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Reward and the HR Practitioner

Reward and the HR Practitioner. Programme. Background/Context What is reward? Reward for the 21 st Century Some Pay Statistics Questions and Discussion. Pre 1980s Unionisation and collective bargaining is the main dynamic in pay negotiations

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Reward and the HR Practitioner

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  1. Reward and the HR Practitioner

  2. Programme • Background/Context • What is reward? • Reward for the 21st Century • Some Pay Statistics • Questions and Discussion

  3. Pre 1980s Unionisation and collective bargaining is the main dynamic in pay negotiations Pay systems are rigid and highly controlled, and pay is based on employees ‘input’ There is a one size fits all approach, for the entire workforce The winter of discontent is the high water mark of union power In response to economic pressures, a new focus on pay and benefits occurred leading into the 1980’s 1980s A competitive business environment, economic pressures and a demand for value for money, drive changes to pay and benefits Pay becomes more dynamic, with performance related pay, and a move towards cash incentives/bonuses. Demonstrated in the social era of the Yuppie, large city bonuses and apparent ‘affluence’ The Government starts to erode union power, reducing central bargaining in the private sector Diversification of the workforce becomes more apparent Outsourcing and delayering, taking out middle management for “simple form – lean staff” Market developments up to 1990 Union power – 1978/9 Black Monday - 1987 Source: Open Field – interviews and desk research, 2007

  4. 1990 1995 2000 Socio - demographics Increasing sophistication Market developments up to 2007 Goal congruency Mergers & AcquisitionsDownsizing and delayeringIncrease in job promiscuity Intellectual capital e-commerce & technologyMatrix management and cross Functional teamsMarket forces become a more important determinant of pay Human capital managementGrowth of global recruitmentLabour market tightensIncrease in regionalisation Adoption of social chapter - WLF Migration from EU Women in workforce DINKys Increase in working mothersPay Inflation 1990-4 Sandwich generationsingle parentingGlobalisationMulticultarlism War for talent Retirement trends – pensions crisisResponsible generation?Thatchers’ children Downshifting & work life balanceLow inflation Reward developments Performance management Competencies developedConcept of reward developsPrivate sector gains expertise in this area, but not public sector Control re-asserted by HRChanging theories - motivation Focus on getting base pay rightContribution based pay Concept of flex and Total RewardFamily friendly rightsHR as a partner, not a servantJob families Variable pay on wider scale Focus on output Increased demand for pay dataNew pay – broadbanding etc HR devolves control Source: Open Field - interviews and desk research, 2007

  5. Influential market forces Source: Open Field - interviews and desk research, 2007 Movement away from market pricing when deciding on pay structure, apart from senior or key positions Market price Fairness Central management control Local/linemanagement discretion Movement away from line management control, with HR starting to re-assert central controls. Self service will give the line flexibility, with HR controls in place Movement away from rigid to flexible systems Rigidity Flexibility Movement away from one size fits all to a segmented workforce and offerings tailored to specific groups Standardisation Individualisation Earnings stability has been established for a number of years Earnings stability Pay inflation Economy enables organisations to grow. Retrenchment in a local market is a result of strategic decision making, to relocate production, for example Growth Retrenchment Expenditure Budget Professionals are asked to reconcile demand for reward measures with cost control

  6. What is Reward?

  7. What is Reward? • “All of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”  • “Throughout history, employers have been challenged with attracting, motivating and retaining employees. From the simplest barter systems of centuries past to the current complex incentive formulas of today, the organizational premise has been the same: Provide productivity and results to our enterprise and we will provide you with something of value.” Source: WorldatWork website 2006

  8. HR needs – little change over time

  9. Why do people look for new jobs? Men Women All • Reward Related 29% 21% 29% • Other Aspects poor 21% 26% 23% • Current job may end 14% 11% 11% • Filling in time 10% 10% 10% • Want more hours 3% 8% 5% • Journey 4% 4% 3%

  10. So cash is only one factor • Interest in the job • Prospects in the organisation • Working conditions • Flexibility and balance • Is it a “nice” place to work

  11. New Opportunities The Pursuit of the Positive

  12. New opportunities • Background • What are the drivers? • What are the opportunities? • How will these impact on reward management?

  13. Background • Historically cumbersome pay structures • Designed to give control and progression, not flexibility • Often complex and poorly understood • A necessary evil

  14. What are the drivers of change ? • Technology • Thinking • The world in which they and we operate

  15. Areas for focus • Job Evaluation • Payment systems • Benefits

  16. New Opportunities in Job Evaluation

  17. A Definition A systematic process for determining the relative “size” of jobs within an organisation ( internal relativities ) with a view to establishing the worth of such jobs in the outside market (external relativities ) using relevant comparators .

