. An approach was discussed where organisations might determine the overall cost of providing a consolidated award (i.e. including the flow through costs) and then decide to spend the equivalent cost on one-off/lump sum unconsolidated awards. This uses the budget in a way that can engage employees as their efforts are acknowledged in a lump sum payment, and the business is able to retain the same base pay position without the flow through costs of pensions, overtime, etc, that would normally accompany a standard consolidated pay increase.
There also remains a key challenge in how to attract the right talent into your organisation when you have limited budgets, particularly when you have to go out and search for that talent rather than them coming to you, as this often brings about the need to consider compensating the candidate for incentive arrangements that they would leave behind. Several organisations have decided to pay a lump sum over the first one to two years that is not linked to pension or bonus payments but with a claw-back type arrangement agreed so that the payment acts as a retainer as well as an attractor.
Reward & communications
It was acknowledged by the group that the power of communications is vital in ensuring that you have an informed and engaged workforce. Often there can be an unintended 'smoke and mirrors' approach to reward arrangements, so there is a need for more consistent, ongoing communication throughout the year.
Sally Knill commented: “This really helps when you are in a challenging environment around pay reviews as people understand the wider context and then your engagement levels don’t suffer even if you’re struggling to pay out the salary increases that people might like.”
Communication mechanisms vary between organisations and there is a need to think carefully about how to communicate the message effectively to the employee audience. The delegates employed various methods from group meetings to intranet communications and standard email. It was strongly agreed that a formal management cascade mechanism works well to ensure that the line managers ultimately take ownership for reward communications that impact their team.
The impact on executive pay & visibility
The group discussed a number of approaches to the complexity of benchmarking individual and international roles in particular. The need to be flexible was key to the final solution, as was communicating the parameters to the line managers to ensure that their understanding was aligned.
The proposals from BIS and the ABI regarding the visibility of executive remuneration arrangements were debated in the context of what exactly the proposed 'improvements'[ would deliver in practice. Some were very crude and would not actually support what the group felt was important – namely transparency and alignment to the business objectives. There was also some discussion around non- financial metrics and whether they could be used appropriately.
Is there still a role for voluntary benefits?
There was a strong consensus around the table that funding an affinity site for discount codes could be beneficial, especially for larger employers. The cost per head can be very low to a business while the benefits to the employee can be significant. Employees like to know that their money can work a bit harder for them, and so this could align strongly to the overall reward proposition that a company may want to put forward.
There was further discussion about how, even with the recent changes in tax legislation, these types of benefits could supplement an existing flexible benefits proposition and still be viewed very positively by employees.
The reward breakfast sparked much debate and discussion but there were a few key conclusions that we can draw:
- The role of a reward professional is becoming more vital within businesses, and also more complex. More creative strategies are required to make the most of existing budgets to ensure that employees remain engaged with the business, are rewarded for their efforts, and that key talent is retained.
- Effective communication is vital. This sounds simple enough but all key parties must be accountable for communicating effectively and ultimately the hiring managers must take ownership of key messages and ensure that their teams are fully informed. This is essential in improving the psychological contract between the business and employee. Effective communication which fosters a culture of employee engagement can lead to improved productivity, increased profitability, an improved employer brand and reduced levels of attrition.
- Many employees fail to understand or appreciate their reward package, and its overall value. Many also have come to expect a pay rise or a bonus as the norm, simply for doing their job. Business leaders need to readdress this expectation and reinforce that performance will be rewarded but, particularly in these economic times, a bonus will only be paid for out- performance of targets.
Reward breakfast attendees
The VMA Group reward breakfast was held in conjunction with Sally Knill, Global Reward Director at PZ Cussons. Sally and the team at VMA Group were joined by:
- David Riley, head of reward & benefits, Wm Morrison Supermarkets
- Gayle Yeandle, reward partner, AstraZeneca
- Bryan Jones, head of reward services, Xchanging
- Richard Stocker, performance & reward manager - UK, Vertex Business Services
- Tanya Thornber, European HR director - reward, Kellogg Company
- Ann Williamson, group reward manager, Warburtons
- Katherine Savage, head of reward, Co-operative Banking Group
- Mark Smith, compensation & benefits director - EMEA, Convatec
- Celine Prince, global head of reward, Victrex
- Graeme Mooney, reward manager, United Utilities
- Jane O’Connell, reward & benefits manager, Scapa Group
This was the second event hosted by VMA Group and took place at PZ Cussons Head Office by Manchester Airport. The forum was established to provide an opportunity for senior reward professionals to share ideas and best practice with their peers.
About Sally Knill
Sally Knill is an accomplished reward professional with 16 years' experience working for a variety of organisations including PZ Cussons, Kelloggs, Intel, Oracle and Dell. Sally has significant experience of multi-country operations both in Europe and Asia.
About Graeme Mooney
Graeme Mooney is a Reward Manager at United Utilities Group PLC, covering all aspects of reward management including executive remuneration arrangements. Before joining United Utilities Graeme was a Senior Compensation and Benefits Specialist at Ford Financial Europe in a role covering UK and European employees, having previously held a number of generalist HR roles within Ford Motor Company.