Reward in 2012 - Hay Group · PDF fileAbout the Reward in 2012 research 1 Summary 2 ... and...

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Reward in 2012 Keeping pace with changes in the economic climate

Transcript of Reward in 2012 - Hay Group · PDF fileAbout the Reward in 2012 research 1 Summary 2 ... and...

Page 1: Reward in 2012 - Hay Group · PDF fileAbout the Reward in 2012 research 1 Summary 2 ... and reward professionals to the changing economic outlook ... the oil and gas sector appears

Reward in 2012Keeping pace with changes in the economic climate

Page 2: Reward in 2012 - Hay Group · PDF fileAbout the Reward in 2012 research 1 Summary 2 ... and reward professionals to the changing economic outlook ... the oil and gas sector appears

ContentsAbout the Reward in 2012 research 1

Summary 2

Key findings 4

Research findings in detail 5

Business performance 5External climate 6Internal impact 6Salary changes 6Short term incentives 8Structure of reward packages 9Staffing levels 9

Sector analysis 10

Public and not for profit sectors 10Chemicals 11Fast moving consumer goods 12Retail 13Financial services 13Industrial brands 14Oil and gas 15Utilities 15Services 16

Conclusions and recommendations 17

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About the Reward in 2012 researchThe Hay Group “Reward in 2012” report has been compiled based upon a survey conducted during November and December 2011 designed to understand the challenges facing HR professionals in the UK in 2012.

The report follows on from the “Reward in 2011” research published by Hay Group in early 2011. The “Reward in 2012” report analyses the responses of organisations and reward professionals to the changing economic outlook and its impact on their HR / reward functions and priorities in 2012.

The report analyses information provided by 182 organisations who participated in our online survey (146 from the private sector and 36 from the public and not for profit sectors). Typical respondents included HR and reward professionals from medium to large sized organisations across all major industries, representing over half a million employees.

Thank you to all of you that took the time to complete this survey and we hope you find the report findings valuable and interesting.

The report includes:

n Business performance

n External climate

n Internal impact

n Salary changes

n Short term incentives

n Structure of reward packages

n Staffing levels

n Sector analyses

If you would like to discuss any aspect of this research and/or would like further advice on any reward related issues, please contact us:

E: [email protected]: 020 7856 7200

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SummaryThis year’s Reward in 2012 research highlights a change in economic outlook from our research undertaken in previous years. While it is clear that organisations are responding to a change for the worse in the economic climate in comparison to 2010 and 2011, the extent of pessimism seen in 2009 does not exist today. Then, implementation of redundancies and pay freezes were widespread and confidence was poor; now, the uncertainty globally and particularly in Europe brings us seemingly back to the uncertainties and the waiting room environment of 2008.

Two thirds of our respondents feel that the worst of the recession is not over for their organisation but a similar proportion still expects business performance to be on or above target. There are caveats, however, and a degree of sector polarisation is evident. The outlook among HR professionals in the public sector is noticeably subdued in the wake of budget cuts and restructuring. At the other end of the scale, the oil and gas sector appears buoyant with inflation-beating pay increases and an upbeat outlook for the coming year.

Two thirds of our respondents feel that the worst of the recession is not over for their organisation.

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Despite some similarities to 2008, the business environment is strikingly different today. At a business level, our previous research showed that the uncertainties of 2008 for reward professionals were followed by a period of getting one’s house in order.

Although some organisations are more confident of their survival now as a result of their activities during the last couple of years in managing costs than in 2008, the general economic picture is that the overall markets are looking bleak. A large number of organisations are struggling to stay afloat in the current market and there is a general lack of confidence with the presence of another downturn close at hand. This is actually the image being projected by the press: that the UK is already in a recession. Plus, there is the threat of a potential Eurozone crisis looking set to continue for the foreseeable future. None the less, one can’t ignore the possibility that the US and Asian economies are grasping on the path to recovery.

At a staff level, employees’ take home pay has been eroded since 2008 through consecutive pay freezes and below-inflation pay rises and our research this year indicates that this trend is set to continue as the majority of employees will receive pay increases less than projected inflation in 2012. At this stage, there is potentially less good will to take advantage of in terms of engagement as the cumulative effects of the high cost of living over a number of years start to bite.

