Seven themes for the future of reward

1. Employee engagement

Reward needs to be considered in terms of its impact on engagement — align reward to values, make reward solutions part of the whole of the ‘joined up’ employee value proposition, challenge assumptions on extrinsic reward, use qualitative not just quantitative measures.

2. Millennium generation

The millennium generation want to be seen to make a difference and receive great feedback, want freedom and their own time but a good salary. In reward we will need to:

  • Find ways to give people more control over time; use different contracts
  • Concentrate on the outputs, not the inputs
  • Develop new and even more flexible benefit plans
  • Ensure better feedback mechanisms and communicate pay messages clearly.

3. Social networking

Information can no longer be controlled by companies as it used to be. You can find out what it is like to work for a particular organisation through the social media sites. People will be even better informed about your organisation including pay and benefit levels with exchanges of pay data. Therefore, rethink what is ‘confidential’. As data will be exchanged anyway outside the organisation look at introducing forums and internal social media sites such as Yammer. Get the performance management system in shape as it will be scrutinised even more.

4. Life expectancy

Life expectancy continues to increase and we have not yet had the leap from the world of genetics. Across Europe state retirement pension ages have increased and will continue to do so. Defined benefit pension plans are mostly closed to new employees and are closing rapidly to existing employees. There will be further moves from state to company pension schemes. DB schemes will be closed to all employees and new tax effective savings vehicles will develop.

5. Environment

Environment issues are mainstream and employees expect to see their companies implement changes to save energy. We will move to considering the ‘whole carbon footprint’ of products and of people: home, travel, work. Reward related issues will be:

  • Bonuses will need to reflect environmental impact
  • There will be a radical change to cars and a reduction in conventional company cars and no company provided fuel
  • Greener options will be the norm in flexible benefits plans
  • Greater need to communicate change with low environmental impact – recycled or ideally no paper: electronic only.

6. Shareholder pressure

Over the last few years there has been an increase in shareholders objecting to companies executive reward policies. Shareholders, reinforced by further corporate governance legislation, will want to see an appropriate level of reward that reflects company performance. Greater care will be needed in designing executive compensation working with the Remuneration Committee taking a longer term view of what company success looks like and the appropriate levels of reward and the potential reputational issues in designing termination terms in executive contracts.

7. Pace of change

The pace of change will continue to increase. Reward programmes will need constant review to ensure that they are fit for purpose. This means greater flexibility in reward and perhaps some new thinking on the relationship between common corporate wide programmes and more discretion to meet the needs of parts of the organisation that have changed.

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