Reward Managament Survey report
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Transcript of Reward Managament Survey report
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Annual survey report 2013
REWARDMANAGEMENT
2013
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REFLECTIONS ON THE LAST 100 YEARS
This year the CIPD celebrates its centenary. How
has reward changed over the intervening years?
Disappointingly, back then, we did not collect
information on how employers determined
salary levels, structured pay or determined pay
progression. Or perhaps we did, but we did not
think that the findings would be useful and so
threw away the results after a number of years.
Hindsight can be a wonderful thing.
In 1913 the average annual earnings for the
UK was around 51 (Change in Distribution of
National Income, Bowley 1920, p13). Today, many
people can earn that amount in a day, but why
people earn that has changed, just as how it is
delivered by employers.
Back then labour had traditionally been seen as
just one element of production, a cost that had
to be minimised and managed. Tasks, such as
sweeping and scavenging or engine cleaning,
were often manual and repetitive. However, ideas
around labour management and development
were beginning to change. Some industrialists
were becoming concerned about the plight of their
employees, for moral, social or political reasons.
The recent Boer War had shown that many urban
volunteers were unable to meet the armys physical
requirements and there was a concern about the
impact of this on Imperial security.
In addition, the UK state was introducing a
system of national insurance to protect workers
if they became unemployed, sick or old. Over the
intervening years, many employers supplemented
these benefits with occupational sick pay and
workplace pensions. For instance, the August
1921 issue of Welfare Work, the predecessor to
People Management, has an interesting case
study on why Cadbury Bros. decided to go beyond
what was required by the 1906 Workmens
Compensation Act.
Benefits developed further, as employers used
them to meet moral concerns, recognise employee
status or found that they could be more cost-
effective than pay. This concern about employee
betterment, or welfare, was one of the drivers
behind the creation of the Welfare Workers
Association, though at the time there was more of
a focus on the plight of women and girls.
From the US, scientific management was
encouraging a rational approach to people
management, including reward. While scientific
management did not emphasise the human in HR,
it did stress that workers were important resources
and that it made business sense to reward them
well for their physical and mental exertions,
something that was taken up by Henry Ford at
his Model T factory when he increased the hourly
rate to $5 an hour and introduced a wide range
of benefits for his employees. Writing around that
time, Conan Doyle refers in his Sherlock Holmes
book, The Valley of Fear, to this idea when one of
the characters says: Thats paying for brains, you see
the American business principle.
A rational way of managing people resulted in
various reward policies and practices to ensure
To mark the CIPDs centenary, Charles Cotton, CIPD Performance and Reward Adviser, shares his thoughts on a century of reward management.
REWARDING TIMES?
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CIPD is 100 in 2013!In 1913, some extraordinary and enlightened people came together to form what is now the CIPD. Lots of things have changed over the last 100 years, but one thing remains the same: our commitment to support and lead an HR profession that can help people and organisations be the best they can be.
Find out more about our centenary celebrations at cipd.co.uk/100
a common approach, though sometimes these
policies were not often thought to be rational
by many in the organisation. Partly, this was
because the reward policies and practices did
not support the business strategy or people
management ambitions of the organisation, often
because the economic, demographic, political and
technological contexts in which they had been
developed had changed. Also, it was because
so-called best practice was often not built on an
evidence base or what suited the organisation but
simply on what other competitor organisations
were doing at that time. Instead, reward could
often be characterised as a series of ad hoc
compromises, which while they made tactical
sense often led to strategic disaster.
The current economic difficulties have thrown
into sharp relief not just what people get
paid, but whether it is fair, from a multitude
of stakeholder perspectives, resulting in a
challenging balancing act for reward. The
development of social media has further increased
reward transparency, both nationally and
internationally, though not always understanding.
How to value jobs and contribution can be
challenging, yet in these complex and changing
times the challenges are even greater; however,
evaluating and pricing tasks and achievements has
never been more important in todays turbulent
and ambiguous environment. Again, the desire
to act now puts pressure onto reward systems
to react swiftly but also potentially encourages
short-term thinking.
As the demands from employees, the business and
new technology become more complex, reward
has become more sophisticated. If you want
to reward or recognise individual or collective
success, you now have a variety of options in
the toolbox, from merit awards and bonuses to
events held in foreign climes and duvet days.
The challenge is to integrate these options into
a holistic approach that is aligned with both the
business and employee needs.
Today, then, the challenge for employers is to
create reward systems that are not only resilient
to pressure and are agile enough to adapt to
changing contexts, but are also fair, transparent,
are able to balance the needs of stakeholders,
reflect the true value of roles as well as individual
and collective achievements, are aligned to
organisational purpose and are supported by
an evidence base. It will be interesting to see
how far we have come when we celebrate our
125th anniversary.
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CONTENTS
Foreword 4
Summary of key findings 7
Base and variable pay policies 11
Employee share schemes and long-term incentive plans 25
Employee benefits 29
Pensions 42
Conclusions and implications for reward management 53
Background to the report 57
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FOREWORD
Welcome to the twelfth edition of the CIPDs
annual Reward Management survey. As ever, we
endeavour to provide useful insights into reward
trends and developments and highlight possible
implications for policy and practice.
For me, one of the standout findings from this
years survey is that employers would like to see
a switch in focus from fixed pay towards variable
pay. Currently, while 32% of employers report
that all of their total pay spend is on fixed pay
and another 32% say that the split between fixed
and variable pay is 90:10, when asked about their
ideal split, these proportions fall to 23% and 26%
respectively. Instead, employers are more likely to
report that an 80:20 or a 70:30 split between fixed
and variable pay as their ideal, especially in the
private sector.
Perhaps this result is not so surprising. It can be
argued that during these difficult times employers
are looking for flexibility in how they reward
their staff so as to ensure that those who add
most value are rewarded for their contributions
assuming that they are able to identify those
individuals in the first place. Variable pay also
has the advantage that, in theory, it only pays
out when there is something to pay out and
should help align organisational reward practices
with the business strategy as well as assisting to
communicate what behaviours, skills, values and
attitudes the organisation values and how it will
reward and recognise these. It can also attract and
retain those employees who want to see their pay
linked to their contribution.
If I were a benefits manager Id be concerned by
the implications of this finding. Id be worried
my employer could be looking to divert resources
from the benefit budget to help facilitate a shift
towards variable pay. Yet, our survey does not
find this. In fact, it shows the opposite. Employers
want to shift the pay/benefit split towards greater
use of benefits, not less. So, on the one hand,
employers want to increase the variable element
of total pay and, on the other hand, they want
to reduce the pay element of total reward and
increase the emphasis on benefits.
How can we explain this seemingly ambigous
finding? One explanation may be that employers
would like to scale back on their employee
numbers and so be able to afford to boost variable
pay and benefits from the headcount savings.
However, our research does not indicate that this
account is likely. Another possible reason is that
employers do not have a reward strategy and this
is why they are pursuing conflicting objectives.
Alternatively, respondents perceive that they can
get a greater return on investment from their
reward spend from variable pay and benefits.
While benefits can be seen as another fixed cost,
they can be less costly than pay as employers often
get cheaper deals from bulk purchasing than
employees could themselves.
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2013If more money is being directed to the gifted
and talented, we could speculate that the role
of benefits needs to increase so as to maintain
engagement among those staff deemed to be
good but not key value creators. Or, if more
emphasis is going to be placed on variable pay,
benefits would have to be expanded to counteract
the possibility that employees could feel more
insecure as their pay becomes more uncertain.
Finally, we could conjecture that while employers
see advantages of increasing the amount of pay
at risk, they are concerned that this could lead
to more of a transactional relationship between
employees and their organisation, that is, you do
x well give you y. Collective benefits are a way of
reminding employees that they are part of a social
endeavour. Whatever the reasons, employers may
see benefits as the new salary, fixed costs with
advantages.
It would be remiss of me not to mention that
this is the CIPDs centenary year. However, were
not the only organisation, or individual, with an
anniversary in 2013. The London Underground
is celebrating being in existence for 150 years.
The creation of the London Underground helped
increase the pool of available skills and labour for
employers by allowing more people to come and
work in the capital. London grew and employers
were able to do more as they tapped into this
growing pool of skills, knowledge and experience
and, of course, London has not been the only
UK city to benefit from a suburban rail network.
