Employee benefits special: hold on to your valuables

Managers are increasingly likely to resign because their salaries are not
rising fast enough, according to the latest annual Chartered Management
Institute survey.

The research, carried out in conjunction with Remuneration Economics, shows
that in the year to the beginning of 2004, resignations rose as average earnings
increases continued to slow. Salary increases linked to rates of inflation may
once have been enough to retain staff, but this is no longer the case in high
employment UK, where skills are increasingly in short supply.

And the trend is continuing. Finance professionals with capabilities in key
areas, are particularly in demand, according to a study from recruitment firm
Robert Walters released earlier this year.

Moreover, Accountancy Age’s own research, published just last week, found
that 60% of finance professionals are actively or passively seeking a new job.

These factors are leading to new strategies designed to retain staff while
motivating them in a focused way. ‘In terms of compensation packages, we’ve
noticed a trend over the past 18 months towards carefully targeted bonus
payments,’ explains Greg Weido, a senior manager at Robert Half.

‘Bonuses are on offer of between 10% and 20% of basic pay, referenced to
achieving set goals or specific targets, such as company accountants
consolidating annual numbers by a specific date, for example.’ Increasingly
businesses are looking at packages where the focus is on the individual member
of staff, and configuring it to suit and motivate them.

Businesses are also thinking more strategically in terms of total reward and
how they can balance it against the preferences of individual employees.

According to the Chartered Institute of Personnel and Development, 50% of
businesses have adopted, or are in the process of adopting, written reward
strategies geared to the objectives of the organisation. There needs to be a
balance between being an employer of choice and offering benefits such as
childcare and flexible working, and getting the best business result.

Among the benefits now falling into focus is pensions. This is especially the
case with older key employees closer to retirement age, and for whom a
well-funded old age has become a priority. The public airing of issues
surrounding retirement provision and the move from defined benefit to defined
contribution schemes have focused the pension debate for many employees.

Research by Deloitte suggests that pensions have been the Cinderella of
benefits for far too long. It reports that among FTSE350 companies, pension
benefits for executive directors can be worth ‘anywhere between 20% and 70% of
their salary or more’ and despite the potentially considerable value available
to employees from negotiating a well-funded pension, they often fail to
understand its worth. At the same time, Deloitte says pension policies often do
not align with other aspects of remuneration, such as salaries.

A lack of good staff, skills shortages and the need to benchmark to corporate
objectives are driving the market – but performance is patchy.

The recruitment market, not surprisingly, is buoyant as employers search for
staff, while staff seek to sell their labour for the best set of rewards they
can achieve. Both parties need to pursue their best interests. Successful
businesses will be the ones that are able to align company reward strategy,
business goals and the aspirations of individual employees.

This is an edited version of an article that first appeared in
Accountancy Age’s sister title, Financial Director

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