Only a quarter of employers feel prepared to manage the risk associated with reward

Only a quarter of HR professionals believe their organisation is well prepared to manage the financial risks associated with rewarding staff according to research conducted by the Chartered Institute of Personnel and Development (CIPD).

The survey CIPD’s Managing reward risks: An integrated approach also found that 15% of respondents think that their organisation is poorly equipped to deal with these risks, up from 9% in 2009.

In addition, employers’ concerns about the overall effectiveness of the pay and benefits package to attract and retain key talent have increased over the past year. The number one risk factor cited by respondents was that reward is unable to attract key skills.

Other highly ranked concerns are: the ability to change pay and benefit practices, the ability to engage employees through pay and benefits, as well as the ability of line managers to manage reward.

Pension costs and concerns about the affordability of reward are higher in the public and voluntary sectors than in the private sector. For example in the public and voluntary sectors, increasing pension costs are ranked fifth and third respectively, compared to being listed as seventeenth in the private sector.

Looking to the next 12 months, the reward risks predicted to become more prescient are increasing pension costs, not having enough cash to meet reward commitments, poor industrial relations, and taxation changes that could reduce the impact of reward.

Charles Cotton, performance and reward adviser at 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.

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

Jonathan Chapman, management education fellow at the Cranfield School of Management and co-author of the report, added: “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.”

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