However, this development has led to challenges
regarding how to utilise this talent as well as
rewarding and recognising their contributions.
On the back of the development of rapid mass
transit, we have seen the creation of the interest-
free loans for rail season tickets and other benefits
related to commuting and travel.
Other organisations celebrating anniversaries
are the Financial Times (125 years) and the New
Statesman (100 years). Over time, both of these
publications have commented on how work has
changed in terms of what we do, where, why and
when. If anything, the world of work has changed
even more rapidly in the past few decades, but
this has also thrown up challenges for us as to how
we price jobs as tasks become more fluid. How we
reward and recognise relevant knowledge, skills
and experiences has also become more difficult
in this environment as they quickly become
outdated. In addition, there are a multitude
of stakeholders and reference points to judge
whether a particular reward decision is fair or not,
more so with the growth of social media.
Our Wimbledon neighbour, the Lawn Tennis
Association, was founded 125 years ago and since
then employers have become more interested in
the physical and, increasingly, the mental well-
being of their employees as the focus has switched
from seeing employees as just an element of
production to a source of competitive advantage.
As our survey shows, there are now a multitude of
interventions, such as staff canteens, time off to
compete in sporting events, employee assistance
programmes, workplace financial education/advice,
company chaplains, gym membership, on-site
massages, company choirs and welfare loans. To a
certain extent, these offerings echo aspects of the
welfare capitalism of Henry Ford, who was born
150 years ago, which aimed to improve the lot of
the employee (though it can also be argued that
it was also aimed at removing the rationale for
organised labour), as well as the establishment
of the CIPD as the Welfare Workers Association
in 1913. Of course, the positive impact of such
employer well-being benefits will be reduced if
employees feel obliged to spend more time at work
during this period of economic uncertainty and less
time keeping physically and mentally healthy.
Another body with something to celebrate
is the National Association of Pension Funds,
clocking in 90 years. Over this period the world of
occupational pensions has changed dramatically,
as human longevity has increased. As the
workforce ages and automatic pension enrolment
in the workplace is gradually introduced,
employers are reviewing the role of pensions in
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particular and reward more generally in terms
of how they attract, retain, engage and exit
employees, both within the organisation and
between roles. While organisations are changing
how they reward and develop an older workforce,
they must also consider their existing value
proposition and how they may need to adapt
it for the employees of tomorrow. With more
financial demands, forward-looking employers
will regard reward more holistically, viewing it
more of a vehicle to help employees create and
manage wealth as well as offering assistance
for individuals in hardship. While the changes in
treatment of tax relief on pension contributions
have created an element of uncertainty around
retirement planning, the creation of a flat-rate
pension should encourage more people to save
more knowing that they will not be penalised by
the state for doing so.
Finally, Doctor Who is celebrating its fiftieth
anniversary as a TV programme. One of the main
themes of the programme is technology and
science. Reward has come a long way from the
days of ink-filled paper ledgers and comptometers
to spreadsheets and integrated human resource
information systems. Yet while we are better
at generating and storing HR data, we do not
appear to be particularly advanced in analysing
that information in a way that is useful for the
business. Few employers are able to calculate
the cost of their compensation and benefit
programmes, let alone be able to express this as a
proportion of revenue, profit or economic value
added. Of course, the danger with HR analytics
and big data is that we focus on the volume of
the data and how we collect and store it, rather
than on the complexity of the data that we are
manipulating and why were analysing it in the
first place.
As ever, I would like to thank all those reward and
HR professionals that took the time to complete
this years survey, at a time when they have so
many competing demands, those practitioners
who helped develop the questionnaire, those
individuals who volunteered to be case studies
and the researchers from the Universities of
Bedfordshire, London Met and Sydney.
Charles Cotton
CIPD Performance and Reward Adviser
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SUMMARY OF KEY FINDINGS
The twelfth annual survey of UK reward management is based on responses received from 444 organisations, across private, public and third sectors. The main aim of the research is to provide readers with a benchmarking and information resource in respect of current and emerging practice in UK reward management.
Base and variable pay policies Just under half of all employers questioned
use individual arrangements or spot salaries
to manage base pay for management, other
employees or both. Other common forms of base
pay structures include narrow-graded pay grades,
pay spines and broad-banded pay structures.
Just over two in five of respondents consider
market rates (underpinned by job evaluation)
the most important factor in determining
salary levels for management, other employees
or both, while just under two in five consider
the organisations ability to pay the most
important factor.
The most common criteria to manage
individual base pay progression are individual
performance (used by around seven in ten
respondents), followed by competencies (just
over two-thirds) and market rates (just under
two-thirds). The least common criteria for pay
progression is length of service.
The top three factors determining the size of
the 2012 pay review for all employees were
the organisations ability to pay, the going
rate of competitors pay rises and movement
in market rates. Inflation was also ranked
as a top three factor for non-management
employee pay reviews.
Over half of organisations operate one or
more performance-related reward, incentive
or recognition scheme. Individual bonuses and
merit pay rises are the most common individual
performance-related schemes, while the most
common group performance-related schemes
are goal-sharing and profit-sharing.
In 2013, around half of respondents forecast
that their organisations total spend on base
and variable pay will increase; one-third predict
it will stay the same and over one in ten
foresee it will decrease. Pay rises are the most
common driver of increasing total spend on
base and variable pay, while employing fewer
staff is the most common driver of decreasing
total spend on pay.
The most common actual splits between total
spend on fixed pay and variable pay are 90%
fixed/10% variable. This ratio is the same as
the most common ideal split between total
spend on fixed pay and variable pay of 90%
fixed/10% variable.
Employee share schemes and long-term incentive plans (LTIs) Over a quarter of respondent organisations
offer employee share schemes and LTIs.
The most common broad-based schemes are
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company share option plans, while the most
common executive schemes are executive share
options.
Over three-quarters of organisations offering
employee share schemes or LTIs predict that
their total spend will stay the same in 2013,
while three in twenty predict an increase in
spend and one in ten a decrease in spend.
Employing more staff and increasing scheme
eligibility are given as the most common reasons
for increasing total spend on shares schemes and
LTIs, while reductions in average awards and
reducing scheme eligibility are given as the most
common reasons for decreasing total spend on
shares schemes and LTIs.
Employee benefits The six most common benefits provided
to all employees are: paid bereavement
leave; pension scheme; training and career
development; over 25 days annual leave
(excluding public holidays); death in service/life
assurance; and Christmas lunch/party.
One-fifth of organisations use flexible benefits
schemes and a further one in twenty will
introduce flexible benefits in 2013. Three
in twenty organisations offer voluntary/
affinity benefits, with a further one in thirty
introducing them in 2013.
Three in twenty organisations currently issue
total reward statements to employees, with
another one in ten planning to introduce them
in 2013.
While seven in ten respondents agree
that a transparent approach to employee
benefits policies and practices exists in their
organisations, around one in four agree that
their organisation prefers a more secretive
approach.
In 2013, over half of respondents predict
their organisations total spend on employee
benefits will stay the same; three in ten
forecast it will increase and around three in
twenty think it will decrease.
Increases in the costs of benefits is the most
common driver of increasing total spend on
employee benefits, while reductions in money
available for the benefits budget is the most
common driver of decreasing total benefits
spend.
The most common actual split between total
spend on employee pay and benefits is 90%
pay/10% benefits and this is also the most
common ideal split.
Pensions Nine out of ten organisations currently offer to
contribute to an employee pension scheme. The
most common type of pension offered to all
employees is a defined contribution (DC) scheme
followed by a defined benefit (DB) plan.
Just over one-third of organisations questioned
automatically enrol employees into an
existing DC pension scheme. Over one-third of
organisations with DC pension schemes have
over 70% employees as members, while one-
fifth have between 10% and 30% as members.
The average (mean) contribution rates to open
DC pensions are 7.9% employer contribution
and 5% employee contribution.
Just under half of respondents say their
organisation is intending, or is required, to
make changes to its pension arrangements
or to introduce a pension for the first time in
the next 12 months, with the most common
change being to comply with auto-enrolment
requirements.
