More employers struggling to manage reward risks, says CIPD

REWARD RISKS

More employers struggling to manage reward risks, says CIPD

The proportion of HR professionals who believe that their organisation, or their client, is poorly prepared to manage the risks around how they reward their staff has grown in the past 12 months, according to a survey by the Chartered Institute of Personnel and Development.

The CIPD survey finds that:

  • 15% of respondents think that their organisation is poorly prepared to deal with these risks, up from 9% in 2009

  • 15% cite that their organisation is well prepared, compared with 17% a year ago.

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Current reward risks concerns

The findings reveal that concerns about the overall effectiveness of the pay and benefits package to attract and retain key talent has increased in significance over the past year, reflecting concerns that firms have not been competing effectively in the labour market as the economy has started to show signs of recovery:

  • “Reward unable to attract key skills” rose in rank to become the main risk faced by employers, from fourth place last year

  • “Reward not retaining employees” rose from rank number 12 to sixth.

Also high on the list of concerns for 2010 are:

  • inability to change reward (ranked number 4)

  • the ability of line managers to manage reward (ranked number 2)

  • ability to engage employees through pay and benefits (ranked number 3).

Sectoral differences

The survey uncovered marked differences by sector:

  • Pension costs and general reward affordability concerns are higher in the public and voluntary sectors than in the private sector. Increasing pension costs are ranked 5 and 3 in the public and voluntary sectors respectively, compared with 17 in the private sector. Not enough cash to meet reward commitments is 4 and 11 respectively and 14 in the private sector.

  • The public sector is also more likely to express fears that their approach to reward was causing poor industrial relations – attitudes of the trade unions towards the reward strategy is ranked 10 in the public sector, compared with 13 in the voluntary and 32 in the private sector.

Charles Cotton, performance and reward adviser, CIPD, said: “The past 12 months have been a turbulent time for many employers in terms of pay and benefits practice. They are fearful that the way that reward helps them attract, retain and motivate their employees is no longer appropriate.”

He added: “While the private sector is concerned that their reward practices will not help them if the economic recovery is sustained, in contrast the public sector is concerned that their reward practices won’t help them as their economy starts to decline.”

Future risks

Looking to the next 12 months, the reward risks predicted to become “more prescient” are:

  • increasing pension costs (rank 1, up from 3)

  • not enough cash to meet reward commitments (rank 2, up from 9)

  • poor industrial relations (rank 3, up from 6)

  • taxation changes reducing the impact of reward (rank 4, up from 25).

A final word

“Changes to how employee pay and benefits are taxed are of major concern to all employers who fear the changes will make it harder for them to compete effectively to recruit and retain valuable talent. These and other changes have also placed an additional burden on reward professionals, with many struggling to manage. A planned response to increasing risks is now needed by organisations to make sure that reward plays a key role in ensuring organisations thrive in this new economic environment.” - Jonathan Chapman, Management Education Fellow, Cranfield School of Management, and co-author of the report.

Want to know more?

Title: Managing Reward Risks: An Integrated Approach, Chartered Institute of Personnel and Development, August 2010.

Survey sample: The research was carried out between 10 June and 9 July 2010. An online questionnaire was sent to 7,000 senior reward professionals in the public, private and voluntary sectors working in the UK and overseas as well as senior HR professionals with significant responsibility for reward. Replies were received from 191 individuals, the majority of them practitioners.

Availability: The 13-page report can be downloaded in PDF format from the CIPD web site at www.cipd.co.uk/subjects/pay/general/_reward-risks.

The Chartered Institute of Personnel and Development (CIPD) has over 135,000 members and is the “leading professional institute for those involved in the management and development of people”. For more details visit www.cipd.co.uk.

Cranfield School of Management is “one of Europe’s leading university management schools renowned for its strong links with industry and business”. It is committed to providing practical management solutions through a range of activities including postgraduate degree programmes, management development, research and consultancy. To find out more visit www.som.cranfield.ac.uk.