Successful pay and benefit strategies require more input and better communication from line managers

09 February 2006

Employers will fail to achieve maximum return on investment with regards to pay and benefits, one of the largest costs to organisations, unless they involve and train line managers. The Reward Management Survey 2006, from people management professionals the Chartered Institute of Personnel and Development (CIPD), finds 51% of organisations believe lack of skills and ability of line managers limits the effectiveness of pay and benefit strategies. A further 36% cite insufficient communication as one of the problems and 26% believe the attitude of line managers is an issue.

The findings were discussed yesterday at the CIPD Annual Reward Conference 2006. Charles Cotton, CIPD Reward Adviser, says, "Line managers are given very little responsibility for determining total reward yet they are expected to communicate it to staff. More involvement of front line managers is needed – both in terms of determining the non-financial benefits (such as training and development and flexible working) and financial aspects of reward, such as pensions and bonus awards. This will enable them to understand the pay and benefit strategy and then implement and communicate it effectively."

Less than a third of organisations are using recruitment and retention as a factor in determining pay award (only 29% compared to 49% last year). But employers are increasing the use of benefits with 46% of organisations planning to introduce new benefits in 2006 compared to just 16% in 2005. The new benefits are government-inspired tax advantaged childcare vouchers, bike loans and home computers.

"It is encouraging to see employers investing in employee benefits. These perks can be important and can help business in terms of recruitment, retention and motivation. However, they will also fail to help if employers continue to ignore some of the pivotal problems surrounding the effectiveness of pay and benefit strategies such as line manager involvement.

"The key is for reward practitioners to get closer to their line mangers by giving them the support and training that they need to implement effectively the organisation’s pay and benefits polices and practices and to communicate what employee behaviours and performances the organisation values and how it will reward them,” says Cotton.

Other findings:
Equal pay: Over half of employers (54%) have carried out or are planning to carry out an equal pay review. More employers are making sure equal pay reviews are carried out regularly and including variants other than gender, such as age and race.

Most common reason for the 46% of respondents who have not carried out an equal pay review, and have no plans to do so in the near future, is that they feel their pay-systems are non-discriminatory.

Pensions: Only 18% of organisations intend to make changes to pension arrangements this year and the main driver for this is future risk (34%). However, reasons for changes such as future risk and funding deficit has declined significantly over the last year indicating that many private organisations have already dealt with the pension crisis by closing their defined benefit scheme to new employees.

The most common approach this year is to amend existing defined-benefit (DB) schemes to make them less costly while increasing the contribution rates for both the employers and employees in an attempt to reduce the scheme deficit.

Other benefits: The ten most common paid-for benefits provided by employers range from occupational sick pay (83%) to relocation assistance (51%). Company cars and car allowances are the benefits most likely to be cut or scaled back. Cut backs in terms of occupational sick pay and permanent health insurance reflect increased focus on absence management and increases of healthcare costs

Around a third (35%) of organisations expect costs of benefits to increase in the next 12 months and half expect it to remain the same.


Notes to editors
• For a press pass please or an advanced copy of the reward survey, please contact: Charlotte Richardson on 020 8616 6406/ c.richardson@cipd.co.uk

• The CIPD Annual Reward Conference 2006 will take place at Olympia, on the 7-9 February 2006. For more information about the Reward conference visit http://www.cipd.co.uk/rewardconference

• CIPD have developed a reward subscription service. CIPD Reward Management is the only information service that covers all aspects of reward management. Relevant to organisations of all sizes and sectors, and illustrated with case studies and examples drawn from real experience, this subscription service is an indispensable guide for all Reward Management professionals. CIPD are also offering a free 28-day trial. For more information visit http://www.cipd.co.uk/rm

• CIPD have developed a Reward at Work portfolio – a range of courses, publications, a qualification and other key resources. For more information call 020 8612 6207, email rewardatwork@cipd.co.uk or visit http://www.cipd.co.uk/rewardatwork

• The Chartered Institute of Personnel and Development (CIPD) has over 124,500 members and is the leading professional institute for those involved in the management and development of people

Press enquiries:
Robert Blevin/ Gerwyn Davies/Emma Price/Charlotte Richardson
Tel: 020 8612 6400

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