How is today’s change culture impacting total reward?

change culture

Need to know:

  • Due to the uncertainty surrounding the impact of Brexit, many employers are delaying major reward decisions.
  • Nevertheless, it is important to adapt to changing trends, such as the move towards a wellbeing focus, and flexible working becoming the norm.
  • Although changes to factors such as the economy and legislation will affect benefits in the future, employers should have one philosophy that underpins and unifies a reward package.

There is no doubt that businesses today are facing a period of unprecedented change and uncertainty. Not only are politics and the economy in the balance, but shifting demographics and technology are having a large impact on both the make-up and expectations of the workforce.

In this complex environment, can employers still find a ‘simple’ way to reward their staff, or has total reward strategy become as labyrinthine and problematic as the rest of the world?

Brexit uncertainty

The prospect of Britain’s exit from the European Union (EU) tends to generate a mixed response from employers, greatly influenced, of course, by their level of dependence on employees from European countries.

For many, there is no certain answer. For example, the Employee Benefits/Barnett Waddingham pensions research 2018, published in December last year, found that 85% believe it is too early to tell what the impact of Brexit will be on the UK pensions landscape.

Some benefits providers and consultancies have seen an increase in queries around workplace pensions from organisations with staff who are not UK nationals. Rachel Meadows, director, pensions and financial planning at Broadstone, says: “If you are an engineer planning to spend five years in the UK then return to Spain, how will your UK pension be treated, both workplace and state?

“While this is always an area for query, Brexit has made this really front and centre for a lot of people. Some [employers] are providing additional information resources for staff to help them understand their options and the potential implications of different Brexit outcomes.”

On the other hand, others report that Brexit uncertainty has had little impact to date. Robert Ordever, managing director of OC Tanner Europe, says: “So far, there have been no significant changes to reward as a direct result of the Brexit process. Employment numbers are strong and there is clear correlation between reward strategies, workplace culture and business results; [these are] all big positives that are not yet outweighed by Brexit fears. We will only start to see real impact in the event of a no-deal exit, where the economy and job market become less stable.”

However, even if Brexit is not having a direct impact, there may be a knock-on effect on budgeting and planning for the future, says Meadows. “Some benefit decisions are being deferred until the situation becomes clearer,” she explains. “Whether you’re on the ‘in’ or ‘out’ side of the debate, it’s pretty unanimous that prolonged and continued uncertainty is the worst of all outcomes for all aspects of running businesses.”

Helen Jamieson, founder and managing director at outsourced HR consultancy Jaluch HR and Training, adds: “Generally, I would say that the last few months have been all about holding our breath. Businesses simply have been waiting to find out what is happening with Brexit and almost all major decisions are on hold as a result. We are not seeing any major reviews of reward strategy or changes in focus.”

Creating a buffer

There has also been an upsurge in training and development, with topics such as mental wellbeing, accountability and leadership taking centre stage, adds Jamieson. This could be a result of the need for organisations to increase knowledge and skills to manage, lead and support their staff at a turbulent time.

“In effect, we are seeing [employers] focused on keeping people engaged, happy, productive and trained, rather than paid more or given more enhanced benefits,” she says. “Employee expectations are enormously driving employer behaviours in relation to reward.

“However, there are many, many organisations out there [that] are simply not listening to what employees say they want and are not changing reward and leadership strategies as a result. These are the ones [that] will really suffer recruitment and retention challenges over the next few years.”

Keeping track of trends

Organisations, therefore, cannot afford to stand still when it comes to rewarding staff, and should continue to study and anticipate trends, says Richard Morgan, strategic consultant at Aon. Currently, there is an emphasis on workforce planning, particularly as the nature of businesses is changing as technology develops, and employees become more diverse in terms of background, age and expectations.

“Most finance and HR directors are not going to want to put up salaries if they can avoid it, and the modern employee has other things [that are] important to them” explains Morgan. “So, salary is important, but people are more focused on the lives they’ve got outside work.”

For this reason, the ability to access workplace flexibility, take sabbaticals or even adapt work to suit caring responsibilities, for children and elderly relatives, are all highly valued, meaning employers should work on getting the balance right, rather than simply hiking up pay.

Changing legislation

Michael Rose, founder of Rewards Consulting, says: “It is not possible to future-proof the approach to total reward to take into account possible detailed changes in tax and legislation, but it is quite possible to see the trends.”

Looking back, these trends have included, for example, the growth of company car benefits in the 1970s in response to pay controls, and their subsequent decline in popularity with the increases in taxation and environmental concerns. Flexible benefits also grew, in part, due to the way salary sacrifice arrangements could be operated to reduce costs.

Today, the ongoing demand for flexibility and the impact of technology in the workplace are factors that will continue to impact both directly and indirectly on reward provision, says Rose.

Sustainability and environmental issues will also inevitably influence government policy, and ultimately affect what businesses do to attract employees. This is the case both from a legal point of view and in the context of employer brand and image.

In response to the fact that many external influences will continue to force change on any benefits scheme, organisations should build a programme based on an overarching, unifying reward philosophy,. explains Rose.

Finally, a culture of transparency and communication is key. Rose concludes: “[Employers should] communicate both what [they] are doing and why, and the role of the employer and employee. Providing flexibility within a total reward framework will [also] make it easier to implement changes in response to environmental factors.”

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