In light of this environment, the following areas have been highlighted by reward professionals as areas of focus in 2012:

These areas of focus indicate that the short-term, reactive measures that were common in 2009 are still, at least for now, a thing of the past. The focus now is on making sure that the right choices for the future as well as the present are made. It appears that, having had to take knee-jerk reactions at the worst of the downturn, reward professionals recognise that we are now in a different place.

n Examining their current approach to reward and its effectiveness in the current climate

n Balancing staff retention with cost control as a result of demands for pay increases in real terms

n Focusing on employee engagement

n Targeted recruitment rather than the blanket recruitment freezes used in the recession

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Over half of the respondents feel that uncertainty around pay is affecting workplace morale.

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Key findings

n Business Performance 62 per cent of respondents are expecting business performance to be at or above targeted levels, while 32 per cent expect below target performance. Responses reflect slightly more pessimism than our research last year but still an improvement on 2009.

n External climate Two thirds of respondents feel the biggest impact of the recession is still not over for their organisation.

n Internal impact Just over half of the respondents feel that uncertainty around pay is affecting workplace morale, manifesting in loss of staff to higher paid jobs and low employee engagement.

n Salary changes This year has seen fewer pay freezes implemented overall, which continues the trend observed in last year’s research. The majority of respondents planning to increase pay in 2012, will do so at rates lower than expected inflation – approximately 75 per cent of increases in the private sector and 90 per cent in the public sector will be no more than 3 per cent.

n Short term incentives 60 per cent of all respondents with a short term incentive plan expect bonus payouts to be on or above target in 2012 in response to performance during 2011.

n Structure of reward packages Respondents report that they are looking at more innovative approaches to managing their reward packages such as revising bonus structures or overhauling performance related pay.

n Staffing levels The share of organisations implementing redundancy processes has fallen during this year and responses indicate plans to do even less in 2012. Staff levels will be managed principally by natural attrition and restructuring during the coming year.

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Research findings in detail

Business performance

51 per cent of respondents are expecting business performance to meet targeted levels this year, while 11 per cent expect above target performance and 32 per cent expect below target performance. Comparing the responses to our research last year indicates a slightly more pessimistic outlook about the continuing economic uncertainty amongst respondents – previously 70 per cent expected business performance to be on or above target and 23 per cent expected it to be below target. However, despite the slight shift this year, responses reflect more optimism overall than in our research undertaken in 2009 – shown in the following graph.

When looking in more detail at responses from specific sectors there are certain disparities in business outlook. The outlook within retail, a sector that we highlighted last year as particularly affected by the downturn, appears to have deteriorated further since last year: 71 per cent of respondents now expect business performance to be below target (with 21 per cent expecting on target performance and 7 per cent expecting above target performance). The outlook in the service sector is also noticeably subdued, with 60 per cent of respondents predicting below target performance. Conversely, the chemicals and oil and gas sectors expect higher than average performance, with 100 per cent of oil and gas respondents predicting on target performance and 70 per cent of chemicals respondents doing so (including 40 per cent predicting above target performance). The outlook in the public sector is similar to that of the private sector as a whole.

Graph showing the business performance outlook for 2010, 2011 and 2012

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60%

50%

40%

30%

20%

10%

0%Reward in 2010 Reward in 2011 Reward in 2012

Below target On target Above target

43% 45%

12%

30%

47%

23%

32%

51%

11%

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66 per cent of respondents stated that the biggest impact of the recession is still not over for their organisation.

1 Which way now for reward? The continuing evolution of reward in the recession, November 2011

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External climate

Echoing the business outlook sentiment above, 66 per cent of respondents stated that the biggest impact of the recession is still not over for their organisation, as opposed to 7 per cent of respondents believing that the worst of the recession is over and 24 per cent are uncertain over its continued impact on their organisation. This indicates a change from last year when the majority of respondents reported having experienced an upturn from the recession.

