Employers struggle to manage risks around reward

by 08 Sep 2010

Employers in the UK are fearful that the way they reward employees to help attract, retain and motivate them is no longer appropriate.

According to a survey of the UK’s Chartered Institute of Personnel and Development (CIPD) members, the proportion of HR professionals who believe that their organisation, or their client, is poorly prepared to manage the risks around how they reward their staff has grown in the past 12 months,

The survey, Managing Reward Risks: An Integrated Approach, found that 15 per cent of respondents think that their organisation is poorly prepared to deal with these risks, up from 9 per cent in 2009, while 15 per cent cite that their organisation is well prepared (compared with 17 per cent in 2009).

The findings reveal that concerns about the overall effectiveness of the pay and benefits package to attract and retain key talent has increased in significance over the past year (reward unable to attract key skills rose in rank from fourth to the number one risk faced by employers and reward not retaining employees rose from twelfth to sixth), reflecting concerns that firms have not been competing effectively in the labour market as the economy has started to show signs of recovery.

Furthermore, the public sector is also more likely to express fears that their approach to reward was causing poor industrial relations (with attitudes of the trade unions towards the reward strategy is 10, compared to 13 in the voluntary and 32 in the private sector)

Charles Cotton, performance and reward adviser, 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 their reward practices will not help them if the economic recovery is sustained, in contrast the public sector is concerned that their reward practices won’t help them as their economy starts to decline.”

Looking to the next 12 months, the reward risks predicted to become more prescient are increasing pension costs (rank 1, up from 3) and not enough cash to meet reward commitments (2, up from 9), poor industrial relations (3, up from 6) and taxation changes reducing the impact of reward (4, up from 25).

Jonathan Chapman, Management Education Fellow, Cranfield School of Management, and co-author of the report said:

“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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