Linking pay and benefits to areas of business, such as customer service, will help justify spend

Two-fifths of organisations plan to increase their benefit spend and over one-third of public and voluntary sector employers will be making changes to pay structures this year. But the majority of organisations fail to measure the real contribution pay and benefit packages can add to business leaving many HR and reward professionals unable to fully justify increase spend or changes to benefit packages. This is according to a new survey of 466 organisations, from the Chartered Institute of Personnel and Development (CIPD).

The Annual Reward Survey 2007 finds only one third of organisations have a reward strategy and just 55% of these measure its effectiveness. Only 23% of these organisations link measurement to business data leaving most unable to show how their reward strategy achieves one of its main objectives to support business goals.

Charles Cotton, CIPD Pay and Benefits Adviser, says: ìGlobal competition is pushing employers to look for ways to cut costs and tax payers, investors and other stakeholders are demanding value for money.

ìWhile the pressure is on to cut costs there is also the demand for better quality goods and services. This increases the pressure on pay and benefit specialists to manage the forces pushing costs down and the upward cost pressures so that stakeholders are satisfied and so that the organisation succeeds in attracting, retaining and motivating talent.

ìBut organisations could make the wrong decision and waste time and money on pay and benefits if they fail to measure the effectiveness of the reward strategy properly. HR and reward professionals should investigate measures, such as customer satisfaction and line manager feedback, to show the real value such packages can have on all areas of the business.î

Sector differences
Around one-quarter of public and voluntary sector organisations forecast a cut in benefit spending this year, compared to just 9% of private service sector organisations and 16% of manufacturing and production.

Private service sector (88%) and manufacturing and production (84%) organisations are more likely to have cash-based bonus or incentive plans, compared to voluntary sector (20%) and public services (34%).

Just over half of employers (54%) still make a traditional general annual pay rise or cost of living uplift, though this approach is less prevalent in the private sectors ñ only two-fifths of private sector organisations make the annual pay rise, compared to over four-fifths of public service organisations.

Reward strategy
35% of organisations have a reward strategy and a further 40% plan to create one in 2007.

The main priorities of their reward strategy are to support business goals (79%), reward high performers (67%) and recruit and retain high performers (62%).

Bonus schemes
40% of those with bonus schemes intend to amend their existing bonus scheme.

23% of organisations plan to introduce another bonus scheme/s to sit alongside their existing arrangements.

16% of organisations that do not have a bonus scheme are introducing a plan in 2007.

Pensions and other benefits
The most popular benefits that are being introduced are the tax-advantaged childcare vouchers and bicycle loans.

The number of organisations offering flexible and voluntary benefits is set to almost double in 2007 ñ 32% currently offer and 28% plan to introduce them this year.

8% of organisations plan to make the annual pay rise non-pensionable while 6% intend to differentiate pay rises for staff in defined benefit and defined contribution arrangements.

20% of employers are planning changes to their pension arrangements in 2007, with the most popular options being to increase employee contributions, introduce salary sacrifice arrangement and increase employer contributions.

These findings will be discussed on Wednesday 7 February, at the CIPDís Annual Reward Conference 2007, in Olympia. Speakers at the conference include:

Professor Douglas McWilliams, Centre for Economics and Research, on the reward climate.

Ian Anderson, Post Office Ltd ñ can performance pay ever really work?

Mark Burch, Crown Prosecution Service, on rewarding talent.

Professor Lord Layard, Author of Happiness: lessons from a new science, on the new science of happiness.