cipd 2013 reward management survey

Annual survey report 2013

REWARDMANAGEMENT

2013

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REFLECTIONS ON THE LAST 100 YEARS

This year the CIPD celebrates its centenary. How

has reward changed over the intervening years?

Disappointingly, back then, we did not collect

information on how employers determined

salary levels, structured pay or determined pay

progression. Or perhaps we did, but we did not

think that the findings would be useful and so

threw away the results after a number of years.

Hindsight can be a wonderful thing.

In 1913 the average annual earnings for the

UK was around £51 (Change in Distribution of

National Income, Bowley 1920, p13). Today, many

people can earn that amount in a day, but why

people earn that has changed, just as how it is

delivered by employers.

Back then labour had traditionally been seen as

just one element of production, a cost that had

to be minimised and managed. Tasks, such as

sweeping and scavenging or engine cleaning,

were often manual and repetitive. However, ideas

around labour management and development

were beginning to change. Some industrialists

were becoming concerned about the plight of their

employees, for moral, social or political reasons.

The recent Boer War had shown that many urban

volunteers were unable to meet the army’s physical

requirements and there was a concern about the

impact of this on Imperial security.

In addition, the UK state was introducing a

system of national insurance to protect workers

if they became unemployed, sick or old. Over the

intervening years, many employers supplemented

these benefits with occupational sick pay and

workplace pensions. For instance, the August

1921 issue of Welfare Work, the predecessor to

People Management, has an interesting case

study on why Cadbury Bros. decided to go beyond

what was required by the 1906 Workmen’s

Compensation Act.

Benefits developed further, as employers used

them to meet moral concerns, recognise employee

status or found that they could be more cost-

effective than pay. This concern about employee

betterment, or welfare, was one of the drivers

behind the creation of the Welfare Workers’

Association, though at the time there was more of

a focus on the plight of women and girls.

From the US, scientific management was

encouraging a rational approach to people

management, including reward. While scientific

management did not emphasise the human in HR,

it did stress that workers were important resources

and that it made business sense to reward them

well for their physical and mental exertions,

something that was taken up by Henry Ford at

his Model T factory when he increased the hourly

rate to $5 an hour and introduced a wide range

of benefits for his employees. Writing around that

time, Conan Doyle refers in his Sherlock Holmes

book, The Valley of Fear, to this idea when one of

the characters says: ‘That’s paying for brains, you see

– the American business principle.’

A rational way of managing people resulted in

various reward policies and practices to ensure

To mark the CIPD’s centenary, Charles Cotton, CIPD Performance and Reward Adviser, shares his thoughts on a century of reward management.

REWARDING TIMES?

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CIPD is 100 in 2013!In 1913, some extraordinary and enlightened people came together to form what is now the CIPD. Lots of things have changed over the last 100 years, but one thing remains the same: our commitment to support and lead an HR profession that can help people and organisations be the best they can be.

Find out more about our centenary celebrations at cipd.co.uk/100

a common approach, though sometimes these

policies were not often thought to be rational

by many in the organisation. Partly, this was

because the reward policies and practices did

not support the business strategy or people

management ambitions of the organisation, often

because the economic, demographic, political and

technological contexts in which they had been

developed had changed. Also, it was because

so-called best practice was often not built on an

evidence base or what suited the organisation but

simply on what other competitor organisations

were doing at that time. Instead, reward could

often be characterised as a series of ad hoc

compromises, which – while they made tactical

sense – often led to strategic disaster.

The current economic difficulties have thrown

into sharp relief not just what people get

paid, but whether it is fair, from a multitude

of stakeholder perspectives, resulting in a

challenging balancing act for reward. The

development of social media has further increased

reward transparency, both nationally and

internationally, though not always understanding.

How to value jobs and contribution can be

challenging, yet in these complex and changing

times the challenges are even greater; however,

evaluating and pricing tasks and achievements has

never been more important in today’s turbulent

and ambiguous environment. Again, the desire

to act now puts pressure onto reward systems

to react swiftly but also potentially encourages

short-term thinking.

As the demands from employees, the business and

new technology become more complex, reward

has become more sophisticated. If you want

to reward or recognise individual or collective

success, you now have a variety of options in

the toolbox, from merit awards and bonuses to

events held in foreign climes and duvet days.

The challenge is to integrate these options into

a holistic approach that is aligned with both the

business and employee needs.

Today, then, the challenge for employers is to

create reward systems that are not only resilient

to pressure and are agile enough to adapt to

changing contexts, but are also fair, transparent,

are able to balance the needs of stakeholders,

reflect the true value of roles as well as individual

and collective achievements, are aligned to

organisational purpose and are supported by

an evidence base. It will be interesting to see

how far we have come when we celebrate our

125th anniversary.

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CONTENTS

Foreword 4

Summary of key findings 7

Base and variable pay policies 11

Employee share schemes and long-term incentive plans 25

Employee benefits 29

Pensions 42

Conclusions and implications for reward management 53

Background to the report 57

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FOREWORD

Welcome to the twelfth edition of the CIPD’s

annual Reward Management survey. As ever, we

endeavour to provide useful insights into reward

trends and developments and highlight possible

implications for policy and practice.

For me, one of the standout findings from this

year’s survey is that employers would like to see

a switch in focus from fixed pay towards variable

pay. Currently, while 32% of employers report

that all of their total pay spend is on fixed pay

and another 32% say that the split between fixed

and variable pay is 90:10, when asked about their

ideal split, these proportions fall to 23% and 26%

respectively. Instead, employers are more likely to

report that an 80:20 or a 70:30 split between fixed

and variable pay as their ideal, especially in the

private sector.

Perhaps this result is not so surprising. It can be

argued that during these difficult times employers

are looking for flexibility in how they reward

their staff so as to ensure that those who add

most value are rewarded for their contributions

– assuming that they are able to identify those

individuals in the first place. Variable pay also

has the advantage that, in theory, it only pays

out when there is something to pay out and

should help align organisational reward practices

with the business strategy as well as assisting to

communicate what behaviours, skills, values and

attitudes the organisation values and how it will

reward and recognise these. It can also attract and

retain those employees who want to see their pay

linked to their contribution.

If I were a benefits manager I’d be concerned by

the implications of this finding. I’d be worried

my employer could be looking to divert resources

from the benefit budget to help facilitate a shift

towards variable pay. Yet, our survey does not

find this. In fact, it shows the opposite. Employers

want to shift the pay/benefit split towards greater

use of benefits, not less. So, on the one hand,

employers want to increase the variable element

of total pay and, on the other hand, they want

to reduce the pay element of total reward and

increase the emphasis on benefits.