Internal impact

With continuing economic uncertainty comes continuing uncertainty over pay. Respondents report that employees are concerned about pay rises failing to keep up with inflation as well as the potential for new or repeat pay freezes.

When questioned about the impact this was having on morale in the workplace, respondents are divided: 51 per cent feel that uncertainty around pay is affecting workplace morale, while 49 per cent do not view it as having an impact. This is also the case when looking solely at responses from the private sector. Divergences from this trend can be observed in certain industries, most likely reflecting the speed of recovery felt within these sectors. 67 per cent of respondents in the oil and gas sector do not see an effect on morale. Conversely, in the services and utilities sectors, 60 and 64 per cent respectively report that pay uncertainties are taking their toll on workplace morale. As could be expected in light of the implementation of the Comprehensive Spending Review, 67 per cent of public sector respondents think that uncertainty over pay is affecting morale in the workplace.

One issue that respondents reported having to deal with as a result of pay uncertainty is staff retention resulting in staff often leaving due to unsatisfactory total remuneration packages. When questioned on the topic of cost control affecting retention of high performers, 43 per cent of respondents stated that this was a concern. A further key issue reported was lower engagement and dissatisfaction amongst employees which confirm the results published in Which way now for reward?1 about the need to define an employer brand.

Salary changes

While all respondents feel pressure from employees to increase pay, 57 per cent also reported feeling this pressure from their CEO or MD. This is in contrast to 43 per cent under pressure to decrease pay, suggesting relatively widespread concern at the top of many organisations to control costs in the current climate.

This year has seen fewer pay freezes implemented – 21 per cent of respondents have frozen pay this year compared to 31 per cent last year, which in turn was a 9 per cent fall from the previous year. Perhaps not surprisingly, proportionately more respondents with pay freezes come from the public sector. This indicates a greater divide between latest practices in the private sector and public sector: 67 per cent of public sector respondents have frozen pay this year (compared to 9 per cent of private sector responses), an increase on the 50 per cent reported last year.

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Looking forward, just over half of private sector respondents anticipate lifting the freeze within the coming year, contrasting with a third of public sector responses.

For those respondents that are planning to increase pay in 2012, the majority plan to do so at rates lower than expected inflation – approximately 75 per cent of increases in the private sector and 90 per cent in the public sector will be no more than 3 per cent. This pattern is mirrored across all levels of staff and suggests wage control is as important to many organisations as in previous years.

Looking at planned salary increases on a sector basis indicates certain exceptions. The outlook for pay next year in the services sector is particularly low with around half of employees set to receive no more than 2 per cent. At the other end of the scale, most employees in the oil and gas sector are in line to receive between 4 and 5.5 per cent on their pay – a continuation of the trend observed last year. In contrast to last year, planned pay increases have weakened in the finance sector and the median increase now stands at 2.5 per cent rather than 2.8 per cent last year.

9%

8%

13%

35%28%

14%

14%

34% 29%37%

13%

8%

33%

17%

8%

8%

1%

91%62%

38%

All organisation – lifting pay freeze

Private sector salary changes 2012

Public sector salary changes 2012

Private sector – lifting pay freeze

Public sector – lifting pay freeze

n Don’t known In the next 3 monthsn In the next 6 monthsn In the next yearn Longer than 12 months

n Decreasing salariesn Freezing salariesn Increasing salaries

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The following table summarises salary forecasts by sector. Shown below are salary forecasts by employee category.

Short term incentives

60 per cent of all respondents with a short term incentive plan expect bonus payouts to be on or above target in 2012. 73 per cent of responses last year outlined plans to pay on or above target bonuses. The reduction on last year’s bonus pots is likely to be a result in part of the ongoing European and economic uncertainties. The FMCG and oil and gas sectors plan higher than average payouts, at 77 per cent and 92 per cent respectively on or above target. Of the minority of public sector respondents offering short term incentives, 75 per cent expect these to be on or above target. At the other end of the scale, 86 per cent of services and retail respondents anticipate payments to be below targeted levels.

