2006 Reviewed – What Were the Hot Issues?

Here, we take a round up of what’s been happening in reward over the past year.

Was 2006 the Year of Increases?

As we end the year, the theme of increases is still on the agenda. The latest inflation figures for November issued in December shows the highest Consumer Price Inflation (CPI) on record at 2.7%, placing the UK above average for the European Union. Meanwhile the Retail Price Index (RPI) which remains a key determinant of annual pay increases, rose to 3.9% creeping closer to the anticipated 4% at year end. October saw the National Minimum Wage increase by 6%, a move supported by Trades Unions and criticised by some Employer’s organisations.

At the same time, bonuses for FTSE 100 Board Directors and CEOs have risen to £3m over the past year, an average increase of 30%, according to Watson Wyatt’s Executive Reward Survey 2006. Findings show that Executive Bonus Plans typically pay CEOs 85% of base pay for achieving targets, part of the continuing private sector trend towards performance related pay.

On the subject of increases, Bonus & Incentive Plans were covered in the September issue of Just Rewards - click here if you missed this issue. Click here to read the October issue that focused on Reward Strategy.

Why do Employers Continue to Focus on Benefits over Pay?

As the cost of living has risen throughout 2006, so more employers have looked to benefits as a means of boosting the value of the reward package while maintaining fixed salary costs. The demise of the Home Computing initiative (HCI) in April 2006 may have come as a surprise; however the popularity of Childcare Vouchers and other Salary Sacrifice arrangements has experienced high levels of growth as shown by various surveys. Look out for the CIPD Reward Management Survey 2007 which will be published next February.

Check out the August issue of Just Rewards by clicking here, for Flexible Benefits and click here to read the November issue on the theme of Pay Structures.

Age Legislation and Pensions – What’s the Impact?

Age legislation regulations implemented on 1 October received lots of publicity, yet the delayed inclusion of Pensions in the legislation on 1 December was low key by comparison. Research by law firm Eversheds shows that 1 in 10 employers have not yet considered the impact, despite compliance costs that could approach £1m per company. Take a look at the July issue on Age Legislation by clicking here.

To find out which reward topics we will be covering in 2007, read the section below.

Just News

Public sector reward reform called by CBI. Public sector pay has grown by over 2% more than growth in economic output since 2000, according to the CBI which is calling for major reforms to reward in the public sector. The recently published CBI report ‘Improving public service management’ argues that public sector employers need to develop ‘risk and reward’ approaches for those who innovate and deliver goals. Key recommendations include determining pay locally against market rates; reducing the domination of length of service based progression in favour of recognising individual or team performance, as well as tackling the pension deficit.

The TUC has opposed the report claiming that the CBI does not understand the public sector and that it has overlooked their success on flexible working and other progressive HR practices.

Novel reward plans for Google staff. Well known for being innovative in rewarding their staff, Google plans to allow employees (excluding executives) to sell vested stock options to financial institutions through an online auction system. The implementation, which is planned for April 2007, is part of the company’s plans to help employees understand the value of their stock options and to improve management of recruitment and retention issues.

This initiative is also intended to address the equity of reward packages where new employees wait out vesting periods in anticipation that share prices continue to increase before employees can cash in while more long standing employees have becomes ‘Google millionaires’.

Website of the Month

Our website of the month for December is www.hrzone.co.uk. Billed as an ‘online network of 22,000 HR professionals’ HR Zone is probably better known for its HR news items and ‘Any answers’ community section, which gives some interesting slants on well worn HR and reward issues. Like other HR news sites such as Personnel Today, HR Zone is funded from sponsor advertising which undoubtedly influences the content. That said, news is weekly rather than daily and it comes in the form of a Newswire and News Briefing which can be read in less than 10 minutes. Registration to all sections of the site is free.

Our review for January will be the online version of the Harvard Business Review. Are there other websites or books you would like us to review? Just click here to tell us about them.

Just Rewards – Preview for 2007

Here are some of the issues we think should be discussed next year and which we are planning to cover in Just Rewards:

• Mergers & Acquisitions – how can reward make M&A integration successful?
• Total Reward – how can it differentiate you from the rest?
• Equal pay and reward – what are the benefits of rising above compliance?

What else would you like to read about? Click here to tell us your suggestions.

If you need specific advice relating to your requirements, please call us on +44 (0)1367 710 618.