Trends 2018: What’s new in pay and rewards? Trends 2018: What’s new in pay and rewards?

Trends 2018: What’s new in pay and rewards?
08 Feb 2018

Last year, continuing economic uncertainty, low wage growth and talent shortages meant that reward strategies were all about finding ways to maximise the organisation’s investment in its talent and optimise compensation spend.

But as this year has gone on, global economic activity has slowly improved, with growth projected to hit a total of 3.6% in 2017 and an expected 3.7% in 2018. Despite this broadly positive reading, however, most economies around the world are seeing growth in real wages remain low or even negative - and this situation will continue to be a key challenge throughout 2018. Here are the key compensation trends that we expect to see over the year ahead:

1. Compensation becomes more aligned with business strategy

Traditionally employers focused on controlling compensation costs through internal and external benchmarking activities, modelling budgets and managing issues of ‘fairness.’ But many organisations have now moved from looking at pay as a cost that must be minimised towards thinking of it as an investment to be optimised.

There is also a growing appetite for spending more time monitoring how well employees and reward strategies are aligned with business strategy, while also evaluating the success and return on investment of pay programmes and structures.

To get this approach right, it is necessary to introduce key performance indicators (KPIs) to assess the effectiveness of your reward strategy and demonstrate how relevant programmes support management goals. The aim is to provide evidence that your reward strategy has contributed to boosting business performance.

While these KPIs can be broad-based – and include traditional statistical analysis – it is also important to employ an evidence- rather than ‘gut feel’-based approach to gathering information about the effectiveness of pay strategies, for example by collating feedback from both managers and employees in order to monitor progress over time.

2. The emergence of new reward approaches

Workforces are becoming increasingly diverse, which means that a one-size-fits-all approach to rewards no longer works. So in a bid to differentiate themselves, some forward-thinking employers are trying out a range of new reward techniques. These include:

3. Increasing focus on pay equity and transparency

As the workforce continues to become more diverse, pay equity and transparency will continue to grow in importance. To reflect this change, many international jurisdictions are now rolling out legislation that aims to reduce gender pay differences. New equal pay laws that focus on ethnicity and minimising pay differentials between chief executives and their employees are also expected to appear in the US and UK.

So for many employers, 2018 will be about working out how to address these differentials, which includes the time-consuming task of collecting data to report their findings effectively.

Rising public awareness of the issue across all employee groups is likewise driving demand for greater pay transparency. Such transparency is less about staff members knowing what each other are paid and more about understanding how their own pay is determined to help them assess whether it is fair or not – and this issue is an important one due to the impact it can have on employee engagement.

4. Growing use of analytics tools to support evidence-based decision-making

To truly undertake evidence-based decision-making, it is vital for employers to improve their employee data management. Some payroll functions are also starting to introduce new analytics tools to help them analyse their people data more effectively. The aim is to become true business enablers by providing leaders with the necessary insights to inform business outcomes.

Conclusion

Adapting to new ways of working and engaging new sources of talent will be key to success in a global market environment that remains difficult. As a result, it is vital to challenge established ways of managing reward and deploy new strategies that are consistent with the type of organisation you are, the markets in which you operate and the types of employees you need to drive business success.

Ruth Thomas is a founder and senior consultant at Curo Compensation. With over 25 years of global HR and reward management experience in the financial services sector, she also has international expertise in managing compensation processes and designing pay and benefit structures, salary progression systems and management incentive plans. Her corporate experience includes working at Lloyds TSB Group, Price Waterhouse Coopers, Dow Jones Group and Credit Suisse.

 

 

Last year, continuing economic uncertainty, low wage growth and talent shortages meant that reward strategies were all about finding ways to maximise the organisation’s investment in its talent and optimise compensation spend.

But as this year has gone on, global economic activity has slowly improved, with growth projected to hit a total of 3.6% in 2017 and an expected 3.7% in 2018. Despite this broadly positive reading, however, most economies around the world are seeing growth in real wages remain low or even negative - and this situation will continue to be a key challenge throughout 2018. Here are the key compensation trends that we expect to see over the year ahead:

1. Compensation becomes more aligned with business strategy

Traditionally employers focused on controlling compensation costs through internal and external benchmarking activities, modelling budgets and managing issues of ‘fairness.’ But many organisations have now moved from looking at pay as a cost that must be minimised towards thinking of it as an investment to be optimised.

There is also a growing appetite for spending more time monitoring how well employees and reward strategies are aligned with business strategy, while also evaluating the success and return on investment of pay programmes and structures.

To get this approach right, it is necessary to introduce key performance indicators (KPIs) to assess the effectiveness of your reward strategy and demonstrate how relevant programmes support management goals. The aim is to provide evidence that your reward strategy has contributed to boosting business performance.

While these KPIs can be broad-based – and include traditional statistical analysis – it is also important to employ an evidence- rather than ‘gut feel’-based approach to gathering information about the effectiveness of pay strategies, for example by collating feedback from both managers and employees in order to monitor progress over time.

2. The emergence of new reward approaches

Workforces are becoming increasingly diverse, which means that a one-size-fits-all approach to rewards no longer works. So in a bid to differentiate themselves, some forward-thinking employers are trying out a range of new reward techniques. These include:

3. Increasing focus on pay equity and transparency

As the workforce continues to become more diverse, pay equity and transparency will continue to grow in importance. To reflect this change, many international jurisdictions are now rolling out legislation that aims to reduce gender pay differences. New equal pay laws that focus on ethnicity and minimising pay differentials between chief executives and their employees are also expected to appear in the US and UK.

So for many employers, 2018 will be about working out how to address these differentials, which includes the time-consuming task of collecting data to report their findings effectively.

Rising public awareness of the issue across all employee groups is likewise driving demand for greater pay transparency. Such transparency is less about staff members knowing what each other are paid and more about understanding how their own pay is determined to help them assess whether it is fair or not – and this issue is an important one due to the impact it can have on employee engagement.

4. Growing use of analytics tools to support evidence-based decision-making

To truly undertake evidence-based decision-making, it is vital for employers to improve their employee data management. Some payroll functions are also starting to introduce new analytics tools to help them analyse their people data more effectively. The aim is to become true business enablers by providing leaders with the necessary insights to inform business outcomes.

Conclusion

Adapting to new ways of working and engaging new sources of talent will be key to success in a global market environment that remains difficult. As a result, it is vital to challenge established ways of managing reward and deploy new strategies that are consistent with the type of organisation you are, the markets in which you operate and the types of employees you need to drive business success.

Ruth Thomas is a founder and senior consultant at Curo Compensation. With over 25 years of global HR and reward management experience in the financial services sector, she also has international expertise in managing compensation processes and designing pay and benefit structures, salary progression systems and management incentive plans. Her corporate experience includes working at Lloyds TSB Group, Price Waterhouse Coopers, Dow Jones Group and Credit Suisse.