2 Which way now for reward? The continuing evolution of reward in the recession, November 2011

27%

23%

50% 46%42%

12%

27%

23%

50% 46%42%

12%

Short term incentive forecast 2011

Short term incentive forecast 2012

n Below targetn Above targetn On target

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Sector All employees median (%)

All orgs 2.8

Private 3

Public 1.5

Chemicals 3.5

Finance 2.5

FMCG 3

Industrial Brands 3

Oil and Gas 5

Retail 2

Services 2.3

Utilities 3.5

Employee level Median (%)

All employees 2.8

Executives 2.7

Management/professional 3

Support/clerical 2.5

Graduate recruits 2.5

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Structure of reward packages

As identified by Hay Group’s Which way now for reward2 research late last year, organisations are reviewing and changing the way they manage reward. Approximately a quarter of respondents to Reward in 2012 reported that their reward strategies are no longer fit for purpose in light of the current climate.

In keeping with this trend, respondents in both surveys report that they are looking at innovative practices. Although one of the most popular practices focuses on simply increasing or decreasing base pay (16 per cent of respondents), improving the link between pay and performance is also popular (also 16 per cent). These practices are closely followed by changing benefits offerings (15 per cent) and bonus design (15 per cent) as well as altering pension arrangements (14 per cent). Some organisations have taken an alternative approach by communicating reward to employees more openly or in more detail.

Staffing levels

Responses to this year’s research indicate a decreasing focus on redundancies. While 23 per cent of respondents have made staff redundant over the past year, 12 per cent are currently undergoing this process and just 7 per cent anticipate redundancies within the next year. The slight deviation from this trend is in the public sector where 17 per cent of respondents are planning redundancies over the next 12 months.

When asked how they plan to change staffing levels over the coming year, the majority of respondents will do so via natural attrition (62 per cent of all respondents) and restructuring (58 per cent). 30 per cent of responses to this question cited a recruitment freeze and 35 per cent cited redundancies.

Approximately a quarter of respondents to Reward in 2012 reported that their reward strategies are no longer fit for purpose in light of the current climate.

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Sector analysesPublic and not for profit sectors

Our Reward in 2012 research confirms the picture of widespread change across the public and not for profit sectors. 85 per cent of organisations sampled suggest that staffing levels will change through restructuring in the next 12 months and 73 per cent through redundancy. Although many of these organisations have spent the last 12 months or more coming to terms with huge funding deficits there is a polarisation within the sector. For instance, many organisations will be directly affected by the Chancellor’s recent 1 per cent salary cap proposals but others have more freedom. To underline this, 62 per cent of our sample plan to increase salaries in the next 12 months, with the majority of this group looking to offer around 2 per cent.

Although a pay award of 2 per cent is pushing towards the kind of figures seen in the private sector, restraint is still there for all to see with over half of respondents believing they are under pressure from their CEO to decrease pay. Downward pressure on salaries is also in existence externally to the organisation. If you work in local government for instance, the new Localism Act requires that you create and publish a pay policy statement detailing senior salaries, the lowest salaries and the relationship between the two. A separate piece of Government guidance calls for salaries over £58,200 to be published.

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With continued restraint on salaries in the public and not for profit sectors, it comes as no surprise that organisations continue to be concerned about the challenge of motivating and engaging their workforce. Although 67 per cent of the respondents believe that pay has affected morale, it does not seem to be having a negative effect on retention rates. Just half of the respondents believe that cost control will damage their ability to retain key talent and 71 per cent have not seen the pay freeze affect turnover. Only a quarter of respondents believe it will be difficult to control wage demands.

The role of a pay and reward professional in the public and not for profit sector will continue to be a difficult one for the foreseeable future. Organisations will continue to strive to design pay structures that both incentivise the individual, drive the operational results required, yet continue to ensure affordability and control.

Chemicals

The chemicals sector in the UK is faring a little better than the broader private sector. Respondents are planning salary increases of 3.5 per cent over the next year, which is slightly higher than the 3 per cent forecast by the broader private sector. The forecast should be tempered with some caution due to the highly cyclical nature of the industry and uncertain economic outlook.