How can we explain this seemingly ambigous

finding? One explanation may be that employers

would like to scale back on their employee

numbers and so be able to afford to boost variable

pay and benefits from the headcount savings.

However, our research does not indicate that this

account is likely. Another possible reason is that

employers do not have a reward strategy and this

is why they are pursuing conflicting objectives.

Alternatively, respondents perceive that they can

get a greater return on investment from their

reward spend from variable pay and benefits.

While benefits can be seen as another fixed cost,

they can be less costly than pay as employers often

get cheaper deals from bulk purchasing than

employees could themselves.

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2013If more money is being directed to the gifted

and talented, we could speculate that the role

of benefits needs to increase so as to maintain

engagement among those staff deemed to be

good but not key value creators. Or, if more

emphasis is going to be placed on variable pay,

benefits would have to be expanded to counteract

the possibility that employees could feel more

insecure as their pay becomes more uncertain.

Finally, we could conjecture that while employers

see advantages of increasing the amount of pay

at risk, they are concerned that this could lead

to more of a transactional relationship between

employees and their organisation, that is, ‘you do

x we’ll give you y’. Collective benefits are a way of

reminding employees that they are part of a social

endeavour. Whatever the reasons, employers may

see benefits as the new salary, fixed costs with

advantages.

It would be remiss of me not to mention that

this is the CIPD’s centenary year. However, we’re

not the only organisation, or individual, with an

anniversary in 2013. The London Underground

is celebrating being in existence for 150 years.

The creation of the London Underground helped

increase the pool of available skills and labour for

employers by allowing more people to come and

work in the capital. London grew and employers

were able to do more as they tapped into this

growing pool of skills, knowledge and experience

and, of course, London has not been the only

UK city to benefit from a suburban rail network.

However, this development has led to challenges

regarding how to utilise this talent as well as

rewarding and recognising their contributions.

On the back of the development of ‘rapid’ mass

transit, we have seen the creation of the interest-

free loans for rail season tickets and other benefits

related to commuting and travel.

Other organisations celebrating anniversaries

are the Financial Times (125 years) and the New

Statesman (100 years). Over time, both of these

publications have commented on how work has

changed in terms of what we do, where, why and

when. If anything, the world of work has changed

even more rapidly in the past few decades, but

this has also thrown up challenges for us as to how

we price jobs as tasks become more fluid. How we

reward and recognise relevant knowledge, skills

and experiences has also become more difficult

in this environment as they quickly become

outdated. In addition, there are a multitude

of stakeholders and reference points to judge

whether a particular reward decision is fair or not,

more so with the growth of social media.

Our Wimbledon neighbour, the Lawn Tennis

Association, was founded 125 years ago and since

then employers have become more interested in

the physical and, increasingly, the mental well-

being of their employees as the focus has switched

from seeing employees as just an element of

production to a source of competitive advantage.

As our survey shows, there are now a multitude of

interventions, such as staff canteens, time off to

compete in sporting events, employee assistance

programmes, workplace financial education/advice,

company chaplains, gym membership, on-site

massages, company choirs and welfare loans. To a

certain extent, these offerings echo aspects of the

welfare capitalism of Henry Ford, who was born

150 years ago, which aimed to improve the lot of

the employee (though it can also be argued that

it was also aimed at removing the rationale for

organised labour), as well as the establishment

of the CIPD as the Welfare Workers’ Association

in 1913. Of course, the positive impact of such

employer well-being benefits will be reduced if

employees feel obliged to spend more time at work

during this period of economic uncertainty and less

time keeping physically and mentally healthy.

Another body with something to celebrate

is the National Association of Pension Funds,

clocking in 90 years. Over this period the world of

occupational pensions has changed dramatically,

as human longevity has increased. As the

workforce ages and automatic pension enrolment

in the workplace is gradually introduced,

employers are reviewing the role of pensions in

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particular and reward more generally in terms

of how they attract, retain, engage and exit

employees, both within the organisation and

between roles. While organisations are changing

how they reward and develop an older workforce,

they must also consider their existing value

proposition and how they may need to adapt

it for the employees of tomorrow. With more

financial demands, forward-looking employers

will regard reward more holistically, viewing it

more of a vehicle to help employees create and

manage wealth as well as offering assistance

for individuals in hardship. While the changes in

treatment of tax relief on pension contributions

have created an element of uncertainty around

retirement planning, the creation of a flat-rate

pension should encourage more people to save

more knowing that they will not be penalised by

the state for doing so.

Finally, Doctor Who is celebrating its fiftieth

anniversary as a TV programme. One of the main

themes of the programme is technology and

science. Reward has come a long way from the

days of ink-filled paper ledgers and comptometers

to spreadsheets and integrated human resource

information systems. Yet while we are better

at generating and storing HR data, we do not

appear to be particularly advanced in analysing

that information in a way that is useful for the

business. Few employers are able to calculate

the cost of their compensation and benefit

programmes, let alone be able to express this as a

proportion of revenue, profit or economic value

added. Of course, the danger with HR analytics

and big data is that we focus on the volume of

the data and how we collect and store it, rather

than on the complexity of the data that we are

manipulating and why we’re analysing it in the

first place.

As ever, I would like to thank all those reward and

HR professionals that took the time to complete

this year’s survey, at a time when they have so

many competing demands, those practitioners

who helped develop the questionnaire, those

individuals who volunteered to be case studies

and the researchers from the Universities of

Bedfordshire, London Met and Sydney.

Charles Cotton

CIPD Performance and Reward Adviser

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SUMMARY OF KEY FINDINGS

The twelfth annual survey of UK reward management is based on responses received from 444 organisations, across private, public and third sectors. The main aim of the research is to provide readers with a benchmarking and information resource in respect of current and emerging practice in UK reward management.

Base and variable pay policies• Just under half of all employers questioned

use individual arrangements or spot salaries

to manage base pay for management, other

employees or both. Other common forms of base

pay structures include narrow-graded pay grades,

pay spines and broad-banded pay structures.

• Just over two in five of respondents consider

market rates (underpinned by job evaluation)

the most important factor in determining

salary levels for management, other employees

or both, while just under two in five consider

the organisation’s ability to pay the most

important factor.

• The most common criteria to manage

individual base pay progression are individual

performance (used by around seven in ten

respondents), followed by competencies (just

over two-thirds) and market rates (just under

two-thirds). The least common criteria for pay

progression is length of service.

• The top three factors determining the size of

the 2012 pay review for all employees were

the organisation’s ability to pay, the ‘going

rate’ of competitors’ pay rises and movement

in market rates. Inflation was also ranked

as a top three factor for non-management

employee pay reviews.