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2013Table 1: Summary of findings
Reward approaches
Percentage of respondents
using
Base pay structures Individual rates/ranges/spot salaries 49.0
Narrow-graded 37.2
Pay spines/service-related 31.5
Job family 30.4
Broad-banded 29.3
Base pay determination Market rates (with JE) 42.5
Ability to pay 39.5
Market rates (without JE) 21.9
Collective bargaining 16.4
Base pay progression criteria Individual performance 71.5
Competencies 64.7
Market rates 64.2
Employee potential/value/retention 51.3
Skills 57.6
Length of service 31.1
Base pay review factors Ability to pay 78.8
Going rate 45.9
Movement in market rates 44.9
Inflation 42.4
Recruitment/retention issues 40.0
Government funding/pay guidelines 34.4
Union/staff pressures 27.1
Living Wage pressures 24.0
Shareholder views 19.8
National Minimum Wage pressures 18.8
Employers offering a performance-related reward scheme
55.2
Individual performance-related schemes
Individual bonuses 59.8*
Merit pay rises 56.4*
Combination schemes 49.4*
Sales commissions 36.5*
Individual non-monetary recognition awards 35.3*
Ad hoc/project-based schemes 19.5*
Other individual-based cash incentives 17.4*
Group performance-related schemes Goal-sharing 50.3*
Profit-sharing 39.7*
Group- or team-based non-monetary recognition
35.1*
Group- or team-based non-monetary incentives
21.2*
Gain-sharing 11.9*
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Table 1: Summary of findings (continued)
Reward approaches
Percentage of respondents
using
Employers offering LTIs 25.5
Top six long-term incentives Executive share option schemes 40.6*
Company share option plan (CSOP) 35.6*
Share incentive plan (SIP) 32.7*
Save as you earn (SAYE) 25.7*
Executive deferred annual cash-based bonus 22.8*
Executive restricted/performance share plan 20.8*
Top six universal benefits Paid bereavement leave 92.9
Pension scheme 83.8
Training and career development 82.9
25+ days annual leave (excl. public hols) 73.0
Death in service/life assurance 68.7
Christmas party/lunch 66.9
Employers providing total reward statements
15.0
Employers offering voluntary/ affinity benefits
15.5
Employers offering flexible benefits 20.3
Employers contributing to a pension scheme
90.5
Open pension schemes Defined contribution 55.2*
Defined benefit 28.1*
Contribution to personal pension 24.9*
Hybrid/other 7.0*
Membership levels of open DC pension schemes
1030% 20.1
3150% 21.0
5170% 23.2
Over 70% 35.7
Organisations auto-enrolling members to DC pension schemes
34.3
Average employer contribution to main DC pension schemes
7.9% of salary
Average employee contribution to main DC pension schemes
5.0% of salary
Employers predicting change to pension schemes
48.0
Top six changes to pension schemes Comply with auto-enrolment requirements 90.0+
Increase employee DB contributions 13.3+
Introduce salary sacrifice 12.4+
Reduce the value of the DB plan 7.1+
Increase employee DC contributions 6.7+
Amend the DC default investment options 5.7+* % of respondents operating a performance-related/long-term incentive scheme/pension scheme+ % of respondents predicting pension changes
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BASE AND VARIABLE PAY POLICIES
Our findings show organisations responding to multiple contextual factors in their reward management choices. Economic conditions continue to drive pay decisions for many. In the private sector, market competition and employee value are also key drivers, while in the public sector more traditional forms of reward management prevail.
Base pay structuresTable 2 shows that individual base pay
arrangements dominate as the most popular
methods of managing base pay, with just under
half of organisations using individual rates or spot
salaries. In previous surveys we have observed that
the incidence of narrow-graded pay structures
has been lower than we might have anticipated;
however, this year there is a sharp increase in
the number of survey organisations managing
base pay this way. This result may, in part, be
due to sampling differences year on year (see
Background to the report) but clearly indicates
that narrow-grading is still very much a part of the
reward system in organisations across all sectors.
There is a marked difference in approach to base
pay management between sectors (Figure 1).
Manufacturing/production and private sector
services both clearly favour the individualised
approach, whereas public services remain wedded
to pay spine/seniority systems, which are largely
absent from the private sector. In the voluntary,
community and not-for-profit sector, the results
are split: individualised pay and pay spines are the
most common approaches, likely to be a reflection
of the heterogeneous nature of this sector.
Differences between base pay management
for different employee groups are not as
marked. While narrow-grading is used by nearly
a third of organisations for non-managerial
employees and a quarter use broad-banding for
management/professionals, individual rates/spot
salaries are the most common for both groups.
Flexible, individualised approaches to base pay
management are clearly a key feature of reward
management in the UK.
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Table 2: Base pay structures (% of respondents)
Individual rates/spot
salariesNarrow-graded
Pay spines/ service-related Job family
Broad- banded
All* 49.0 37.2 31.5 30.4 29.3
2012* 47.2 29.0 28.5 24.5 27.0
2011* 52.6 21.0 29.8 27.6 34.9
By sector*
Manufacturing and production
60.0 48.2 17.6 43.5 40.0
Private sector services 63.5 38.8 14.7 34.7 33.5
Public services 23.8 32.4 68.6 17.1 21.9
Voluntary, community and not-for-profit
39.5 28.4 33.3 24.7 18.5
By employee category
Management/professional 44.3 25.5 23.2 25.2 25.2
Other employees 32.9 32.2 29.9 23.6 17.1*% of respondents selecting for either employee category or both employee categories
Manufacturing and production Private sector Voluntary and not-for-profit Public services
70
60
50
40
30
20
10
0Individual Narrow graded Pay spines Job family Broad-banded
Figure 1: Base pay structures, by sector (% of respondents)
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2013Table 3: Base pay determination (% of respondents)
Market rates(using JE)
Abilityto pay
Market rates (not using JE)
Collective bargaining
All* 42.5 39.5 21.9 16.4
2012* 37.5 42.7 31.0 24.0
By sector*
Manufacturing and production
44.0 38.1 28.6 22.6
Private sector services 42.9 43.5 31.0 5.4
Public services 34.3 31.4 6.7 40.0
Voluntary, community and not-for-profit
50.6 43.2 16.0 2.5
By employee category
Management/professional 40.2 31.7 19.2 8.9
Other employees 33.1 34.7 15.5 16.7*% of respondents selecting for either employee category or both employee categories
Figure 2: Pay determination in 2012 and 2013 (% of respondents)
2013 2012
50
40
30
20
10
0Market rates
(using JE)Ability to pay Market rates
(not using JE)Collective bargaining
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Pay progressionThe criteria organisations use to progress
individuals within a pay grade/scale are shown in
Table 4. Individual performance continues to be
the most common method of pay progression,
although rates have fallen slightly in 2013. In
contrast, the incidence of competency-based
progression has risen dramatically; indeed, all
criteria other than individual performance have
increased this year. We might speculate that as
performance outputs are more difficult to achieve
in tough economic times, organisations have placed
more emphasis on inputs in the form of employees
competencies and skills. Market rates and employee
potential/retention have also increased slightly,
perhaps indicating a return to a more competitive
approach to base pay progression.
Table 4 also shows the breakdown of pay
progression criteria by sector and employee
category. Individual performance and market rates
dominate in the private sector, whereas length
of service is largely a public sector phenomenon.
Figure 3 illustrates the differences in approach
to pay progression for management and
professionals compared with other employees.
Length of service is the only criteria used more
commonly for non-managerial staff than
management/professionals.
