reward january 2010

Reward

by Fluid

January 2010

Contents3-4 Introduction to Fluid5-12 Benefits13-15 Flexible benefits16-21 Pay and salaries22-24 Bonuses25-32 Reward33-45 Real-life examples46-47 Exercise48-49 Case studies49-50 Conclusion and questions

Introduction

Introduction to Fluid• Fluid Consulting Limited (Fluid) is a specialist

human resources consultancy headed by Tim Holden MCIPD

• 10 years in banking• 10 years in Human Resources consultancy• Fluid trading since 2006• The core services provided by Fluid are:

- Retention- Selection- Attraction- Remuneration & Reward - Outplacement- Training & HR consultancy

Benefits

Benefits (1 of 7)• ONLINE PROVIDERS• Enrolment period• Pre-selection modelling• Alerts and updates• Access by net/intranet• Personal data archive• Online advice and helpdesk-phone/email• Software/admin hosted by client/supplier• Implementation cost per 1000 people if in-

house/outsourced• Ongoing cost per head for admin

Benefits (2 of 7)• TOP TEN• Free car parking• Paid time off for medical & dental appointments• Counselling/employee assistance programme• Long-service awards• Car allowances• Optical benefits• Private medical insurance• Company car scheme• Permanent health insurance• Childcare vouchers

Benefits (3 of 7)• RETURN ON INVESTMENT• Cost per benefit based on 1000 employees, salary

average £25000, cost per employee (cpe), cost for all (cfa)

• Pension £2000(cpe), £2M(cfa), based on 8% employer contribution

• Pension via salary sacrifice -£160(cpe), -£160000(cfa), employers’ NI saving on 5% employee contribution

• Life assurance £70(cpe), £70000(cfa) 4 x salary• PMI £450(cpe), £450000(cfa)• Health screening £350(cpe), £350000(cfa)• EAP £12(cpe), £12000(cfa)

Benefits (4 of 7)• RETURN ON INVESTMENT• Dental insurance £150(cpe), £150000(cfa), mid-

range cover• Holiday £480(cpe), £480000(cfa) five days over

statutory minimum as 1/260th salary• Childcare vouchers -£373(cpe), -£14920(cfa)

employers’ NI saving from £243 per month into vouchers

• Bicycles -£90(cpe), -£1800(cfa) employers NI and VAT saving from a £300 cycle

• Voluntary benefits £8(cpe), £8000(cfa) online packaged voluntary benefit scheme

• Xmas party £80(cpe), £80000(cfa)

Benefits (5 of 7)• BENEFITS AGENCY STAFF ARE ENTITLED

TO• Training schemes or training days 73%• Team drinks & social functions 72%• Contributions to company or private pension 51%• Personal incentives such as meals and events

50%• Mobile phone supplied by employer 49%• Flexible working hours/flexi time 45%• Dress down policy 44%• Private medical insurance 39%• Team bonuses other than individual 39%

Benefits (6 of 7)• BENEFITS STRATEGY REVIEW• Regular reviews• Balanced benefits• Communicate• Pressure• Be competitive

Benefits (7 of 7)• CHARITIES, % that offer benefits• Reduced hours 84%• Job-sharing 68%• Home-working 68%• Childcare vouchers 64%• Occupational health 64%• Flexitime 64%• Compressed hours 56%• Sabbaticals 56%• Car allowance 52%• Loans 52%

Flexible benefits

Flexible benefits (1 of 2)• WHAT YOU NEED FOR A SUCCESSFUL FLEX

LAUNCH• Build a strong business case to obtain senior buy-

in• Select an experienced broker to negotiate

favourable terms • Choose a technology provider with a proven

record• Don’t be over-ambitious initially• Spend as long as it takes cleansing your benefits

data• Appoint a project team with at least one senior

champion

Flexible benefits (2 of 2)• Choose a system with built-in rules that prevent

uninsured liabilities or additional administrative burden

• Communicate clearly with employees at all stages including focus groups initially and feedback surveys after launch

• Remember that flex is flexible

Pay and salaries

Pay and salaries (1 of 5)• SALES & MARKETING• Director, average £168/basic £128• Senior function head, average £111/basic £95• Function head, average £88/basic £76• Department manager, average £71/basic £60• Section manager, average £51/basic £44• Team leader, average £40/basic £37• Sales/marketing executive, average £33/basic

£31 • Professional, average £29/basic £26• Junior professional, average £20/basic £19

Pay and salaries (2 of 5)• FINANCE• Director, average £165/basic £133• Senior function head, average £116/basic £97• Function head, average £87/basic £78• Department manager, average £69/basic £63• Section manager, average £53/basic £49• Section leader, average £46/basic £44• Senior accountant, average £37/basic £35 • Accountant, average £28/basic £27• Junior accountant, average £22/basic £21