• Over half of organisations operate one or

more performance-related reward, incentive

or recognition scheme. Individual bonuses and

merit pay rises are the most common individual

performance-related schemes, while the most

common group performance-related schemes

are goal-sharing and profit-sharing.

• In 2013, around half of respondents forecast

that their organisation’s total spend on base

and variable pay will increase; one-third predict

it will stay the same and over one in ten

foresee it will decrease. Pay rises are the most

common driver of increasing total spend on

base and variable pay, while employing fewer

staff is the most common driver of decreasing

total spend on pay.

• The most common actual splits between total

spend on fixed pay and variable pay are 90%

fixed/10% variable. This ratio is the same as

the most common ideal split between total

spend on fixed pay and variable pay of 90%

fixed/10% variable.

Employee share schemes and long-term incentive plans (LTIs)• Over a quarter of respondent organisations

offer employee share schemes and LTIs.

• The most common broad-based schemes are

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company share option plans, while the most

common executive schemes are executive share

options.

• Over three-quarters of organisations offering

employee share schemes or LTIs predict that

their total spend will stay the same in 2013,

while three in twenty predict an increase in

spend and one in ten a decrease in spend.

• Employing more staff and increasing scheme

eligibility are given as the most common reasons

for increasing total spend on shares schemes and

LTIs, while reductions in average awards and

reducing scheme eligibility are given as the most

common reasons for decreasing total spend on

shares schemes and LTIs.

Employee benefits• The six most common benefits provided

to all employees are: paid bereavement

leave; pension scheme; training and career

development; over 25 days’ annual leave

(excluding public holidays); death in service/life

assurance; and Christmas lunch/party.

• One-fifth of organisations use flexible benefits

schemes and a further one in twenty will

introduce flexible benefits in 2013. Three

in twenty organisations offer voluntary/

affinity benefits, with a further one in thirty

introducing them in 2013.

• Three in twenty organisations currently issue

total reward statements to employees, with

another one in ten planning to introduce them

in 2013.

• While seven in ten respondents agree

that a transparent approach to employee

benefits policies and practices exists in their

organisations, around one in four agree that

their organisation prefers a more secretive

approach.

• In 2013, over half of respondents predict

their organisation’s total spend on employee

benefits will stay the same; three in ten

forecast it will increase and around three in

twenty think it will decrease.

• Increases in the costs of benefits is the most


employee benefits, while reductions in money

available for the benefits budget is the most

common driver of decreasing total benefits

spend.

• The most common actual split between total

spend on employee pay and benefits is 90%

pay/10% benefits and this is also the most

common ideal split.

Pensions• Nine out of ten organisations currently offer to

contribute to an employee pension scheme. The

most common type of pension offered to all

employees is a defined contribution (DC) scheme

followed by a defined benefit (DB) plan.

• Just over one-third of organisations questioned

automatically enrol employees into an

existing DC pension scheme. Over one-third of

organisations with DC pension schemes have

over 70% employees as members, while one-

fifth have between 10% and 30% as members.

• The average (mean) contribution rates to open

DC pensions are 7.9% employer contribution

and 5% employee contribution.

• Just under half of respondents say their

organisation is intending, or is required, to

make changes to its pension arrangements

or to introduce a pension for the first time in

the next 12 months, with the most common

change being to comply with auto-enrolment

requirements.

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2013Table 1: Summary of findings

Reward approaches

Percentage of respondents

using

Base pay structures Individual rates/ranges/spot salaries 49.0

Narrow-graded 37.2

Pay spines/service-related 31.5

Job family 30.4

Broad-banded 29.3

Base pay determination Market rates (with JE) 42.5

Ability to pay 39.5

Market rates (without JE) 21.9

Collective bargaining 16.4

Base pay progression criteria Individual performance 71.5

Competencies 64.7

Market rates 64.2

Employee potential/value/retention 51.3

Skills 57.6

Length of service 31.1

Base pay review factors Ability to pay 78.8

Going rate 45.9

Movement in market rates 44.9

Inflation 42.4

Recruitment/retention issues 40.0

Government funding/pay guidelines 34.4

Union/staff pressures 27.1

Living Wage pressures 24.0

Shareholder views 19.8

National Minimum Wage pressures 18.8

Employers offering a performance-related reward scheme

55.2

Individual performance-related schemes

Individual bonuses 59.8*

Merit pay rises 56.4*

Combination schemes 49.4*

Sales commissions 36.5*

Individual non-monetary recognition awards 35.3*

Ad hoc/project-based schemes 19.5*

Other individual-based cash incentives 17.4*

Group performance-related schemes Goal-sharing 50.3*

Profit-sharing 39.7*

Group- or team-based non-monetary recognition

35.1*

Group- or team-based non-monetary incentives

21.2*

Gain-sharing 11.9*

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Table 1: Summary of findings (continued)

Reward approaches

Percentage of respondents

using

Employers offering LTIs 25.5

Top six long-term incentives Executive share option schemes 40.6*

Company share option plan (CSOP) 35.6*

Share incentive plan (SIP) 32.7*

Save as you earn (SAYE) 25.7*

Executive deferred annual cash-based bonus 22.8*

Executive restricted/performance share plan 20.8*

Top six universal benefits Paid bereavement leave 92.9

Pension scheme 83.8

Training and career development 82.9

25+ days’ annual leave (excl. public hols) 73.0

Death in service/life assurance 68.7

Christmas party/lunch 66.9

Employers providing total reward statements

15.0

Employers offering voluntary/ affinity benefits

15.5

Employers offering flexible benefits 20.3

Employers contributing to a pension scheme

90.5

Open pension schemes Defined contribution 55.2*

Defined benefit 28.1*

Contribution to personal pension 24.9*

Hybrid/other 7.0*

Membership levels of open DC pension schemes

10–30% 20.1

31–50% 21.0

51–70% 23.2

Over 70% 35.7

Organisations auto-enrolling members to DC pension schemes

34.3

Average employer contribution to main DC pension schemes

7.9% of salary

Average employee contribution to main DC pension schemes

5.0% of salary

Employers predicting change to pension schemes

48.0

Top six changes to pension schemes Comply with auto-enrolment requirements 90.0+

Increase employee DB contributions 13.3+

Introduce salary sacrifice 12.4+

Reduce the value of the DB plan 7.1+

Increase employee DC contributions 6.7+

Amend the DC default investment options 5.7+* % of respondents operating a performance-related/long-term incentive scheme/pension scheme+ % of respondents predicting pension changes

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BASE AND VARIABLE PAY POLICIES

Our findings show organisations responding to multiple contextual factors in their reward management choices. Economic conditions continue to drive pay decisions for many. In the private sector, market competition and employee value are also key drivers, while in the public sector more traditional forms of reward management prevail.