Executives in the chemicals sector are likely to see the smallest base salary increases of 3 per cent, compared with all other employee groups receiving 3.5 per cent. This suggests a possible reaction to the current level of scrutiny on top level pay, a trend not observed in responses from the private sector as a whole.

63 per cent of chemicals sector respondents who have an incentive scheme expect bonuses to be on or above target in 2012.

The role of a pay and reward professional in the public and not for profit sector will continue to be a difficult one for the foreseeable future.

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Fast Moving Consumer Goods (FMCG)

The FMCG sector has a positive outlook for 2012, although there is a degree of uncertainty about how the economy will perform, and doubts about how this will impact on business. The sector has been resilient during the last couple of years compared with the general market, with people continuing to buy many FMCG products such as food and drink whether they were experiencing financial difficulties or not. This trend filters through to business expectations for 2012 with 77 per cent of respondents expecting business performance to be on or above target this year (a very small decline from 2011 expectations). This figure shows how well the sector continues to perform in adversity.

Organisations in this sector often have sophisticated reward departments and are able to adapt their reward strategies relatively quickly in response to changes in the economic climate. One consequence of the recent recession was the opportunity it gave to reward functions in the sector to re-assess their cost base. This exercise has left many FMCG companies in a much better state to respond to an economic downturn should it occur. This strength is reflected by our respondents; 100 per cent of our surveyed organisations plan to increase salaries in the next 12 months, with a median forecast increase of 3 per cent. This level of increase is unchanged from last year.

One of the biggest challenges that respondents said they will be facing during 2012 (as in 2011) is the battle to retain talent. The sector is notoriously competitive with companies targeting the same prospective employee talent pool and/or poaching from competing organisations. FMCG organisations will need to have effective reward policies in place to ensure key talent stays within the company. Many FMCG companies recently reviewed their reward structures and implemented a policy of pay for performance. They will have to ensure that high performing employees are rewarded in line with the expectations that these reviews created.

In summary, whilst 62 per cent of respondents expect their businesses to continue to feel the impact of the recent recession and continuing economic uncertainty in 2012, most feel that they are in a good position to respond where necessary. Unnecessary costs have been cut, reward programmes reviewed and a high performance culture (based on the hitting of financial targets) institutionalised.

FMCG companies will have to ensure that high performing employees are rewarded in line with the expectations that pay for performance reviews created..

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Retail

The retail sector had a tough 2011, with 71 per cent of our respondents reporting below target business performance and similarly, most companies are expecting a difficult 2012. There are a number of potential economic issues, including UK wide rising unemployment, reduced public spending and high inflation that could all have an impact on consumer spending confidence.

As in 2011, there is expected to be a clear divide between the fortunes of the major supermarkets (despite recent warnings, continue to perform well) and the high street retailers (who continue to see tough trading conditions.) Overall a third of our respondents plan to freeze salaries in 2012, with the rest planning to increase salaries, with a median forecast increase of 2 per cent. Last year all surveyed companies planned to increase salaries and the median forecast was 2.5 per cent.

Maintaining employee morale and communicating effectively will be important. 80 per cent of our respondents think that uncertainty over pay has affected employee morale. It will be key to ensure that morale remains as high as possible to ensure productivity and business performance hold up. 79 per cent of respondents either believe that the impact of the recent recession is not yet over or are unsure about future impacts. In this climate communicating effectively to employees is vital.

Financial services

Responses from the financial services sector indicate a negative shift in business sentiment this year. More than half of respondents report that the worst of the recession is still not over for their organisation. Overall, business performance in the sector has been a mixed picture over the past twelve months – 58 per cent of organisations have performed at or above target, with the rest performing below target.

More caution over reward costs is apparent this year – while all respondents planned to increase salaries this time last year, this has now fallen to 88 per cent with the remainder planning to freeze pay. The median salary increase for the coming year is 2.5 per cent (lower than the all organisations median of 2.8 per cent) and applies to all levels of employees from clerical up to executives. Of those organisations operating a short term incentive scheme, 44 per cent in 2012 will pay out below target, 44 per cent on target and 12 per cent above target.