Pay and salaries (3 of 5)• VOLUNTARY SECTOR• Chief Executive £80• Director £68• Senior function head £53• Function head £44• Department or section manager £36• Senior specialist/professional/technical £30• Specialist/professional/technical £22• Junior specialist/professional/technical £18• Trainee specialist/professional/technical £15• Trainee non-professional £13

Pay and salaries (4 of 5)• ANNUAL SALARY REVIEW• Work out your budget• Review reward principles• Analyse market pay data• Gain budget approval• Communicate the timetable• Support line managers• Fine-tune the process• Explain decisions to staff• Inform payroll

Pay and salaries (5 of 5)• SALARY SURVEYS• Ask who produced the survey• Check out the methods of data collection• Make sure the sample size is big enough• Pay attention to all reward package elements• Understand the key statistics• Get the right match• Decide your market position• Use your judgement

Bonuses

Bonuses (1 of 2)• Director, average bonus £49/basic £134• Senior function head, average bonus £30/basic

£106• Function head, average bonus £16/basic £80• Department manager, average bonus £10/basic

£63• Section manager, average bonus £7/basic £49• Team leader, average bonus £4/basic £42• Senior, average bonus £3/basic £35 • Professional, average bonus £2/basic £29• Junior professional, average bonus £1/basic £21• Trainee, average bonus £1/basic £16

Bonuses (2 of 2)• BONUS/INCENTIVE SCHEME PERFORMANCE

MEASURES• Company performance/profitability 46%• Individual performance 35%• Customer service/satisfaction 18%• Productivity 17%• Sales targets 11%• Teamworking/team objectives 11%• Absence/attendance levels 6%• Health & safety 6%• Quality measures 4%• Exceptional performance 4%

Reward

Reward (1 of 7)

• COMMUNICATING REWARDS• Benchmark your current position• Select your benefits with care• Introduce two-way communications• Totally rewarding• Talk to your advocates

Reward (2 of 7)• MOST IMPORTANT REWARD ACTIVITIES• Benefits• Grading structure/job evaluation• Bonus schemes• Annual salary review• Harmonisation of pay/benefits/grading• Pensions• Total reward• Performance-related pay

Reward (3 of 7)• MOST TIME-CONSUMING REWARD

ACTIVITIES• Benefits• Annual salary review• Grading structure/job evaluation• Bonus incentive schemes• Salary benchmarking• Pensions administration• Reward strategy• Share schemes and options• Equal pay

Reward (4 of 7)• MAIN REWARD ISSUES, 1st priority %, 2nd

priority %• Base salary competitiveness 47%(1), 20%(2) • Effectiveness/competitiveness of PRP 29%(1),

26%(2)• Cost control 29%(1), 28%(2)• Cost reduction 28%(1), 28%(2)• Total reward competitiveness 25%(1), 27%(2) • Improving effectiveness of current benefits spend

20%(1), 28%(2)• Harmonisation and/or removing inconsistencies

20%(1), 30%(2)

Reward (5 of 7)• MAIN BENEFITS ISSUES, 1st priority %• Final-salary pensions costs 36%• Employees do not understand benefits package

35%• Long-term sickness provision/costs 25%• Uncompetitive benefits package 23%• Company cars 22%• Lack of joined-up thinking with overall package

22%• Employees demanding more flexibility 16%• Employees demanding more benefits 15%• Private medical insurance costs 15%

Reward (6 of 7)• REWARD DURING RECESSION• Avoid panicking• Think long-term• Engage with your employees• Check what your competitors are offering staff• Keep your staff up to date

Reward (7 of 7)• MAKING BUDGETS STRETCH FURTHER• Get flexible• Communicate• Promote cycling• Use shares• Charity begins at work• Look at top pay levels• Recognise your employees formally….• ….and informally• Bulk buy your benefits• Assemble a package

Real-life examples

Real-life examples (1 of 11)• ORGANISATION A-TOTAL REWARD &

BENEFITS, 10300 employees, manufacturing• Introduced a specific brand following focus

groups, initially using paper and online selection methods

• Issued total reward statements to all employees to support the annual pay negotiations and the recruitment strategy

• Transferred the scheme online with computer access on-site and added benefits to suit a wide range of people

Real-life examples (2 of 11)• ORGANISATION A-ACHIEVEMENTS• Increase to 81% from 74% of the workforce making at

least one flexible benefit selection• Employees now have more flexibility to take benefits

or cash options• Benefits support work-life balance, wellbeing,

employee engagement, environmental issues, savings and parental needs

• Increased retention rate as voluntary leaver rate cut by 4%

• Employees can access their statements and check their selections at any time

• Trade union support for the communication of the benefits to members

Real-life examples (3 of 11)• ORGANISATION B-NEW MISSION AND VALUES

REQUIRING A CHANGE IN BEHAVIOURS THROUGH AN ADVANCED RECOGNITION CULTURE, 3500 employees, financial services

• Conducted an employee survey which identified that employees would feel more engaged if they felt more valued. Those departments with high recognition scores were asked to disseminate best practice.