Base pay structuresTable 2 shows that individual base pay

arrangements dominate as the most popular

methods of managing base pay, with just under

half of organisations using individual rates or spot

salaries. In previous surveys we have observed that

the incidence of narrow-graded pay structures

has been lower than we might have anticipated;

however, this year there is a sharp increase in

the number of survey organisations managing

base pay this way. This result may, in part, be

due to sampling differences year on year (see

‘Background to the report’) but clearly indicates

that narrow-grading is still very much a part of the

reward system in organisations across all sectors.

There is a marked difference in approach to base

pay management between sectors (Figure 1).

Manufacturing/production and private sector

services both clearly favour the individualised

approach, whereas public services remain wedded

to pay spine/seniority systems, which are largely

absent from the private sector. In the voluntary,

community and not-for-profit sector, the results

are split: individualised pay and pay spines are the

most common approaches, likely to be a reflection

of the heterogeneous nature of this sector.

Differences between base pay management

for different employee groups are not as

marked. While narrow-grading is used by nearly

a third of organisations for non-managerial

employees and a quarter use broad-banding for

management/professionals, individual rates/spot

salaries are the most common for both groups.

Flexible, individualised approaches to base pay

management are clearly a key feature of reward

management in the UK.

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Table 2: Base pay structures (% of respondents)

Individual rates/spot

salariesNarrow-graded

Pay spines/ service-related Job family

Broad- banded

All* 49.0 37.2 31.5 30.4 29.3

2012* 47.2 29.0 28.5 24.5 27.0

2011* 52.6 21.0 29.8 27.6 34.9

By sector*

Manufacturing and production

60.0 48.2 17.6 43.5 40.0

Private sector services 63.5 38.8 14.7 34.7 33.5

Public services 23.8 32.4 68.6 17.1 21.9

Voluntary, community and not-for-profit

39.5 28.4 33.3 24.7 18.5

By employee category

Management/professional 44.3 25.5 23.2 25.2 25.2

Other employees 32.9 32.2 29.9 23.6 17.1*% of respondents selecting for either employee category or both employee categories

Manufacturing and production Private sector Voluntary and not-for-profit Public services

70

60

50

40

30

20

10

0Individual Narrow graded Pay spines Job family Broad-banded

Figure 1: Base pay structures, by sector (% of respondents)

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2013Table 3: Base pay determination (% of respondents)

Market rates(using JE)

Abilityto pay

Market rates (not using JE)

Collective bargaining

All* 42.5 39.5 21.9 16.4

2012* 37.5 42.7 31.0 24.0

By sector*


44.0 38.1 28.6 22.6

Private sector services 42.9 43.5 31.0 5.4

Public services 34.3 31.4 6.7 40.0


50.6 43.2 16.0 2.5


Management/professional 40.2 31.7 19.2 8.9

Other employees 33.1 34.7 15.5 16.7*% of respondents selecting for either employee category or both employee categories

Figure 2: Pay determination in 2012 and 2013 (% of respondents)

2013 2012

50

40

30

20

10

0Market rates

(using JE)Ability to pay Market rates

(not using JE)Collective bargaining

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Pay progressionThe criteria organisations use to progress

individuals within a pay grade/scale are shown in

Table 4. Individual performance continues to be

the most common method of pay progression,

although rates have fallen slightly in 2013. In

contrast, the incidence of competency-based

progression has risen dramatically; indeed, all

criteria other than individual performance have

increased this year. We might speculate that as

performance outputs are more difficult to achieve

in tough economic times, organisations have placed

more emphasis on inputs in the form of employees’

competencies and skills. Market rates and employee

potential/retention have also increased slightly,

perhaps indicating a return to a more competitive

approach to base pay progression.

Table 4 also shows the breakdown of pay

progression criteria by sector and employee

category. Individual performance and market rates

dominate in the private sector, whereas length

of service is largely a public sector phenomenon.

Figure 3 illustrates the differences in approach

to pay progression for management and

professionals compared with other employees.

Length of service is the only criteria used more

commonly for non-managerial staff than

management/professionals.

Table 4: Base pay progression (% of respondents)

Individual performance Competencies

Market rates Skills

Employee potential/

value/ retention

Length of service

All* 71.5 64.7 64.2 57.6 51.3 31.1

2012* 78.6 49.4 56.8 44.1 48.0 28.7

2011* 74.0 50.2 62.6 44.2 45.7 24.5

By sector*


88.0 71.1 84.3 74.7 69.9 26.5

Private sector services 86.3 73.2 74.4 67.3 73.8 17.3

Public services 45.0 51.0 33.0 36.0 19.0 60.0


55.4 56.8 60.8 45.9 23.0 28.4


Management/professional

69.4 61.0 60.1 51.8 50.4 25.9

Other employees 57.3 52.9 53.3 50.9 36.2 28.8*% of respondents selecting for either employee category or both employee categories

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Table 5 shows the most common combination

of factors used by our respondent organisations

in pay progression by sector. While there are

clear differences in approach between private

sector employers and those in the public and

third sectors, the treatment of employee groups

within sectors is fairly consistent. The preferred

combination of individual performance,

competencies, skills, market rate and employee

potential/value/retention is dominant across

employee groups in both private sector categories.

Table 5: Most common combinations of factors used to determine base pay progression (% respondents)

Management and professional Other employees

Manufacturing and production Competencies, skills, individual performance, market rates, employee potential (22.9%)

Competencies, skills, individual performance, market rates, employee potential (10.3%)

Private sector services Competencies, skills, individual performance, market rates, employee potential (29.3%)


Public services Competencies, individual performance (6.1%)

Individual performance, length of service (5.3%)



Competencies, skills, individual performance, market rates (5.6%)

*% of respondents selecting for either employee category or both employee categories

Management/professional Other employees

70

60

50

40

30

20

10

0Individual

performanceCompetencies Market rates Skills

Employee value/

retentionLength

of service

Figure 3: Pay progression criteria, by employee category (% of respondents)

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2012 pay reviewsTable 6 shows that the top three factors

determining the size of the 2012 pay review for

all employees were the organisation’s ability to

pay, the ‘going rate’ of competitors’ pay rises and

movement in market rates. This clearly indicates

that organisations continue to walk the line

between awarding pay rises to keep competitive

with the market while ultimately being constrained

by what is affordable. Inflation was also ranked as

a top three factor for non-management employee

pay reviews, presumably as cost of living changes

are more crucial for those on lower incomes. There

are other differences between the two employee

groups. Recruitment and retention issues are,

as would be expected, more of a factor for the

management/professional ‘talent’ group. Whereas

Living Wage and National Minimum Wage

concerns feature more for other, presumably less

well paid, employees. It is also noteworthy that

last year the Living Wage was seen as slightly more

of a factor than the National Minimum Wage in

determining the size of the base pay review. By

sector, government funding is more of an issue

among public services and voluntary, community

and not-for-profit employers.