  18. Job evaluation • Job Evaluation as a tool, not a God • Flexible, Relevant and Simple • Felt Fair, Consistent, Robust and Defensible • Supportive of and contributing to equal pay • A help not a hindrance

  19. Job evaluation • Technology allows for this • Thinking is enabling the process • As the world gets smaller, the links get bigger

  20. Job evaluation • PC based systems • Paperless Job Descriptions • Tailored factors • Linked directly to personnel records systems • Interactive online JE systems • Systems that link explicitly to market benchmarking data

  21. Job evaluation • Users want relevant, flexible tools • Transparency is crucial • Simplicity is a watchword

  22. Job evaluation • Moves away from vast structures • Local system, local impact • Still integrated, but flexible

  23. Where does this lead? • Tension between “off the shelf” and flexible systems • Pay systems that reflect reality • Enable employers to pay on contribution, not service

  24. New Opportunities in Payment Systems

  25. Definition • Pay systems provide the foundation for financial reward systems • Pay systems fall into two main categories: • those where pay does not vary in relation to achievements or performance, (basic rate systems), and • those where pay, or part pay, does vary in relation to results/profits/performance (including the acquisition of skills). • There are also systems where pay, and any enhancement, is related to the gaining of extra skills or competencies. These systems can provide opportunities for greater job satisfaction - allowing workers to carry out a wider range of work, or work at a higher level. Source: ACAS Advisory booklet – Pay systems. May 2006

  26. Payment systems • Realism from “both sides” • Individual contribution can be reflected and rewarded • Move away from increments • Markets can be addressed • Equality, fairness and transparency

  27. Payment systems • Technology supports this • Thinking is catching up - slowly • Global challenges need local responses

  28. Payment systems • Recruit the right people • Continually invest in them • Agree objectives • Set standards and give examples • Reward according to contribution

  29. Payment systems • Adding value • Not just cost neutral • Definitely not incremental • Partly developmental • NMW • Watch out - this is flexibility not anarchy

  30. New Opportunities in Benefits

  31. Benefits – a definition • Some form of compensation given to employees in addition to regular salaries or wages. • Given at the entire or partial expense of the employer. • While some employee benefits are described by law, many employers offer additional benefits in order to attract and retain quality workers and maintain morale. • Some types of benefits are also used as incentives to encourage increased worker productivity. • Benefit packages can make up between 30 and 40 percent of an employee's total compensation for employment (Total Reward/Reward Statements)

  32. Benefits • Flexible/cafeteria benefits • Flexible for whom? • Relevant benefits • Choice

  33. Benefits • Decide what is to be made flexible • Benefits can also reflect contribution • Give everyone a level playing field • Communication

  34. Common flexible benefits are • buying and selling holidays • childcare vouchers • advances and loans • company cars • company shares • private health schemes • medical insurance

  35. Benefits • Technology supports flexibility • Thinking is on track – but action lags behind • The world offers real opportunity

  36. What if… • With flexibility comes responsibility • Have contingency plans • Do not be afraid to react to change • Make it work for you • Communication – never too much

  37. The last word • There are real opportunities to make big changes…. • … but there are also challenges and pitfalls • The drivers allow real change to take place • It’s up to you/us to make the most of these

  38. Pay Statistics

  39. Paystatistics • Settlements • Forecasts • Earnings • Important Pressures on pay rises

  40. R£WARD Index, Settlements & ForecastsMarch 1998 to March 2008 (12 Month Averages)

  41. 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 Important pressures on pay rises

  42. Regional statistics • On average, across all levels, pay in West Midlands is 10% behind national (11% in 2007). • 8% lower at Director level • 9% below at Management level (12%) • 13% at Clerical level (12%) and12% below at Operative level (10%)

  43. Regional statistics • So for example a manager earning £45,000 at national average would be earning £40,950 in Staffordshire • The same manager in Greater London would be earning £49,950 • And in Central London that rises to £61,500 • Director earning just under £60,000 in Staffs could be earning over £90,000 in London

  44. Settlements and forecasts - west midlands Settlements Forecasts Management 3.0% (2.8%) 3.3% (3.1%) Clerical 3.1% (2.9%) 3.2% (3.1%) Operatives 3.0% (2.8%) 3.1% (2.9%) National is 3.2% and 3.3% respectively

  45. Benefits • Hours of Work • Holiday Entitlement • Provision of Company Cars

  46. Contracted hours of work

  47. Holidays per annum

  48. Provision of company cars

  49. Summing up • The world of reward is changing • Customers (internal and external) are becoming more sophisticated • Pressures are more diverse and growing • Equality and the need for equity continue to drive key changes • Flexibility is becoming the real keyword • Drivers all support change • Globalisation just makes things more complex • But local issues also play a part

  50. Reward and the HR Practitioner

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