It is recognised that there is concern among employees about pay keeping up with the cost of living accompanied by a continued uncertainty due to persistent economic difficulties. As such, a third of respondents think controlling demands for pay increases in the coming year will be difficult. In light of this, it is not surprising that a key focus for the majority in 2012 is to review reward policy. This continues a recent trend of innovative approaches in the sector: 80 per cent of respondents have focused on changing benefits or bonus schemes compared to just 10 per cent focusing on reducing pay with no alternative offering to employees.

While all respondents planned to increase salaries this time last year, this has now fallen to 88 per cent with the remainder planning to freeze pay.

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Industrial brands

The majority of industrial organisations (such as manufacturing, engineering and construction companies) have weathered the storm and have reported business performance that is on, or above target for 2011. A large proportion of companies have also reported below target performance – highlighting the fact that there are still significant challenges facing the industrial services sector and the mood may be about to change.

Output in the UK construction industry dropped by 3 per cent in 2011 and the forecast for 2012 is for more of the same. The manufacturing sector faired a little better during 2011, but the continuing Eurozone crisis and a lack of available credit has lead to a fall in demand and a drop in industrial output.

91 per cent of the industrial organisations surveyed have increased salaries by 2.9 per cent on average during 2011, which is in-line with the private sector as a whole. Although average salary increases have been lower than inflation, natural employee attrition has remained subdued as few employees risk a move elsewhere.

The forecast for 2012 is for flat growth – the Engineering Employers Federation UK and Binder Dijker Otte (accounting firm) have revised their expectations of manufacturing growth to 0.9 per cent – down from 2.2 per cent. Rather surprisingly then, all of the industrial organisations surveyed have indicated that they plan to increase salaries by an average of 3 per cent in 2012, despite the overall outlook.

The government has recently launched a £125m initiative to help promote growth in UK advanced manufacturing and related supply chains, by capitalising on the latest trend for relocating elements of their supply chain back alongside their existing UK operations. More than half of the organisations surveyed for Reward in 2012 have indicated that they are planning to alter current staffing levels in the next 12 months via organisational restructuring, and it is likely that mergers and acquisitions will continue to be prevalent in the industrial sector, as businesses continue to jockey for position.

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Oil and gas

A fairly bullish picture emerges when looking at one of the few economic bright spots in the UK economy today.

The median base salary forecast of 5 per cent is far higher than the 3 per cent increase planned in the private sector as a whole. In addition, no respondents have either had a pay freeze over the last 12 months, or are planning one in the next 12. It is perhaps not surprising that 50 per cent of respondents report their employees are happy with the level of their pay – compared with just 22 per cent in the private sector as a whole. With the oil and gas sector paying such significant increases, it is likely we will see the premium paid for working in it increase over the coming year.

92 per cent of respondents are expecting bonuses to be paid at target in the next 12 months, reflecting the buoyant economic situation oil and gas companies are in. Despite this, there is still an air of caution, as a fifth of companies are still in a recruitment freeze.

Utilities

There is a mixed picture to be found in the Utilities sector. Respondents came from water, electricity and renewable sectors. As a whole, utilities companies are forecasting a 3.5 per cent base salary increase over the next year, which compares favourably to the private sector forecast of 3 per cent. In addition, no respondents are expecting a salary freeze over the coming year, unlike 8 per cent of the private sector.

Support and clerical staff are set to get stronger increases (3.8 per cent) than executives at 3 per cent in the utilities sector over the coming year. The unionised work forces present in many companies at least partly explain this difference, although it is perhaps also a sign that utilities sector clients are attempting to ease the impact of soaring inflation on employees who are likely to be feeling the strongest effect on their disposable income.

Despite a more positive outlook on salaries, 70 per cent of respondents do not believe the biggest impact of the recession has been felt on their company, compared with 51 per cent in the private sector as a whole. A third of utilities sector respondents are planning to make redundancies, compared with just 4 per cent in the private sector.

It is not surprising that 50 per cent of respondents report employees are happy with the level of their pay – compared with just 22 per cent in the private sector as a whole.

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More than half of the organisations surveyed for Reward in 2012 have indicated that they’re planning to alter current staffing levels in the next 12 months via organisational restructuring, but mostly through natural attrition.