2013 pay reviewsFor the first time this year the survey asked

respondents about pay reviews for the

forthcoming year in open-text format in an

attempt to better understand the subtleties of pay

review decisions. Interestingly, most respondents

identified largely similar factors to the ones

provided in 2012. As in 2012, it is likely to be

internal assessment of ability to pay which will

determine 2013’s pay review outcomes. However,

we do see a more nuanced picture. Alongside

the terms ‘ability to pay’ and ‘affordability’ we

also have ‘profitability’, ‘company performance’,

‘budgetary restrictions’, ‘funding streams’,

government funding, ‘management of costs’,

‘level of savings made’ and even ‘staying in

business’, which remind us that there are a

multitude of sub-factors which determine an

organisation’s ability to pay before we even begin

to consider the interplay between main factors.

There are strong links between different sets of

factors, however. Ability to pay is often coupled

with other concerns; we see a balancing act as

organisations respond to competing pressures, as

the following responses indicate:

Table 6: Factors determining size of base pay reviews in 2012 (% respondents)

All grades* Management/professionals Other employees

Ability to pay 78.8 Ability to pay 73.6 Ability to pay 68.7

Going rate 45.9 Going rate 41.9 Inflation 37.6

Movement in market rates 44.9 Movement in market rates 41.2 Going rate 34.5

Inflation 42.4 Recruitment and retention 37.8 Movement in market rates 34.5

Recruitment/retention issues 40.0 Inflation 37.6 Government funding 30.0

Government funding 34.4 Government funding 32.4 Recruitment and retention 27.9

Union/staff pressures 27.1 Union/staff pressures 18.7 Union/staff pressures 24.1

Living Wage pressures 24.0 Shareholder views 17.6 Living Wage pressures 20.9

Shareholder views 19.8 Living Wage pressures 15.8 National Minimum Wage 17.1

National Minimum Wage 18.8 National Minimum Wage 11.5 Shareholder views 14.2*% of respondents selecting for either employee category or both employee categories

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2013‘Benchmarking and the ability for the organisation

to pay any increases whilst remaining profitable.’

(Large manufacturing and production company)

‘Company performance dictates total funds

available, which will be prioritised to groups

where recruitment and retention is problematic.’

(Private sector services SME)

‘Union buy-in to below-inflation wage rises at a

time when costs are rising and revenue growth is

slowing, the aim being to keep people in jobs until

an upturn is felt and we can increase wage rises

accordingly.’ (Large public services organisation)

‘Organisational surplus/profit balanced with

organisational management and working conditions

improvements – “we can’t pay much more but we’ve

improved how the organisation manages you”.’

(Voluntary, community and not-for-profit SME)

‘Government pay guidance and the ability of the

organisation to convince stakeholders to operate

these as flexibly as possible.’ (Large public services

organisation)

Overall, the picture gained from these answers is a

complex one. Organisations are clearly feeling the

push and pull of a number of competing factors

while being heavily constrained by company

performance or government funding issues.

Performance-related reward, incentive and recognitionOver half of all organisations in our survey

operate one or more performance-related reward,

incentive or recognition scheme (Table 7). This

figure is much reduced from last year, which could

be due to sampling differences; the 2013 survey

has a greater representation of public services

and voluntary, community and not-for-profit

organisations than in 2012, where performance-

related reward (PRR) is less common. However,

a closer look at Table 7 reveals that, other than

manufacturing/production, all sectors, sizes

and ownership types have seen a reduction in

incidence of PRR schemes. In speculating on why

this might be, one suggestion is that organisations

continuing to feel the effects of economic

downturn are putting certain schemes on hold or

shelving them altogether. This view is supported

Table 7: Organisations operating performance-related reward, incentive and recognition schemes (% of respondents)

2013 all 55.2

2012 all 65.3

By sector* 2012 2013

Manufacturing and production 62.8 66.7

Private sector services 76.9 71.9

Public services 55.6 41.0

Voluntary, community, not-for profit 37.5 25.9

Multiple sectors 73.3 N/A

By size

SME (<250) 59.2 43.5

Large (250–9,999) 68.3 62.0

Very large (10,000+) 91.7 74.3

By geographic ownership

Mainly UK-owned organisation 56.7 47.9

Division of mainly UK-owned organisation 85.2 75.0

Division of internationally owned organisation 80.3 74.3*% of respondents selecting for either employee category or both employee categories

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to some extent by respondents to our question

about PRR effectiveness (see below), some of

whom mention reviewing their performance-

related schemes in light of economic conditions,

particularly merit pay/PRP schemes that increase

base pay, for example:

‘We have not been able to make a pay award

since 2009 and are intending to move away from a

PRP system.’ (Large voluntary, community, not-for-

profit organisation)

However, the arguments for variable pay (for

example bonuses and commissions that have to be

re-earned) would suggest that these schemes are

well suited to conditions where general base pay

increases are unaffordable; the organisation only

pays out when performance has been achieved.

The apparent decrease in operation of even these

schemes may well indicate that the economic

climate is biting deeper than ever.

Tables 8 and 9 and Figure 4 show the proportion

of different types of performance-related scheme

in operation. Individual bonuses remain the

most common form of individual PRR scheme,

but incidence has dropped this year compared

with 2011 and 2012. Suggestions that this may

have any connection to the bad press associated

with ‘bonus culture’ are speculative, but this may

be an area to watch in future survey rounds.

Merit pay as a proportion of all PRR schemes has

remained the same, while combination schemes

have increased substantially. Again, this shift from

individual variable pay towards schemes where

the award depends on a mix of individual, group

and/or organisational performance may indicate

unwillingness to risk paying out unless overall

organisational performance is strong.

