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How reward will shape the HR landscape of 2020 Promoted

Tim Kellett, Director - Paydata

Ringing in the New Year is always synonymous with the opportunity for new beginnings and resolutions. For HR, it presents the opportunity to step back and take a look at the trends that will shape HR professionals’ agendas over 2020.

With the Queen’s speech recently announcing 40 new laws to be passed at the beginning of this year and Brexit set for the 31 January, reward management consultancy Paydata examines how reward practices will be affected over the coming year.

Recognising reward’s contribution to the C-Suite
The role of an HR professional has evolved from someone who carries out the heavy lifting of compliance, pay review planning and other essential HR tasks to someone who is recognised as a strategic advisor focused on business strategy and employee career paths. CEOs will increasingly leverage HR’s expertise in making projections and mobilising people to deliver their vision. With a more bottom-up approach and flatter hierarchies being commonplace, HR is key to managing newer structures that challenge traditional notions of how they should be best managed.

HR leaders increasingly operate at the intersection of technology and people, needing to be tech-savvy and responsive enough to manage restless and agile workforces. Reward touches upon the very foundations of an effective recruitment strategy, employee engagement, embracing changes in the workplace and supporting lifelong learning. HR professionals’ place at the table is long overdue.


Embracing the rise of analytics, automation and artificial intelligence

A wealth of data is available to increasingly inform HR decisions around managing a workforce.  Automation potentially removes unconscious bias in recruitment decisions and key performance indicator data can help identify the best candidates. Opportunities also lie in automating time-intensive tasks such as supporting new starters, with Chatbots, currently widely used in customer services, helping employees by answering frequently asked questions and queries around compensation and benefits. Using the power of analytics and technology can free up HR to concentrate on shaping the strategy and tackling business-critical people projects.

However, the human dimension cannot be underestimated in the context of HR – the over-commoditisation of recruitment processes, the employee experience and performance reviews risks undermining the culture of a company. Employers must harness technology to drive insights into the needs and motivations of employees and modernise their approach whilst continually testing how this is affecting the culture and impacting employees. Assessment of decisions by managers and teams ensures that the company does not lose focus on treating each employee as an individual.

Promoting organisational transparency
The gender pay gap reporting requirement was the starting point in the ongoing scrutiny of fair pay through corporate governance. The ethnicity pay gap is touted as the next measure that can assess the effectiveness of companies in supporting equal opportunities regardless of gender, race or disability. The CEO pay ratio reporting comes into effect this month, providing a snapshot of the pay gap across organisations. Concerns that chief executive pay levels are out of step with company performance, combined with research published in Executive Pay 2018 by the CIPD showing the average worker would take 167 years to earn a FTSE 100 leader’s annual pay, led to the introduction of the measure for companies with 250 employees or more. Designed to build a reference point year on year to monitor progress, reporting aims to track the effectiveness of the frameworks in place in achieving fair pay systems.

A growing concept shaping remuneration strategies is that of ‘responsible reward’. This ensures that reward frameworks take into account wider factors at play in driving profit within organisations, considering sustainability and the impact on the community that the business serves. Equality is a central tenet of this – whilst Equal Pay is guaranteed in law, inequality of pay can still exist where no equal pay audit has ever been conducted or where job titles overlap and no grading system is in place to ensure jobs are paid on a like for like basis. Job grading introduces a framework, which objectively demonstrates to key internal and external stakeholders that a system of fair pay is in operation, on the basis of which consistent and rational decisions are made.

Addressing recruitment and retention difficulties
Paydata’s autumn edition of its UK Reward Management Survey highlighted the ongoing recruitment and retention challenges employers face. 66 per cent have experienced difficulty in recruiting people over the last 12 months and 60 per cent expect to have difficulty in the year ahead. Loyalty no longer automatically results in higher pay levels, with two thirds of organisations paying a premium to recruit the right talent and offering new recruits salaries that conflict with those paid to existing employees. Communicating competitive reward packages – both in terms of market competitive pay and benefits that promote wider employee wellbeing – are crucial to attracting and retaining talent. Market benchmarking is an important tool for employers to know that the reward packages they offer are appropriate and competitive in the market.

Just over half of respondents have experienced difficulty in retaining people and 55 per cent expect difficulties to persist. The role of reward in employee engagement is increasingly important, as benefits become more creative and aligned more with employee values. Traditional cash-based benefits are being teamed with volunteer days, gym memberships and give as your earn schemes that are equally valued in the eyes of employees. Frequent 1:1 meetings between managers and employees promotes engagement further, ensuring that employees feel listened to, valued and recognised. Better outcomes are achieved by understanding employees’ experiences from the outset, as entry interviews are becoming as commonplace as exit interviews.

Designing a future-proof reward strategy
Managing a remote workforce will become the norm and employers must increasingly re-think the design and processes in place within their workforce. Flatter hierarchies and generational differences are key challenges when it comes to ensuring all spectrums of the workforce are engaged (which include traditionalists, baby boomers, generations X, Y and Z). This involves rethinking the whole concept of office spaces and who does the work. Globalisation is driving remote working practices, leading to increasingly diverse workforces that could even be contracted on a project by project basis, with colleagues from around the world being brought together based on their specific skillset to meet customer demands.

Annual performance management reviews are increasingly at odds with the on-demand culture of millennials in particular. Continuous pay reviews are, in reality, common practice for many organisations through the use of out of cycle pay award systems. 75 per cent of respondents in Paydata’s UK Reward Management Survey reported that market pressures drive their out of cycle pay awards, which used to be traditionally reserved for making adjustments based on promotions within the year. The use of out of cycle pay increases suggests that employers may be supplementing the incremental pay increases that have just risen from two per cent to three per cent, after a decade of relatively flat growth where pay levels just tracked inflation. Acknowledging this practice would enable HR to plan HR budgets with more certainty and show that they are responsive in meeting the needs of employees – making sure reward accurately reflects employee contribution and remains competitive.

Keep ahead of the curve
Businesses who are not continually adapting and responding are at risk of stagnating. Maintaining a cohesive environment that is driven by a strong brand identity, actively listening to employees and being agile will ensure that companies can drive their growth and deliver their vision. Organisations must foster and translate their purpose into an impactful experience for both customers and employees. On-boarding, transparent cultures promoting fairness and harnessing the power of technology will all help to create a workplace that thrives beyond 2020.

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