Table 4: Base pay progression (% of respondents)
Individual performance Competencies
Market rates Skills
Employee potential/
value/ retention
Length of service
All* 71.5 64.7 64.2 57.6 51.3 31.1
2012* 78.6 49.4 56.8 44.1 48.0 28.7
2011* 74.0 50.2 62.6 44.2 45.7 24.5
By sector*
Manufacturing and production
88.0 71.1 84.3 74.7 69.9 26.5
Private sector services 86.3 73.2 74.4 67.3 73.8 17.3
Public services 45.0 51.0 33.0 36.0 19.0 60.0
Voluntary, community and not-for-profit
55.4 56.8 60.8 45.9 23.0 28.4
By employee category
Management/professional
69.4 61.0 60.1 51.8 50.4 25.9
Other employees 57.3 52.9 53.3 50.9 36.2 28.8*% of respondents selecting for either employee category or both employee categories
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Table 5 shows the most common combination
of factors used by our respondent organisations
in pay progression by sector. While there are
clear differences in approach between private
sector employers and those in the public and
third sectors, the treatment of employee groups
within sectors is fairly consistent. The preferred
combination of individual performance,
competencies, skills, market rate and employee
potential/value/retention is dominant across
employee groups in both private sector categories.
Table 5: Most common combinations of factors used to determine base pay progression (% respondents)
Management and professional Other employees
Manufacturing and production Competencies, skills, individual performance, market rates, employee potential (22.9%)
Competencies, skills, individual performance, market rates, employee potential (10.3%)
Private sector services Competencies, skills, individual performance, market rates, employee potential (29.3%)
Competencies, skills, individual performance, market rates, employee potential (20.0%)
Public services Competencies, individual performance (6.1%)
Individual performance, length of service (5.3%)
Voluntary, community and not-for-profit
Competencies, skills, individual performance, market rates, employee potential (6.9%)
Competencies, skills, individual performance, market rates (5.6%)
*% of respondents selecting for either employee category or both employee categories
Management/professional Other employees
70
60
50
40
30
20
10
0Individual
performanceCompetencies Market rates Skills
Employee value/
retentionLength
of service
Figure 3: Pay progression criteria, by employee category (% of respondents)
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2012 pay reviewsTable 6 shows that the top three factors
determining the size of the 2012 pay review for
all employees were the organisations ability to
pay, the going rate of competitors pay rises and
movement in market rates. This clearly indicates
that organisations continue to walk the line
between awarding pay rises to keep competitive
with the market while ultimately being constrained
by what is affordable. Inflation was also ranked as
a top three factor for non-management employee
pay reviews, presumably as cost of living changes
are more crucial for those on lower incomes. There
are other differences between the two employee
groups. Recruitment and retention issues are,
as would be expected, more of a factor for the
management/professional talent group. Whereas
Living Wage and National Minimum Wage
concerns feature more for other, presumably less
well paid, employees. It is also noteworthy that
last year the Living Wage was seen as slightly more
of a factor than the National Minimum Wage in
determining the size of the base pay review. By
sector, government funding is more of an issue
among public services and voluntary, community
and not-for-profit employers.
2013 pay reviewsFor the first time this year the survey asked
respondents about pay reviews for the
forthcoming year in open-text format in an
attempt to better understand the subtleties of pay
review decisions. Interestingly, most respondents
identified largely similar factors to the ones
provided in 2012. As in 2012, it is likely to be
internal assessment of ability to pay which will
determine 2013s pay review outcomes. However,
we do see a more nuanced picture. Alongside
the terms ability to pay and affordability we
also have profitability, company performance,
budgetary restrictions, funding streams,
government funding, management of costs,
level of savings made and even staying in
business, which remind us that there are a
multitude of sub-factors which determine an
organisations ability to pay before we even begin
to consider the interplay between main factors.
There are strong links between different sets of
factors, however. Ability to pay is often coupled
with other concerns; we see a balancing act as
organisations respond to competing pressures, as
the following responses indicate:
Table 6: Factors determining size of base pay reviews in 2012 (% respondents)
All grades* Management/professionals Other employees
Ability to pay 78.8 Ability to pay 73.6 Ability to pay 68.7
Going rate 45.9 Going rate 41.9 Inflation 37.6
Movement in market rates 44.9 Movement in market rates 41.2 Going rate 34.5
Inflation 42.4 Recruitment and retention 37.8 Movement in market rates 34.5
Recruitment/retention issues 40.0 Inflation 37.6 Government funding 30.0
Government funding 34.4 Government funding 32.4 Recruitment and retention 27.9
Union/staff pressures 27.1 Union/staff pressures 18.7 Union/staff pressures 24.1
Living Wage pressures 24.0 Shareholder views 17.6 Living Wage pressures 20.9
Shareholder views 19.8 Living Wage pressures 15.8 National Minimum Wage 17.1
National Minimum Wage 18.8 National Minimum Wage 11.5 Shareholder views 14.2*% of respondents selecting for either employee category or both employee categories
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2013Benchmarking and the ability for the organisation
to pay any increases whilst remaining profitable.
(Large manufacturing and production company)
Company performance dictates total funds
available, which will be prioritised to groups
where recruitment and retention is problematic.
(Private sector services SME)
Union buy-in to below-inflation wage rises at a
time when costs are rising and revenue growth is
slowing, the aim being to keep people in jobs until
an upturn is felt and we can increase wage rises
accordingly. (Large public services organisation)
Organisational surplus/profit balanced with
organisational management and working conditions
improvements we cant pay much more but weve
improved how the organisation manages you.
(Voluntary, community and not-for-profit SME)
Government pay guidance and the ability of the
organisation to convince stakeholders to operate
these as flexibly as possible. (Large public services
organisation)
Overall, the picture gained from these answers is a
complex one. Organisations are clearly feeling the
push and pull of a number of competing factors
while being heavily constrained by company
performance or government funding issues.
Performance-related reward, incentive and recognitionOver half of all organisations in our survey
operate one or more performance-related reward,
incentive or recognition scheme (Table 7). This
figure is much reduced from last year, which could
be due to sampling differences; the 2013 survey
has a greater representation of public services
and voluntary, community and not-for-profit
organisations than in 2012, where performance-
related reward (PRR) is less common. However,
a closer look at Table 7 reveals that, other than
manufacturing/production, all sectors, sizes
and ownership types have seen a reduction in
incidence of PRR schemes. In speculating on why
this might be, one suggestion is that organisations
continuing to feel the effects of economic
downturn are putting certain schemes on hold or
shelving them altogether. This view is supported
Table 7: Organisations operating performance-related reward, incentive and recognition schemes (% of respondents)
2013 all 55.2
2012 all 65.3
By sector* 2012 2013
Manufacturing and production 62.8 66.7
Private sector services 76.9 71.9
Public services 55.6 41.0
Voluntary, community, not-for profit 37.5 25.9
Multiple sectors 73.3 N/A
By size
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to some extent by respondents to our question
about PRR effectiveness (see below), some of
whom mention reviewing their performance-
related schemes in light of economic conditions,
particularly merit pay/PRP schemes that increase
base pay, for example:
We have not been able to make a pay award
since 2009 and are intending to move away from a
PRP system. (Large voluntary, community, not-for-
profit organisation)
However, the arguments for variable pay (for
example bonuses and commissions that have to be
re-earned) would suggest that these schemes are
well suited to conditions where general base pay
increases are unaffordable; the organisation only
pays out when performance has been achieved.
The apparent decrease in operation of even these
schemes may well indicate that the economic
climate is biting deeper than ever.
Tables 8 and 9 and Figure 4 show the proportion
of different types of performance-related scheme
in operation. Individual bonuses remain the
most common form of individual PRR scheme,
but incidence has dropped this year compared
with 2011 and 2012. Suggestions that this may
have any connection to the bad press associated
with bonus culture are speculative, but this may
be an area to watch in future survey rounds.
Merit pay as a proportion of all PRR schemes has
remained the same, while combination schemes
have increased substantially. Again, this shift from
individual variable pay towards schemes where
the award depends on a mix of individual, group
and/or organisational performance may indicate
unwillingness to risk paying out unless overall
organisational performance is strong.