There are clear sectoral differences in approach

to individual PRR; combination schemes are

most common in manufacturing/production

Table 8: Individual performance-related reward schemes (% of respondents operating a PRR scheme)

Ind

ivid

ual

bo

nu

ses

Mer

it p

ay r

ises

Co

mb

inat

ion

sch

emes

Ind

ivid

ual

no

n-m

on

etar

y re

cog

nit

ion

aw

ard

s

Sale

s co

mm

issi

on

s

Ad

ho

c/p

roje

ct-b

ased

sc

hem

es

Oth

er in

div

idu

al-b

ased

cas

h

ince

nti

ves

All* 59.8 56.4 49.4 35.3 36.5 19.5 17.4

2012* 66.8 56.5 40.1 33.9 37.3 17.8 25.7

2011* 65.2 60.8 35.4 33.1 40.9 22.1 20.4

By sector*


51.8 57.1 66.1 37.5 35.7 25.0 10.7

Private sector services 69.7 55.7 51.6 34.4 53.3 18.9 23.8

Public services 48.8 51.2 32.6 37.2 4.7 14.0 14.0


45.0 70.0 25.0 30.0 5.0 20.0 5.0


Management/professional 58.8 54.6 47.5 31.9 29.8 17.2 13.0

Other employees 46.0 50.2 40.0 37.7 25.6 14.0 15.3

*% of respondents selecting for either employee category or both employee categories

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2013companies, whereas private sector services use

individual bonuses to a greater extent than other

sectors. Sales commissions are most common in

private sector services, where the type of work is

best suited to this form of performance-related

incentive. Merit pay rises are most common in the

third sector, where incentive schemes are rarely

used. Among public services organisations using

PRR, both merit pay and individual bonuses are

used most often.

We also see a difference in approach depending

on employee category. Management and

professionals are more likely to receive financial

performance-based rewards of nearly every type

than other employees. This could indicate a more

‘talent management’ oriented approach to this

group, while non-monetary recognition is perhaps

more suited to the broad base of employees.

Group-based performance-related reward schemes

remain less common than individual-based schemes,

reflecting the largely individualised nature of UK

reward management. However, our results have

shown another increase this year in nearly all group-

based schemes, perhaps indicating a shift in approach

back towards more collective reward systems. Again,

we will await future surveys to determine if this

apparent trend continues.

Once again, goal-sharing (group bonuses based on

group/team achievement of specific objectives) is

the most common form of group PRR, especially

in private sector companies. The public and third

sectors are far more likely to use non-monetary

recognition and incentive schemes. The difference

in approach between employee groups can also

be seen here; once again, management and

professionals are more likely to be included in

monetary schemes, while other employees are more

likely to be included in non-monetary schemes.

2011 2012

70

60

50

40

30

20

10

0Individualbonuses

Meritpay rises

Combinationschemes

2013

Individual non-monetary

Salescommissions

Ad hoc Otherindividual

Figure 4: Individual performance-related schemes in past three years (% of respondents operating a PRR scheme)

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Most effective performance-related schemesThis year, survey respondents were asked which

performance-related reward, recognition

and incentive schemes in operation in their

organisations were most effective and why. They

provided responses in open-text answers so we

could gain a deeper understanding of all the

factors in play.

Many responses centred on individual bonus

schemes, particularly flexible, discretionary bonuses

as well as those based on achievement of specific

performance targets. The next most cited schemes

were merit pay rises. One respondent from a large

manufacturing and production company said

their merit pay scheme was ‘the most effective

in terms of matching contribution with reward’.

Sales commission schemes were also mentioned

frequently by respondents; supporting comments

largely related to the direct link between behaviour

and results. Combination schemes appear to be

among the most effective, as one respondent

from a large public services organisation put it,

because they ‘enable a clear line of sight between

organisation, team and individual performance’.

Group- and team-based schemes such as goal-

sharing were cited less often as effective schemes,

especially given the relatively high incidence of

such schemes (Table 9). However, profit-sharing

was thought by a proportion of respondents

to be the most effective scheme, popular with

employees and providing the ‘engagement factor’.

Non-monetary recognition schemes also feature

strongly among responses and these schemes seem

to be providing a useful reward mechanism during

difficult economic times:

‘In the current climate our recognition scheme

non-monetary awards are proving the most

effective because they are enabling us to

recognise success, improve morale and provide

some genuine personal reward for our staff in a

period when there are limited pay uplifts and no

performance bonus awards.’ (Large public services

organisation)

However, one quite surprising aspect of the

responses to this question was the relatively high

proportion of respondents who either said none of

their performance-related schemes were effective

or that it was impossible to tell as there was little

or no evaluation of such schemes. One respondent

Table 9: Group performance-related reward schemes (% of respondents operating a PRR scheme)

Goal- sharing

Profit- sharing

Group or team-based

non-monetary recognition

Group or team-based

non-monetary incentives

Gain- sharing

All* 50.3 39.7 35.1 21.2 11.9

2012* 47.9 38.1 26.8 18.6 21.6

2011* 14.9 21.0 18.2 8.3 7.2

By sector*


52.4 47.6 28.6 16.7 11.9


Public services 35.3 11.8 76.5 47.1 0.0


14.3 0.0 71.4 42.9 0.0


Management/professional 48.2 39.0 31.2 19.1 12.1

Other employees 42.6 38.0 37.2 21.7 5.4*% of respondents selecting for either employee category or both employee categories

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2013found their organisation’s scheme ‘demotivational’;

another said theirs had a ‘tendency to encourage

narrow/short-term behaviour’. It seems reward

practitioners are as split as academics on the topic of

performance-related reward effectiveness.

Total spend on fixed and variable pay When it comes to the proportions of total spend on

fixed and variable pay in our survey organisations,

the most common split is 90% fixed/10% variable

or 100% fixed pay (Table 10). Predictably perhaps,

we do see some marked sectoral variation in

results. Public services and the voluntary sector are

far more likely to have 100% spend on fixed pay

than private sector organisations, where the split is

more commonly 90% fixed/10% variable. Looking

at Table 11, however, the most favoured ideal split

between total spend on fixed pay and variable pay

would be 90% fixed/10% variable overall. In fact, in

general respondents in all sectors would like to see

a lower proportion of total spend on fixed pay and

more on variable pay.

Table 10: Actual proportions of total spend on fixed and variable pay (% of respondents)

AllManufacturing and production

Private sector services Public services


100% variable 0.3 1.4 0.0 0.0 0.0

10% fixed/90% variable 0.5 0.0 1.4 0.0 0.0

20% fixed/80% variable 1.4 1.4 2.7 0.0 0.0

30% fixed/70% variable 1.9 1.4 2.1 1.3 3.0

40% fixed/60% variable 0.5 1.4 0.7 0.0 0.0

50% fixed/50% variable 2.5 4.2 4.1 0.0 0.0

60% fixed/40% variable 3.6 1.4 5.5 3.8 1.5

70% fixed/30% variable 8.5 2.8 10.3 10.0 9.1

80% fixed/20% variable 17.6 25.0 19.9 11.3 12.1

90% fixed/10% variable 31.6 45.8 32.2 27.5 19.7

100% fixed 31.6 15.3 21.2 46.3 54.5

Table 11: Ideal proportions of total spend on fixed and variable pay (% of respondents)

