Employers in the dark over cost of reward

Employers are in the dark about the cost of their reward spend, according to new research by the Chartered Institute of Personnel and Development (CIPD).

Its Annual Reward Management Survey found that 46% of employers are not aware of their total remuneration spend, including employee benefits, base pay, variable pay and employer national insurance contributions.

Furthermore, only one-third of organisations (32%) assess the impact of their reward practices, meaning the vast majority are not aware if their rewards are working.

Charles Cotton, reward advisor at the CIPD, said: “These findings are stunning as organisations might have in place reward systems that actually do not enable them to fulfil their objectives. The result is they may waste their money, and that of shareholders and tax-payers.”

Voluntary sector organisations are the least clued up on staff costs, with 56% not calculating the value what they offer to employees. Manufacturing (48%), public sector (47%) and private services employers (40%) fair only slightly better.

The survey also found that while smaller companies with 50 employees or fewer are more likely or able to calculate their remuneration spends (65%) than larger employees (56%), larger organisations are more likely to conduct an assessment of their reward practices than smaller ones. Half of organisations with more than 5,000 employees carry out this study while just 29% of smaller organisations do the same.

Of those organisations that do calculate the size of their remuneration expenditure, the vast majority (83%) are unable to break it down into its constitute elements of salaries, variable pay and benefits.

Cotton added: “If organisations do not have a complete handle on where their staff spending goes, it makes it far more difficult to prioritise investment in the measures that will retain and motivate talented individuals. Reward, if implemented correctly, can engage staff at a time when pay freezes and redundancies are prevalent, boosting the chances of the organisations coming out of the recession in good shape to benefit from the recovery.”