There are clear sectoral differences in approach
to individual PRR; combination schemes are
most common in manufacturing/production
Table 8: Individual performance-related reward schemes (% of respondents operating a PRR scheme)
Ind
ivid
ual
bo
nu
ses
Mer
it p
ay r
ises
Co
mb
inat
ion
sch
emes
Ind
ivid
ual
no
n-m
on
etar
y re
cog
nit
ion
aw
ard
s
Sale
s co
mm
issi
on
s
Ad
ho
c/p
roje
ct-b
ased
sc
hem
es
Oth
er in
div
idu
al-b
ased
cas
h
ince
nti
ves
All* 59.8 56.4 49.4 35.3 36.5 19.5 17.4
2012* 66.8 56.5 40.1 33.9 37.3 17.8 25.7
2011* 65.2 60.8 35.4 33.1 40.9 22.1 20.4
By sector*
Manufacturing and production
51.8 57.1 66.1 37.5 35.7 25.0 10.7
Private sector services 69.7 55.7 51.6 34.4 53.3 18.9 23.8
Public services 48.8 51.2 32.6 37.2 4.7 14.0 14.0
Voluntary, community and not-for-profit
45.0 70.0 25.0 30.0 5.0 20.0 5.0
By employee category
Management/professional 58.8 54.6 47.5 31.9 29.8 17.2 13.0
Other employees 46.0 50.2 40.0 37.7 25.6 14.0 15.3
*% of respondents selecting for either employee category or both employee categories
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2013companies, whereas private sector services use
individual bonuses to a greater extent than other
sectors. Sales commissions are most common in
private sector services, where the type of work is
best suited to this form of performance-related
incentive. Merit pay rises are most common in the
third sector, where incentive schemes are rarely
used. Among public services organisations using
PRR, both merit pay and individual bonuses are
used most often.
We also see a difference in approach depending
on employee category. Management and
professionals are more likely to receive financial
performance-based rewards of nearly every type
than other employees. This could indicate a more
talent management oriented approach to this
group, while non-monetary recognition is perhaps
more suited to the broad base of employees.
Group-based performance-related reward schemes
remain less common than individual-based schemes,
reflecting the largely individualised nature of UK
reward management. However, our results have
shown another increase this year in nearly all group-
based schemes, perhaps indicating a shift in approach
back towards more collective reward systems. Again,
we will await future surveys to determine if this
apparent trend continues.
Once again, goal-sharing (group bonuses based on
group/team achievement of specific objectives) is
the most common form of group PRR, especially
in private sector companies. The public and third
sectors are far more likely to use non-monetary
recognition and incentive schemes. The difference
in approach between employee groups can also
be seen here; once again, management and
professionals are more likely to be included in
monetary schemes, while other employees are more
likely to be included in non-monetary schemes.
2011 2012
70
60
50
40
30
20
10
0Individualbonuses
Meritpay rises
Combinationschemes
2013
Individual non-monetary
Salescommissions
Ad hoc Otherindividual
Figure 4: Individual performance-related schemes in past three years (% of respondents operating a PRR scheme)
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Most effective performance-related schemesThis year, survey respondents were asked which
performance-related reward, recognition
and incentive schemes in operation in their
organisations were most effective and why. They
provided responses in open-text answers so we
could gain a deeper understanding of all the
factors in play.
Many responses centred on individual bonus
schemes, particularly flexible, discretionary bonuses
as well as those based on achievement of specific
performance targets. The next most cited schemes
were merit pay rises. One respondent from a large
manufacturing and production company said
their merit pay scheme was the most effective
in terms of matching contribution with reward.
Sales commission schemes were also mentioned
frequently by respondents; supporting comments
largely related to the direct link between behaviour
and results. Combination schemes appear to be
among the most effective, as one respondent
from a large public services organisation put it,
because they enable a clear line of sight between
organisation, team and individual performance.
Group- and team-based schemes such as goal-
sharing were cited less often as effective schemes,
especially given the relatively high incidence of
such schemes (Table 9). However, profit-sharing
was thought by a proportion of respondents
to be the most effective scheme, popular with
employees and providing the engagement factor.
Non-monetary recognition schemes also feature
strongly among responses and these schemes seem
to be providing a useful reward mechanism during
difficult economic times:
In the current climate our recognition scheme
non-monetary awards are proving the most
effective because they are enabling us to
recognise success, improve morale and provide
some genuine personal reward for our staff in a
period when there are limited pay uplifts and no
performance bonus awards. (Large public services
organisation)
However, one quite surprising aspect of the
responses to this question was the relatively high
proportion of respondents who either said none of
their performance-related schemes were effective
or that it was impossible to tell as there was little
or no evaluation of such schemes. One respondent
Table 9: Group performance-related reward schemes (% of respondents operating a PRR scheme)
Goal- sharing
Profit- sharing
Group or team-based
non-monetary recognition
Group or team-based
non-monetary incentives
Gain- sharing
All* 50.3 39.7 35.1 21.2 11.9
2012* 47.9 38.1 26.8 18.6 21.6
2011* 14.9 21.0 18.2 8.3 7.2
By sector*
Manufacturing and production
52.4 47.6 28.6 16.7 11.9
Private sector services 55.3 44.7 27.1 16.5 15.3
Public services 35.3 11.8 76.5 47.1 0.0
Voluntary, community and not-for-profit
14.3 0.0 71.4 42.9 0.0
By employee category
Management/professional 48.2 39.0 31.2 19.1 12.1
Other employees 42.6 38.0 37.2 21.7 5.4*% of respondents selecting for either employee category or both employee categories
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2013found their organisations scheme demotivational;
another said theirs had a tendency to encourage
narrow/short-term behaviour. It seems reward
practitioners are as split as academics on the topic of
performance-related reward effectiveness.
Total spend on fixed and variable pay When it comes to the proportions of total spend on
fixed and variable pay in our survey organisations,
the most common split is 90% fixed/10% variable
or 100% fixed pay (Table 10). Predictably perhaps,
we do see some marked sectoral variation in
results. Public services and the voluntary sector are
far more likely to have 100% spend on fixed pay
than private sector organisations, where the split is
more commonly 90% fixed/10% variable. Looking
at Table 11, however, the most favoured ideal split
between total spend on fixed pay and variable pay
would be 90% fixed/10% variable overall. In fact, in
general respondents in all sectors would like to see
a lower proportion of total spend on fixed pay and
more on variable pay.
Table 10: Actual proportions of total spend on fixed and variable pay (% of respondents)
AllManufacturing and production
Private sector services Public services
Voluntary, community and not-for-profit
100% variable 0.3 1.4 0.0 0.0 0.0
10% fixed/90% variable 0.5 0.0 1.4 0.0 0.0
20% fixed/80% variable 1.4 1.4 2.7 0.0 0.0
30% fixed/70% variable 1.9 1.4 2.1 1.3 3.0
40% fixed/60% variable 0.5 1.4 0.7 0.0 0.0
50% fixed/50% variable 2.5 4.2 4.1 0.0 0.0
60% fixed/40% variable 3.6 1.4 5.5 3.8 1.5
70% fixed/30% variable 8.5 2.8 10.3 10.0 9.1
80% fixed/20% variable 17.6 25.0 19.9 11.3 12.1
90% fixed/10% variable 31.6 45.8 32.2 27.5 19.7
100% fixed 31.6 15.3 21.2 46.3 54.5
Table 11: Ideal proportions of total spend on fixed and variable pay (% of respondents)
AllManufacturing and production
Private sector services Public services
Voluntary, community and not-for-profit
100% variable 1.2 1.5 1.5 0.0 1.7
10% fixed/90% variable 0.9 0.0 2.2 0.0 0.0
20% fixed/80% variable 0.6 1.5 0.7 0.0 0.0
30% fixed/70% variable 1.8 1.5 2.9 0.0 1.7
40% fixed/60% variable 1.8 2.9 1.5 2.9 0.0
50% fixed/50% variable 3.0 7.4 2.2 1.4 1.7
60% fixed/40% variable 3.6 2.9 5.8 2.9 0.0
70% fixed/30% variable 14.1 10.3 19.0 13.0 8.5
80% fixed/20% variable 23.7 22.1 26.3 18.8 25.4
90% fixed/10% variable 26.4 35.3 21.9 30.4 22.0
100% fixed 22.8 14.7 16.1 30.4 39.0
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This is an interesting finding, indicating that new
pay thinking on strategic reward advocating
higher proportions of variable pay has, to a limited
extent, been adopted within organisations which
ideally would like to shift further towards variable
pay. However, there does seem to be a limit here;
Tables 10 and 11 show clearly that while the actual
figures at the bottom of Table 10 all shift towards
higher ideal proportions of variable pay in Table
11, there is relatively little change past the 70%
fixed/30% variable mark, indicating that while
respondents would in general prefer more variable
pay, at present they would be unwilling to move to
reward structures where variable pay is in greater
proportion than fixed pay.
