Why are firms losing control of their compensation schemes?
Employers across the world are turning to multiple outsourcing partners to handle compensation schemes as in-house systems fail to keep up with increasingly complex incentive plans across organisations.
This is according to a new report from CSC, which polled 300 senior HR, rewards, and compensation leaders across Europe, Asia Pacific, and North America to discover a widespread rethink over how organisations are managing their incentive plans.
Many said they are now outsourcing and turning to tech partners to improve efficiency and control over incentive plans, with 77% of the respondents saying they use multiple outsourcing partners to administer compensation schemes across jurisdictions.
Challenges in compensation schemes
This rising approach comes as the administration of compensation schemes grows more complex, with participation rising across global organisations.
According to the report, 80% of firms observed higher participation in compensation schemes over the past three years as firms extend incentives beyond senior executives to support retention and reward performance.
"Participation in LTI (long-term incentive) schemes is widening, and expectations around fairness and transparency are increasing," said Shane Hugill, head of Executive Compensation Services at CSC, in a statement.
"While that's positive from a talent and performance perspective, it also means firms are dealing with more moving parts."
Another challenge for organisations is fragmented data.
Two in three (66%) respondents cited reliance on multiple service providers as a key barrier to maintaining accurate and consistent data.
Another 64% said their data is fragmented because they operate across multiple regulatory environments.
"Many are managing programmes across multiple providers and jurisdictions, which can make it harder to keep data consistent and processes under control," Hugill added.
These challenges can lead to major consequences. The report warned that organisations not only risk losing a single accurate view of their incentive plan data, but they also leave themselves vulnerable to errors and compliance failures.
"As the labour market becomes increasingly competitive, firms have to think more creatively about how they reward and retain top talent," said Jennifer Kenton, chief commercial officer at CSC, in a statement.
"That can make executive compensation harder to manage, and that's why firms need a trusted partner with proven expertise in administration and execution for all incentive plans."