• Created a new language for recognition with visible totems and tools presented to team leaders and managers in a masterclass run by an external expert.

Real-life examples (4 of 11)• ORGANISATION B-NEW MISSION AND VALUES

REQUIRING A CHANGE IN BEHAVIOURS THROUGH AN ADVANCED RECOGNITION CULTURE, 3500 employees, financial services

• Awards dinner and long-service awards were revamped and an online Thank You site was created, offering cards and small gifts.

• Introduced awards for employees, allocated by a staff voting process.

Real-life examples (5 of 11)• ORGANISATION B-ACHIEVEMENTS• Thank You site now receives about 1900 entries a

month from people appreciating their colleagues• More than 400 Thank You cards are sent every

month• Very positive feedback from revamp of long

service award• Employee survey found recognition had improved

from 68% to 76%

Real-life examples (6 of 11)• ORGANISATION C-CHANGE OF CULTURE BY

DEVELOPING A PERFORMANCE APPROACH THAT REWARDS THE DELIVERY OF RESULTS AND RECOGNISES EMPLOYEES’ CONTRIBUTION, 800 employees, chemicals

• Introduced a ‘pay for performance’ approach to all staff, linking reward to individual and team performance

• Created a simplified pay and grading structure to give managers greater flexibility and a performance review process to identify top performers

• Developed innovative ways to recognise the contribution of all employees, including granting 200 free share options for all employees

Real-life examples (7 of 11)• ORGANISATION C-ACHIEVEMENTS• Strong link between performance and increased

shareholder value• Universal buy-in and support from business

managers• Redesigned sales incentives seen as a valuable

tool for driving and rewarding profitable growth• Many individuals and teams exceeded sales

targets• Results surpassed expectations with profit up

50% to $48M• High employee engagement, with 70% happy

with the rewards they receive, and 84% proud to work for the company

Real-life examples (8 of 11)• ORGANISATION D-MODERNISED TERMS &

CONDITIONS, INCLUDING INCENTIVES TO ALIGN THEM WITH COMPANY OBJECTIVES, 2600 employees, retail

• Invested an extra £2M in the retail payroll budget & benchmarked pay against competitors

• Linked individual pay to actual sales turnover and defined performance criteria in consultation with the works council. This took into account existing bonuses, incentives and terms & conditions

• Communicated changes via 13 nationwide area briefings in two weeks with back-up documentation and carried out additional employee survey to measure levels of satisfaction

Real-life examples (9 of 11)• ORGANISATION D-ACHIEVEMENTS• Store manager turnover was reduced by 43% and

overall labour turnover dropped by 16%• The number of customer complaints declined by

25%• Three in five employees said their salary was fair

for their responsibilities, compared with 16% in a previous satisfaction survey and motivation levels are now at 62%

• Absence has fallen by 27%

Real-life examples (10 of 11)• ORGANISATION E-INTRODUCED A CLEAR PAY

AND GRADING STRUCTURE AS MORE THAN 6000 WORKERS HAD NO STRUCTURE IN PLACE, 15000 employees, builders merchant

• Benchmarked salary across the industry and consulted line managers to define roles and competencies

• Designed a pay and grading structure to demonstrate pay and career progression

• Trained line managers in an employee assessment process

• Communicated the new structure in face-to-face briefings and online Q&A chat sessions

Real-life examples (11 of 11)• ORGANISATION E-ACHIEVEMENTS• 6000 employees have a pay and grading

structure with defined job roles• There is now a reward system in place for

increasing responsibility and gaining new skills and knowledge and a career workbook shows employees what they need to achieve to improve pay

• The results of the latest survey indicated that overall satisfaction with pay had increased by 11%. A telephone survey following implementation found more than 80% agreed that the structure is easy to understand

• Staff turnover is showing signs of reducing

Exercise

Case studies

Conclusion & Questions

Conclusion

• Summary• Questions

reward january 2010

Business

employers ni saving

advanced recognition culture

senior function head

function head

section manager

team leader

performance approach

values requiring