Base and variable pay predictions for 2013Table 12 and Figure 5 reveal respondents
predictions for changes to base and variable
pay spend in 2013. Just over half of respondents
predict their organisations total spend on base
and variable pay will increase, whereas 34.9%
predict it will stay the same and 12.2% predict it
will decrease in the next year. Manufacturing and
production, SMEs, divisions of UK companies and
private (publicly traded) organisations are more
likely to predict increasing total spend. Of those
organisations predicting a decrease of total spend,
very large, mainly UK-owned, public sector services
organisations are the most common. Presumably,
this result is down to large government-funded
organisations being required to cut spending,
including pay budgets.
Table 12: Prediction for changes to total spend on base and variable pay in 2013 (% of respondents)
Increasespend
Staythe same
Decreasespend
All 52.9 34.9 12.2
By sector
Manufacturing and production
63.2 27.6 9.2
Private sector services 57.3 35.1 7.6
Public services 35.2 38.1 26.7
Voluntary, community and not-for-profit
55.6 38.3 6.2
By size
SME (
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2013When we look at what our respondents say is
driving these changes to total spend on base and
variable pay, Table 13 shows that pay rises and
employing more staff are the most common drivers
of increasing spend on pay, while employing fewer
staff and pay cuts are the most common drivers of
spend decreases. There is a clear division here in
organisations which are taking on more employees
and awarding pay increases, while others are
reducing headcount and cutting pay. The positive
aspect of this is that the majority of organisations,
are increasing spend and, it seems, are doing so
for positive reasons. One particular result to note
is the relatively high response for other drivers of
decreasing pay spend when the other category for
increasing spend is so low. It is possible that again
the public sector requirement to cut pay budgets is
the key factor here.
34.952.9
12.2
Increase spend
Stay the same
Decrease spend
Figure 5: Prediction for changes to total spend on base and variable pay in 2013 (% of respondents)
Table 13: Drivers of predicted changes to total spend on base and variable pay in 2013 (% of respondents predicting the change)
Drivers for increasing pay spend Drivers for decreasing pay spend
Pay rises 83.8 Employing fewer staff 81.5
Employing more staff 50.6 Pay cuts 29.6
Skills shortages 19.1 Reductions in average variable pay 22.2
Increases in average variable pay 15.3 Other 20.4
Other 4.7 Skills shortages easing 1.9
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Case study Intel Corporation Europe
When it comes to putting reward right at the heart of the employment relationship, the computing giant Intel are firm believers in their managers exemplifying principles of reciprocal trust and open communication and this approach has seen spectacular results.
Intel Corporations operation in Europe extends from Ireland in the west to Kazakhstan in the east and Israel in the south, employing approximately 17,000 workers in sales and marketing, manufacturing and design. Intels mission This decade, we will create and extend computing technology to connect and enrich the lives of every person on earth reflects both their ambition and their values. That such a mission would drive bold corporate objectives might be expected, but it is in the translation of these high-level objectives into meaningful working practices that has been key to delivering results.
Gary Boyle, HR Business Partner for Europe, believes that this has been achieved through a combination of a strong reward philosophy; open, clear communications; and line managers who are passionate about Intel and engaged with the companys vision and values.
Intels reward philosophy is based on matching or exceeding the market for fixed elements of the total reward package (base pay, benefits and employee share schemes) and rewarding exceptional performance with variable pay practices which allow repeat high-performers to earn at the very top of the market. An annual bonus is based on individual targets with a multiplier based on overall company performance, while a six-monthly bonus is awarded on size of revenue, operating margin and feedback from customers. What may be surprising in a diverse employee population of 17,000 is that the bonuses are open to all, regardless of role, business group or location. The message to employees is unambiguous: performance drives earnings potential and performance is dependent on everyone everyone will have a role to play, and a share, in company success.
Boyle is equally clear about the critical role of line managers in the performance equation and believes strongly that this is where HR should facilitate, not direct. For reward to be meaningful from an employee perspective, Boyle says, you dont need someone from HR coming in and telling you about the pay philosophy, you need your manager understanding it and being able to relate it to you as an individual. In Boyles view, the relationship between direct reports and managers and the trust people have in their managers has the potential to be more important than pay in motivating and retaining high-performers.
According to Boyle, a healthy management relationship and the principle of matching what you say with what you do have been responsible for some extraordinary results at Intel. In 2010 the company faced a product recall. Its factories around the world, already working to near capacity, were challenged with doubling production to meet customer demands. Intel approached the situation as a potential winwin; they knew that getting this right would improve financial results and they committed to sharing any gains 50/50 with employees. A huge communications campaign promoted the challenge and kept employees informed of performance against target on a daily basis. Employees rose to the challenge spectacularly and achieved the equivalent of 14 weeks production in just 8 weeks, each earning a $1,000 bonus in the process.
In an economic environment of zero or very low base pay increases, it is clear from Intels example that greater employee financial involvement underpinned by a positive employment relationship could be a very powerful tool indeed.
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EMPLOYEE SHARE SCHEMES AND LONG-TERM INCENTIVE PLANS
Our findings indicate relative stability in this area of reward management, with executive share options and company share option plans remaining the most common schemes. Looking forward, our respondents predict spending on this area of reward will stay the same over the forthcoming year.
Table 14 shows roughly the same proportion of
organisations offering employee share schemes
and long-term incentive (LTI) plans as last year.
Although share schemes and LTIs remain a
predominantly private sector reward mechanism,
small numbers of respondents in other sectors
report their use. Results this year also show that
these schemes are most common, as we would
Table 14: Organisations operating long-term incentive schemes (% of respondents)
2013 25.5
2012 28.6
By sector 2012 2013
Manufacturing and production 43.6 46.0
Private sector services 34.7 35.7
Public services 2.8 5.7
Voluntary, community, not-for-profit 0.0 7.4
Multiple sectors 56.7 N/A
By size
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expect, in publicly traded private firms. It is
interesting to note that the differences in LTI use
between size of organisation is not as marked as
last year, partially due to the apparent fall in use
among very large organisations as well as divisions
of UK-owned organisations. However, this may
well be due to sampling effects, as the numbers of
respondents in these categories is relatively small.
Broad-based and executive schemesTable 15 and Figure 6 show that the most common
schemes are executive share options, although
broad-based schemes such as company share option
plans (CSOPs) and share incentive plans (SIPs)
are also used by roughly a third of respondents
operating share/LTI schemes. The results also show
some slight industry variations; for example, SIPs are
more common in manufacturing and production
Table 15: Long-term incentives (% of respondents operating a share/LTI scheme)
Broad-based schemes Executive share schemes
Co
mp
any
shar
e o
pti
on
pla
n
(CSO
P)
Shar
e in
cen
tive
p
lan
(SI
P)
Save
as
you
ear
n
(SA
YE)
Exec
uti
ve s
har
e o
pti
on
s
Exec
uti
ve
def
erre
d a
nn
ual
cas
h b
on
us
Exec
uti
ve
rest
rict
/per
form
sh
are
pla
n
Exec
uti
ve d
efer
red
/co
-in
vest
sh
are
pla
n
Phan
tom
sh
are
sch
eme
Ente
rpri
se m
anag
emen
t in
cen
tive
s (E
MIs
)
SAR
S/eq
uit
y SA
RS
All 35.6 32.7 25.7 40.6 22.8 20.8 11.9 9.9 8.9 6.9
By sector
Manufacturing and production 35.0 37.5 27.5 45.0 25.0 27.5 7.5 5.0 5.0 5.0
Private sector services 35.7 26.8 25.0 39.3 19.6 17.9 16.1 12.5 12.5 8.9
By size
SME (
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2013
than in private sector services. We also see variation
according to firm size and ownership. SMEs favour
CSOPs, while SIPs and executive share options are
more common in large and very large companies.
Executive share options also feature strongly on
reward plans for divisions of internationally owned
organisations and publicly traded private companies.
