An alarming number of UK organisations do not calculate how much they spend in total on remunerating staff (including base pay, variable pay, benefits and employer national insurance contributions), according to this yearís Annual Reward Management Survey from the Chartered Institute of Personnel and Development (CIPD). Almost half of the organisations surveyed (46%) fall into this category.
The survey shows that voluntary sector organisations are the least aware of their total remuneration spend, with 56% not calculating the full costs of what they offer to staff. Within the private sector, manufacturing/production and private services organisations fair only slightly better, with 48% and 40% respectively not being aware. It is a similarly bleak forecast for public sector employers, with 47% not taking this necessary step.
And of the organisations that calculate the size of their total remuneration expenditure, the vast majority (83%) are unable to break it down into its constituent elements (salaries, variable pay and benefits).
Charles Cotton, CIPDís Reward Adviser, says:
ìIt is a shame that our survey does not show that the tighter margins associated with the current recession are leading to greater scrutiny around pay and reward. This might have helped organisations avoid some of the job losses and redundancies we have seen recently.
ìIf organisations do not have a complete handle on where their staff spending goes, it makes it far more difficult to prioritise investment in the measures that will retain and motivate talented individuals. Reward, if implemented correctly, can engage staff at a time when pay freezes and redundancies are prevalent, boosting the chances of the organisations coming out of the recession in good shape to benefit from the recovery.
ìThe findings also bring the issue of transparency to the fore as shareholders and tax-payers are left unaware of where their money goes. This is especially striking at a time of economic uncertainty where everyone needs to pay the utmost attention to their finances. If employers are going to be effective in how they manage reward then they need to invest in systems that allow them to capture this information.î
Furthermore, the survey reveals that only one-third of organisations (32%) assess the impact that their reward practices have on their employees, indicating that the vast majority of employers (68%) are not aware of whether their rewards are working or not.
Voluntary sector and public sector organisations are the least likely to evaluate reward, with only 19% and 25% respectively doing so. Within the private sector, manufacturing-production firms (30%) and private services sector employers (40%) follow suit.
Cotton continues: ìThese findings are stunning as organisations might have in place reward systems that actually do not enable them to fulfil their objectives. The result is they may waste their money, and that of shareholders and tax-payers.
ìBut even worse, organisations may find that by not targeting reward spend effectively, they could see their biggest asset - their top performers - leaving at a time when organisations should be doing everything possible to engage and retain the best to remain resilient through recession, and emerge strongly in the recovery.î
Other key findings:
Smaller employers (with fewer than 50 employees) are more likely to, or able to, calculate their total remuneration spend than larger organisations. Sixty-five percent of these organisations calculate their overall remuneration expenditure, while only 56% of companies with more than 5,000 employees do the same
However, larger organisations are more likely to conduct an assessment of their reward practices than smaller ones. Fifty-percent of organisations with more than 5,000 employees carry out this study while just 29% of organisations with fewer than 50 people do the same
The survey also reveals that just over half of organisations (54%) have carried out an equal pay review (EPR), or 33% are planning to do so in the next 12 months. There are variations by sector, with public service employers leading the way. By size, larger employers are more likely to have carried out an EPR
Just over two fifths of the organisations with bonus or incentive arrangements will be changing them this year, while one in 10 will be introducing another bonus scheme. A further one in 10 will be introducing a bonus scheme for the first time
CIPD Reward Survey highlights need for employers to get a firmer grip on total staff costs
An alarming number of UK organisations do not calculate how much they spend in total on remunerating staff (including base pay, variable pay, benefits and employer national insurance contributions)