AllManufacturing and production



100% variable 1.2 1.5 1.5 0.0 1.7

10% fixed/90% variable 0.9 0.0 2.2 0.0 0.0

20% fixed/80% variable 0.6 1.5 0.7 0.0 0.0

30% fixed/70% variable 1.8 1.5 2.9 0.0 1.7

40% fixed/60% variable 1.8 2.9 1.5 2.9 0.0

50% fixed/50% variable 3.0 7.4 2.2 1.4 1.7

60% fixed/40% variable 3.6 2.9 5.8 2.9 0.0

70% fixed/30% variable 14.1 10.3 19.0 13.0 8.5

80% fixed/20% variable 23.7 22.1 26.3 18.8 25.4

90% fixed/10% variable 26.4 35.3 21.9 30.4 22.0

100% fixed 22.8 14.7 16.1 30.4 39.0

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This is an interesting finding, indicating that ‘new

pay’ thinking on strategic reward advocating

higher proportions of variable pay has, to a limited

extent, been adopted within organisations which

ideally would like to shift further towards variable

pay. However, there does seem to be a limit here;

Tables 10 and 11 show clearly that while the actual

figures at the bottom of Table 10 all shift towards

higher ideal proportions of variable pay in Table

11, there is relatively little change past the 70%

fixed/30% variable mark, indicating that while

respondents would in general prefer more variable

pay, at present they would be unwilling to move to

reward structures where variable pay is in greater

proportion than fixed pay.

Base and variable pay – predictions for 2013Table 12 and Figure 5 reveal respondents’

predictions for changes to base and variable

pay spend in 2013. Just over half of respondents

predict their organisation’s total spend on base

and variable pay will increase, whereas 34.9%

predict it will stay the same and 12.2% predict it

will decrease in the next year. Manufacturing and

production, SMEs, divisions of UK companies and

private (publicly traded) organisations are more

likely to predict increasing total spend. Of those

organisations predicting a decrease of total spend,

very large, mainly UK-owned, public sector services

organisations are the most common. Presumably,

this result is down to large government-funded

organisations being required to cut spending,

including pay budgets.

Table 12: Prediction for changes to total spend on base and variable pay in 2013 (% of respondents)

Increasespend

Staythe same

Decreasespend

All 52.9 34.9 12.2

By sector


63.2 27.6 9.2

Private sector services 57.3 35.1 7.6

Public services 35.2 38.1 26.7


55.6 38.3 6.2

By size

SME (<250) 56.0 38.2 5.8

Large (250–9,999) 52.8 32.4 14.8

Very large (10,000+) 37.1 34.3 28.6


Mainly UK-owned organisation

51.4 35.8 12.8

Division of mainly UK-owned organisation

65.0 30.0 5.0

Division of internationally owned organisation

53.3 35.2 11.4

By structural ownership

Private sector (privately held) 57.7 35.2 7.1

Private sector (publicly held) 61.8 26.3 11.8

Public sector 29.8 38.1 32.1

Non-profit 56.4 38.6 5.0

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2013When we look at what our respondents say is

driving these changes to total spend on base and

variable pay, Table 13 shows that pay rises and

employing more staff are the most common drivers

of increasing spend on pay, while employing fewer

staff and pay cuts are the most common drivers of

spend decreases. There is a clear division here in

organisations which are taking on more employees

and awarding pay increases, while others are

reducing headcount and cutting pay. The positive

aspect of this is that the majority of organisations,

are increasing spend and, it seems, are doing so

for positive reasons. One particular result to note

is the relatively high response for ‘other’ drivers of

decreasing pay spend when the ‘other’ category for

increasing spend is so low. It is possible that again

the public sector requirement to cut pay budgets is

the key factor here.

34.952.9

12.2

Increase spend

Stay the same

Decrease spend

Figure 5: Prediction for changes to total spend on base and variable pay in 2013 (% of respondents)

Table 13: Drivers of predicted changes to total spend on base and variable pay in 2013 (% of respondents predicting the change)

Drivers for increasing pay spend Drivers for decreasing pay spend

Pay rises 83.8 Employing fewer staff 81.5

Employing more staff 50.6 Pay cuts 29.6

Skills shortages 19.1 Reductions in average variable pay 22.2

Increases in average variable pay 15.3 Other 20.4

Other 4.7 Skills shortages easing 1.9

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Case study – Intel Corporation Europe

When it comes to putting reward right at the heart of the employment relationship, the computing giant Intel are firm believers in their managers exemplifying principles of reciprocal trust and open communication – and this approach has seen spectacular results.

Intel Corporation’s operation in Europe extends from Ireland in the west to Kazakhstan in the east and Israel in the south, employing approximately 17,000 workers in sales and marketing, manufacturing and design. Intel’s mission – ‘This decade, we will create and extend computing technology to connect and enrich the lives of every person on earth’ – reflects both their ambition and their values. That such a mission would drive bold corporate objectives might be expected, but it is in the translation of these high-level objectives into meaningful working practices that has been key to delivering results.

Gary Boyle, HR Business Partner for Europe, believes that this has been achieved through a combination of a strong reward philosophy; open, clear communications; and line managers who are passionate about Intel and engaged with the company’s vision and values.

Intel’s reward philosophy is based on matching or exceeding the market for fixed elements of the total reward package (base pay, benefits and employee share schemes) and rewarding exceptional performance with variable pay practices which allow repeat high-performers to earn at the very top of the market. An annual bonus is based on individual targets with a multiplier based on overall company performance, while a six-monthly bonus is awarded on size of revenue, operating margin and feedback from customers. What may be surprising in a diverse employee population of 17,000 is that the bonuses are open to all, regardless of role, business group or location. The message to employees is unambiguous: performance drives earnings potential and performance is dependent on everyone – everyone will have a role to play, and a share, in company success.

Boyle is equally clear about the critical role of line managers in the performance equation and believes strongly that this is where HR should facilitate, not direct. For reward to be meaningful from an employee perspective, Boyle says, ‘you don’t need someone from HR coming in and telling you about the pay philosophy, you need your manager understanding it and being able to relate it to you as an individual.’ In Boyle’s view, the relationship between direct reports and managers and the trust people have in their managers has the potential to be more important than pay in motivating and retaining high-performers.

According to Boyle, a healthy management relationship and the principle of ‘matching what you say with what you do’ have been responsible for some extraordinary results at Intel. In 2010 the company faced a product recall. Its factories around the world, already working to near capacity, were challenged with doubling production to meet customer demands. Intel approached the situation as a potential win–win; they knew that getting this right would improve financial results and they committed to sharing any gains 50/50 with employees. A huge communications campaign promoted the challenge and kept employees informed of performance against target on a daily basis. Employees rose to the challenge spectacularly and achieved the equivalent of 14 weeks’ production in just 8 weeks, each earning a $1,000 bonus in the process.