Manufacturing and production Private services
50
40
30
20
10
0CSOP SIP SAYE Exec share
optionsExec defbonus
Execrestrict
Execdef
Phantom EMIs SARS
Figure 6: Long-term incentives by sector (% of respondents operating a share/LTI scheme)
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Table 16: Prediction for changes to total spend on share schemes/LTIs in 2013 (% of respondents operating a share/LTI scheme)
Stay the same Increase spend Decrease spend
All 76.1 15.0 8.8
By sector
Manufacturing and production 77.5 17.5 5.0
Private sector services 73.8 16.4 9.8
Public services 83.3 0.0 16.7
Voluntary, community and not-for-profit 83.3 0.0 16.7
By size
SME (
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EMPLOYEE BENEFITS
This years Reward Management survey aimed to be even more comprehensive in its gathering of data on the provision and extent of employee benefits in the UK. The range of benefits offered on a universal basis is remarkable. Furthermore, respondents indicated they would prefer a greater proportion of total reward spend being directed towards benefits provision.
Tables 1723 show the range and extent of
employee benefits offered by survey respondents.
They have been categorised this year under broad
headings which reflect key areas of benefits
provision. However, we accept that the broad
headings are not mutually exclusive and some
benefits could go under different headings.
Overall, results show that provision of benefits is
not only increasing in many areas but also that
in general provision is becoming more universal
and less dependent on grade/seniority. It is also
notable that compared with last year, far fewer
benefits are provided only through flexible or
voluntary schemes.
Career development While in many organisations career development
and reward management operate in separate
spheres, the total reward perspective encourages
HR practitioners to think about and express
employee development in reward terms. Table
17 shows that our respondent organisations
may well be thinking in this way as training and
career development as a benefit is provided to
nearly all employees. Rates of study leave, unpaid
sabbaticals and coaching/mentoring programmes
are also widespread, although far more
dependent upon employee grade/seniority.
Table 17: Provision of career development benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
Training and career development
82.9 10.9 0.7 0.5 5.0
Study leave (paid) 47.6 22.3 1.4 3.3 25.4
Sabbaticals (unpaid) 39.8 10.4 1.7 2.2 45.8
Professional subscriptions (paid/part-paid)
37.4 36.2 0.7 0.0 25.8
Coaching/mentoring programmes
30.1 35.2 1.0 1.7 32.1
Sabbaticals (paid) 7.2 7.2 0.8 0.0 84.7
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Financial benefits/pay in kind Table 18 shows pension schemes top the list of
most extensive financial benefits provided by
respondent organisations and the 9% reporting
they do not currently offer a pension scheme will
no doubt be looking at introducing schemes over
the next couple of years to ensure compliance
with pension law changes. More information on
the 91% of respondents who do can be found in
the next section.
Other notable financial benefits include debt
advice/guidance/counselling, offered by nearly
half of organisations. This is the first year
the reward management survey has asked
respondents about this particular benefit, so we
cannot track whether its provision has increased
in recent years as personal debt has become
more problematic for many. This will be an area
to watch in future surveys. However, last year
we did ask about free financial advice/education
and its provision has increased greatly; offered
by 12.3% in 2012 to 26.5% of respondents in
2013 perhaps due to pension auto-enrolment.
Another related benefit is a welfare loan for
financial hardship and we have seen a rise over
the year in the proportion of employers offering
this to all employees. We may see more employers
adopt such a scheme as the government raises
the amount of money that organisations can loan
interest free to employees. We can speculate that
in the future that some employers will start to
adopt a more joined-up approach to workplace
savings, investments and loans.
Table 18: Provision of financial/pay in kind benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
Pension scheme 83.8 4.9 0.9 1.4 9.0
Debt advice/counselling/guidance
48.2 0.7 0.0 2.1 48.9
Give as you earn 34.4 0.0 1.0 1.9 62.7
Free/subsidised canteen 29.2 0.7 0.0 0.0 70.1
Discounted own products/services
28.9 0.9 0.0 0.5 69.7
Discount cards 28.5 0.0 1.4 3.6 66.5
Free financial education/advice
26.5 0.9 0.2 0.5 71.8
Discounted shopping vouchers
20.8 0.0 1.7 3.6 73.9
Relocation assistance 19.0 32.8 0.5 0.5 47.3
Christmas hamper/vouchers/gifts
17.1 1.2 0.2 0.0 81.4
Welfare loans for financial hardship
13.0 1.4 0.7 1.0 83.9
Corporate wrapper workplace benefits
9.2 0.5 0.7 0.5 89.1
Christmas bonus 7.4 4.0 0.0 0.7 87.9
Credit union 7.0 0.0 0.0 0.5 92.5
Homeworker allowance 5.8 2.4 0.5 0.0 91.3
Luncheon vouchers 2.2 0.0 0.0 0.0 97.8
First-time buyers home deposit assistance
1.0 0.0 0.2 0.0 98.8
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2013Health and well-being benefitsOur health and well-being results (Table 19)
show a mix of benefits from insurance-based
schemes (death-in-service/life assurance being
the most common) to medical assistance (for
example flu jabs and on-site medical services)
and promotion of fitness/lifestyle facilities (for
example gym membership, on-site fitness classes).
Employee assistance programmes (EAPs) are now
offered by well over half of organisations in our
survey, a figure that is an increase on last year,
showing the growing popularity of such schemes.
The general nature of EAPs, providing tailored
services to employees (and often members of their
family/household), may be an attractive option for
employers looking for cost-effective ways to take
preventative measures against absenteeism and
staff turnover caused by well-being problems.
Leave, personal and family-related benefitsHelping employees maintain a healthy worklife
balance is another key component of the total
reward approach and our survey results show
high levels of paid leave in excess of statutory
requirements and, to a lesser extent, flexibility
in buying and selling leave allowances. Flexible/
homeworking remains a common feature of
benefits provision, use of which has increased this
year despite recent publicity indicating a possible
backlash in the USA. Family-friendly policies such
as provision of childcare vouchers and enhanced
maternity/paternity leave are also widespread. Just
under half of employers in our sample provide paid
leave to all employees on military reserve activities.
Table 19: Provision of health and well-being benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
Death in service/life assurance
68.7 6.3 3.7 4.7 16.6
Tea/coffee/cold drinks free 66.7 2.8 0.0 0.0 30.5
Eyecare vouchers 62.9 2.8 1.4 0.9 32.0
Employee assistance programme
56.2 1.4 0.7 1.2 40.5
Flu jabs 27.0 3.1 0.7 0.9 68.2
Gym (on-site or membership)
23.6 1.7 3.8 4.5 66.5
Private medical insurance 23.0 23.9 3.5 4.9 44.8
Health screening 20.4 12.8 4.0 2.1 60.6
Permanent health insurance
19.4 10.1 3.3 1.4 65.8
Critical illness insurance 17.2 8.7 5.4 3.1 65.6
Free fruit 15.6 0.0 0.0 0.0 84.4
Workplace chaplain/equivalent
12.3 0.0 0.0 0.0 87.7
On-site aerobics/Pilates 13.2 0.7 0.2 2.2 83.7
On-site medical facility 13.1 0.0 0.0 0.5 86.4
Healthcare cash plans 11.6 2.4 4.7 9.2 72.1
Dental insurance 8.1 4.5 8.8 10.0 68.6
On-site massages 7.4 0.2 0.2 2.9 89.3
Personal fitness trainer 2.9 0.0 0.2 1.9 95.0
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Social benefitsTable 21 shows that catering for employees
social needs at work is also an important aspect
of benefits provision, with social events such as
Christmas parties and company picnics popular.
Transport benefitsTransport is an area of benefits provision where
we do see differentials between grades of
employee, with car allowances, company cars and
fuel allowances predominantly provided according
to grade/seniority (Table 23).
