Thought leaders 2010: The year ahead: Communication must maximise reward

Key Points

  • Communication is a key way to maximise employee engagement through reward during the coming 12 months
  • Employers will need to focus on developing creative solutions with meaningful stakeholder input to increase engagement across the organisation
  • Organisations need to be responsive to their employees’ needs and issues, which are constantly changing


Involving staff will help them see the full value of their benefits, says Michael Rose of the Independent Reward Consultants Association

How do you use benefits and reward to engage staff in the year ahead? In a word, the answer is: ‘communicate’.

As the old song goes, “It’s not what you do but the way that you do it”. OK, so it is a bit more complicated than that, but communication is a key way to maximise engagement through reward in 2010. To that you can add ‘flexibility’ and ‘choice’.

This will be a year of financial constraints on pay. You may not be able to spend much, so it is vital to maximise the perceived value of reward overall. And you do that through effective communications using the best media for the different employee groups.

You also need to get more out of less to do what you can in the circumstances. Employers will need to focus on developing creative solutions with meaningful stakeholder input to increase engagement across the organisation. You engage people by getting them involved in the decisions that affect them.

This year, the tax and national insurance burden will increase. Although it is not the employer’s role to compensate for tax changes, we should still do what we can to maximise the tax breaks still available, such as salary sacrifice for pensions, childcare vouchers, and green company car schemes. Companies should look at the HM Revenue and Customs-approved share plans available: sharesave, share incentive plans (Sips) and company share option plans. Sips, in particular, can be used creatively to complement pay.

In 2010, every organisation should consider flexible benefits. The Independent Reward Consultants Association’s experience is that this almost always gives a net financial saving to the business as well as greater involvement and choice for employees.

DB scheme closures

We have now reached a tipping point with the closure of defined benefit (DB) pension schemes. By the end of 2010, most private sector employers will have closed their DB plans at least to new members and most for existing members. But there will still be a wide range of practices in the replacement plans. Rather than following the crowd, employers need to think through exactly why they may want to close their DB plan and understand the value of pension as part of total reward. Where DB plan continue, ensure people understand their value by showing the annual accrual rate as a percentage of salary – roughly the amount they would have had to have saved that year.

This is particularly important in the public sector.

A key outcome of the current economic situation is greater shareholder and public awareness, and scrutiny of, pay and benefit relativities and executive pay levels against organisational performance. We should expect more shareholder challenge and votes against pay and bonus recommendations at annual general meetings. Companies will need to be much more understanding of their shareholders’ views and recognise the potential impact on employee engagement of a rejected executive plan. Paradoxically, we may see more bonuses overall because they can vary with the financial circumstances of the business as against consolidated salary.

Organisations must be responsive to employees’ needs and issues, which are constantly changing. For example, saving for a deposit for a house may be a priority for some. Consider allowing employees to put money that might otherwise have gone into a pension into a corporate Isa, which can then be used for a mortgage deposit (or repaying a student loan or later transfer into a pension). This offers the sort of flexibility that demonstrates the employer’s understanding of employee issues and so strengthens engagement.

Read more articles from Thought leaders: The year ahead