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Services

The majority of services organisations (such as business and professional services) are experiencing post recession negative effects and are therefore still facing significant challenges in meeting their targets. Over half of respondents reported below target business performance for 2011, yet 40 per cent reported on target performance, which illustrates the general sense of uncertainty with some organisations meeting their targets and others not.

Despite the current uncertainty, 88 per cent of services organisations have increased salaries during 2011 due to experiencing more and more pressure from their employees to raise salaries. Average salary increases have been on par with the market, thus natural employee attrition has remained subdued as few employees risk a move elsewhere.

Forecasts for 2012 shows that services organisations plan to increase salaries well below inflation rates once again by an average of 2.3 per cent. The caveat lies on the fact that half of respondents are concerned that cost control through pay will damage the ability to retain high performers. Nevertheless, the strategy for services organisations appear to be mostly centred on pay and reward review and cost control. More than half of the organisations surveyed for Reward in 2012 have indicated that they’re planning to alter current staffing levels in the next 12 months via organisational restructuring, but mostly through natural attrition.

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Conclusions and recommendationsThe overall message this year from our research reflects that last seen in 2008: we are back to “wait and see”. Organisations must be prepared for a large amount of change and reward review. Although the environment for HR professionals is as uncertain as ever, it is important that they ensure there is an alignment between reward, reward strategies and the new economic realities for business.

Despite the similarities to 2008, to forget that we are operating in a different environment today is to underplay the difficult conditions that HR professionals have experienced since the start of the downturn, and subsequently focusing on the changing role of the reward professional. They have had to be reactive at the worst of the downturn and are reluctant to return to this, reflected in the focus on longer-term measures for 2012 and development. Having gone through pay freezes and limited pay increases in a climate of relatively high inflation, employees have seen the real value of their pay fall and many respondents recognise that there is concern among employees that the bad times will return. A careful balancing act is now required for slimmed-down organisations to operate effectively while engaging staff and continuing to control costs.

The main objectives for 2012 for business leaders and senior managers both in the private and the public sector is to ensure composure is maintained, make some investments for the future in both the public and private sectors and avoid large job losses. The companies that succeed in this will be well on the way to being rewarded with a more engaged workforce and as was highlighted in Hay Group’s and FORTUNE’s World’s Most Admired Companies research3, the most admired companies have a more engaged workforce than before the recession. In particular, reward professionals will need to focus on the following in the coming months:

3 Hay Group and FORTUNE, World’s Most Admired Companies 2011

n Employee engagement Active initiatives developed to maintain and increase employee engagement while budgets are still tight.

n Talent management Effective programmes must be designed to ensure businesses are best placed to react to any economic shocks and changes.

n Reward packages Reward packages should be reviewed to ensure they are still fit-for-purpose.

n Communication Effective communication must be in place so that employees are aware of the total value of their reward package.

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Africa Cape Town Johannesburg Pretoria

Asia Bangkok BeijingHong KongJakarta Kuala LumpurMumbaiNew Delhi SeoulShanghaiShenzhenSingaporeTokyo

Europe Athens BarcelonaBerlin BilbaoBirminghamBratislavaBristolBrusselsBucharestBudapest DublinFrankfurtGlasgow

HelsinkiIstanbulKievLilleLisbonLondon MadridManchesterMilanMoscowOsloParisPrague RomeStockholm StrasbourgViennaVilniusWarsaw ZeistZurich

Middle EastDubaiRiyadhTel Aviv

North America AtlantaBoston CalgaryCharlotteChicago

DallasEdmontonHalifaxKansas CityLos AngelesMexico CityMontrealNew York MetroOttawaPhiladelphiaReginaSan FranciscoSan Jose (CR)TorontoVancouverWashington DC Metro

Pacific AucklandBrisbaneCanberraMelbournePerthSydneyWellington

South America BogotaBuenos AiresCaracasLimaSantiagoSao Paulo

Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 84 offices in 48 countries, we have helped thousands of clients, including private, public and not-for-profit organisations representing every major business category. We focus on change in order to help people and organisations realize their potential.