Table 20: Provision of leave, personal and family benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
Paid leave for bereavement
92.9 0.9 0.0 0.0 6.2
25 days and over paid leave (excluding bank holidays)
73.0 19.7 0.2 0.0 7.0
Childcare vouchers 63.3 1.4 6.5 7.0 21.8
Allow Internet purchases to be delivered at work
59.5 3.4 0.5 0.5 36.2
Enhanced maternity/paternity leave
57.8 1.9 0.5 0.0 39.9
Paid leave for military reserve activities
50.4 1.2 0.0 0.5 48.0
Flexible/homeworking 44.2 32.2 2.3 0.0 21.3
Time off for voluntary work
33.6 2.8 0.5 1.9 61.2
Paid carers leave 28.9 1.2 0.0 0.0 70.0
Emergency childcare support
25.5 0.0 0.5 0.9 73.1
Emergency eldercare support
24.7 0.0 0.5 0.7 74.1
Ability to buy and sell additional days of paid leave
22.9 2.7 3.9 1.7 68.9
Paid leave to train and compete in sports events
13.5 1.7 0.2 0.5 84.1
Learning assistance (not work-related)
8.3 2.1 0.7 1.0 87.9
On-site crche 5.2 0.7 0.0 0.0 94.1
Concierge benefits 1.9 0.0 0.0 0.0 98.1
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2013Table 21: Provision of social benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
Christmas party/lunch 66.9 2.1 0.0 1.1 29.9
Dress-down days 53.5 0.0 0.5 1.0 45.1
Company picnic/barbeque 29.3 0.7 0.0 0.7 69.3
Social club 23.4 0.0 0.0 2.4 74.2
Company sports day 12.1 0.0 0.0 0.7 87.2
Theatre/concert trips 11.5 0.0 0.0 2.6 85.9
Company choir/band 8.8 0.0 0.0 1.0 90.2
Table 23: Provision of transport benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme only Do not provide
On-site car parking (free/subsidised)
59.6 15.9 0.5 0.7 23.4
Cycle-to-work scheme loan 46.7 0.7 4.7 4.9 43.0
Travel season ticket loan 31.8 2.3 1.6 1.6 62.6
Travel insurance 13.4 6.4 6.1 3.1 71.1
Fuel allowance 8.9 21.0 0.5 0.0 69.7
Car allowance 4.0 51.6 1.2 0.5 42.8
Car loan 2.9 6.0 .5 0.7 90.0
All employee car ownership schemes
1.2 5.6 1.4 0.9 90.8
Carbon offsetting/credits 1.2 0.5 0.7 0.0 97.6
Company car 0.2 37.6 0.7 0.0 61.4
Table 22: Provision of technology benefits (% of respondents)
Provide to all employees
Provision dependent on
grade/seniority
Part of a flexible benefits
scheme only
Part of a voluntary benefits
scheme onlyDo notprovide
Home computers 4.4 20.4 1.2 1.9 72.1
Mobile phone (personal use) 4.4 37.1 0.7 1.2 56.6
Mobile phone (salary sacrifice) 1.0 7.2 1.0 1.4 89.5
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Table 24 breaks down the provision of benefits
to all employees according to sector. The lists
are similar; paid leave for bereavement is the
most common benefit in all sectors; training and
development, and provision of pension schemes
are also common to all sectors top lists; 25 days
and over paid leave is present in all sectors except
private sector services.
Certain benefits seem to be more sector-specific.
For manufacturing and production, on-site
parking is in the top six, presumably because
production units will often be in out-of-town
locations. Free tea/coffee and cold drinks only
appears in the private sector services top six,
whereas enhanced maternity/paternity leave
and paid leave for military reserve activities
only appear in the more welfare-oriented public
services list. The third sector top six benefits
include childcare vouchers and allowing Internet
purchases to be delivered to work.
Table 24: Top six universal benefits offered, by sector (% of respondents)
Manufacturing and production
Paid leave for bereavement 92.0
Training and career development 85.1
On-site car parking (free/subsidised) 81.6
Pension scheme 78.1
25 days and over paid leave 77.0
Christmas party/lunch 77.0
Private sector services
Paid leave for bereavement 86.0
Tea/coffee/cold drinks free 84.2
Christmas party/lunch 83.0
Training and career development 80.1
Pension scheme 73.1
Death in service/life assurance 70.2
Public services
Paid leave for bereavement 93.3
Pension scheme 90.5
25 days and over paid leave 82.9
Training and career development 79.0
Enhanced maternity/paternity leave 74.3
Paid leave for military reserve activities 70.5
Voluntary, community and not-for-profit
Paid leave for bereavement 97.5
Pension scheme 91.4
Training and career development 86.4
25 days and over paid leave 77.8
Allow Internet purchases to be delivered at work 71.6
Childcare vouchers 69.1
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2013Most popular employee benefitsOur survey respondents were asked which
benefits are most popular with employees and
why. The results in some respects are not that
surprising: pension schemes feature very highly,
many commenting on the rarity of their final
salary schemes and high levels of employer
contributions, which make them attractive options
for employees. Other financial-based benefits
are also popular, particularly healthcare/medical
insurance. Similarly, worklife balance benefits
such as flexibility, enhanced leave and childcare
vouchers feature strongly, many respondents
making the connection with the profile of their
workforces. Interestingly, this is the area where
a number of respondents comment on lack of
provision versus the demand for it, for example:
Many employees have indicated that flexible
working or hours and enhanced paternity benefits
as well as childcare voucherswould be valued.
The organisation does not currently provide these
though. (Private sector services SME)
However, perhaps the most telling aspect of the
question responses is the almost total absence
of career development and training support
cited as popular benefits among employees. One
respondent mentions personal and professional
development, another a personal training
allowance and one other sabbaticals, but these
are the only mentions from over 400 responses.
There are various possible explanations here.
One is that employees and/or survey respondents
do not see training and development activities
as benefits per se; another is that training
and development is so universal (and often
provided for reasons not associated with benefits
provision) that it is not valued as highly as more
traditional benefits, which either provide a level
of economic security (pensions, health insurance)
or enhance the quality of work and family life
(flexible working, holiday entitlement, and so on).
Whatever the explanation, this is a noteworthy
finding, with implications for the study of total
reward and non-monetary reward generally.
It may also have a public policy implication if
employers cut back on training because they
think that skills development is a waste of money
because it is not valued by workers and instead
focus resources on particular employee groups or
firm-specific skills.
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Total reward statementsContinuing the total reward theme, Table 25
shows relatively few organisations currently
issuing total reward statements to employees,
although 8.6% of respondents are planning to
introduce them in 2013. Total reward statements
are more common in the private sector and in very
large organisations, presumably as the range of
financial benefits is more extensive here.
Flexible benefits and voluntary/affinity benefits schemesTable 25 and Figure 8 also show the levels of
usage of flexible and voluntary benefits schemes.
Again, neither is extensive and both appear to
have decreased significantly in the past couple of
years. Reasons for this are not readily apparent;
there may well be sampling effects or we could be
seeing a move away from these more expensive
systems during continuing economic austerity.
Table 25 also shows a level of variation according
to sector and size of organisation. Private sector
companies and large organisations are far more
likely to offer both voluntary and flexible benefits
schemes.
Benefits transparency Following on from last years investigation into
pay transparency in organisations, for 2013
we asked respondents about the approach to
transparency of benefits specifically and the extent
to which organisations are prepared to disclose
to employees information about pensions and
employee benefits and how individuals or groups
of employees are treated the same or differently.
Table 25: Types of benefits offered (% of respondents)
Total reward statements
Voluntary/affinity benefits
Flexible benefits
All 15.0 15.5 20.3
2012 17.8 24.7 24.2
2011 N/A 45.1 34.0
By sector
Manufacturing and production
19.0 15.7 25.6
Private sector services 18.8 21.8 24.4
Public services 7.6 8.7 17.3
Voluntary, community and not-for-profit
12.8 11.4 10.0
By size
SME (
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2013
Table 26 shows that overall most respondents
agree that a transparent approach to employee
benefits policies and practices exists in their
organisations, that is, that benefit policies,
practices and outcomes are made public with the
intention that all benefit information across all
grades is as transparent as possible.
This is in direct contrast with last years findings,
which indicated most organisations prefer to
keep pay confidential rather than promote
transparency. While there could be a level of
movement in approach following the Equality
Acts prevention of employers using punitive
measures to enforce pay confidentiality clauses
in employment contracts, it is unlikely that such
attitudes have shifted so far and so fast. It seems
more likely that there is a distinct difference
in approach to pay as opposed to benefits;