In an economic environment of zero or very low base pay increases, it is clear from Intel’s example that greater employee financial involvement underpinned by a positive employment relationship could be a very powerful tool indeed.

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2013

EMPLOYEE SHARE SCHEMES AND LONG-TERM INCENTIVE PLANS

Our findings indicate relative stability in this area of reward management, with executive share options and company share option plans remaining the most common schemes. Looking forward, our respondents predict spending on this area of reward will stay the same over the forthcoming year.

Table 14 shows roughly the same proportion of

organisations offering employee share schemes

and long-term incentive (LTI) plans as last year.

Although share schemes and LTIs remain a

predominantly private sector reward mechanism,

small numbers of respondents in other sectors

report their use. Results this year also show that

these schemes are most common, as we would

Table 14: Organisations operating long-term incentive schemes (% of respondents)

2013 25.5

2012 28.6

By sector 2012 2013




Voluntary, community, not-for-profit 0.0 7.4

Multiple sectors 56.7 N/A

By size

SME (<250) 21.1 21.5

Large (250–9,999) 33.6 29.2

Very large (10,000+) 43.5 25.7




Division of internationally owned organisation 45.8 47.6


Private sector (privately held) N/A 29.1

Private sector (publicly held) N/A 63.2

Public sector N/A 7.1

Non-profit N/A 5.9

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expect, in publicly traded private firms. It is

interesting to note that the differences in LTI use

between size of organisation is not as marked as

last year, partially due to the apparent fall in use

among very large organisations as well as divisions

of UK-owned organisations. However, this may

well be due to sampling effects, as the numbers of

respondents in these categories is relatively small.

Broad-based and executive schemesTable 15 and Figure 6 show that the most common

schemes are executive share options, although

broad-based schemes such as company share option

plans (CSOPs) and share incentive plans (SIPs)

are also used by roughly a third of respondents

operating share/LTI schemes. The results also show

some slight industry variations; for example, SIPs are

more common in manufacturing and production

Table 15: Long-term incentives (% of respondents operating a share/LTI scheme)

Broad-based schemes Executive share schemes

Co

mp

any

shar

e o

pti

on

pla

n

(CSO

P)

Shar

e in

cen

tive

p

lan

(SI

P)

Save

as

you

ear

n

(SA

YE)

Exec

uti

ve s

har

e o

pti

on

s

Exec

uti

ve

def

erre

d a

nn

ual

cas

h b

on

us

Exec

uti

ve

rest

rict

/per

form

sh

are

pla

n

Exec

uti

ve d

efer

red

/co

-in

vest

sh

are

pla

n

Phan

tom

sh

are

sch

eme

Ente

rpri

se m

anag

emen

t in

cen

tive

s (E

MIs

)

SAR

S/eq

uit

y SA

RS

All 35.6 32.7 25.7 40.6 22.8 20.8 11.9 9.9 8.9 6.9

By sector

Manufacturing and production 35.0 37.5 27.5 45.0 25.0 27.5 7.5 5.0 5.0 5.0

Private sector services 35.7 26.8 25.0 39.3 19.6 17.9 16.1 12.5 12.5 8.9

By size

SME (<250) 40.5 21.6 10.8 18.9 18.9 8.1 2.7 10.8 18.9 5.4

Large (250–9,999) 32.7 34.5 32.7 52.7 27.3 27.3 10.9 10.9 3.6 7.3

Very large (10,000+) 33.3 66.7 44.4 55.6 11.1 33.3 55.6 0.0 0.0 11.1


Mainly UK-owned organisation 38.8 28.6 34.7 30.6 24.5 22.4 10.2 8.2 14.3 0.0


25.0 50.0 0.0 0.0 50.0 0.0 0.0 25.0 25.0 0.0


33.3 35.4 18.8 54.2 18.8 20.8 14.6 10.4 2.1 14.6


Private sector (privately held) 36.7 32.7 12.2 28.6 22.4 8.2 6.1 16.3 18.4 2.0

Private sector (publicly held) 35.4 35.4 39.6 54.2 22.9 35.4 18.8 2.1 0.0 12.5

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2013

than in private sector services. We also see variation

according to firm size and ownership. SMEs favour

CSOPs, while SIPs and executive share options are

more common in large and very large companies.

Executive share options also feature strongly on

reward plans for divisions of internationally owned

organisations and publicly traded private companies.

Manufacturing and production Private services

50

40

30

20

10

0CSOP SIP SAYE Exec share

optionsExec defbonus

Execrestrict

Execdef

Phantom EMIs SARS

Figure 6: Long-term incentives by sector (% of respondents operating a share/LTI scheme)

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Table 16: Prediction for changes to total spend on share schemes/LTIs in 2013 (% of respondents operating a share/LTI scheme)

Stay the same Increase spend Decrease spend

All 76.1 15.0 8.8

By sector

Manufacturing and production 77.5 17.5 5.0



Voluntary, community and not-for-profit 83.3 0.0 16.7

By size

SME (<250) 73.2 9.8 17.1

Large (250–9,999) 77.8 19.0 3.2

Very large (10,000+) 77.8 11.1 11.1


Mainly UK-owned organisation 72.9 15.3 11.9

Division of mainly UK-owned organisation 75.0 25.0 0.0

Division of internationally owned organisation 80.0 14.0 6.0





Non-profit 83.3 0.0 16.7

Employee share schemes/LTIs – predictions for 2013Table 16 and Figure 7 show the majority of

organisations offering share/LTI schemes predict

that their total spend will stay the same in 2013.

There is little sectoral variation here, although

SMEs and UK-owned organisations are more likely

to be predicting a decrease in spend, while large

organisations and UK-owned divisions are more

likely to predict increases in spend.

Employing more staff and increasing scheme

eligibility were given as the most common reasons

for increasing total spend on share schemes and

LTIs. Reductions in average awards and reducing

scheme eligibility were given as the most common

reasons for decreasing total spend on share

schemes and LTIs. However, the numbers of

respondents are so small here (as the vast majority

predicted no change) that we must treat these

results with caution.

15

76.1

8.8

Increase spend

Stay the same

Decrease spend

Figure 7: Prediction for changes to total spend on share schemes/LTIs in 2013 (% of respondents operating a share/LTI scheme)

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EMPLOYEE BENEFITS

This year’s Reward Management survey aimed to be even more comprehensive in its gathering of data on the provision and extent of employee benefits in the UK. The range of benefits offered on a universal basis is remarkable. Furthermore, respondents indicated they would prefer a greater proportion of total reward spend being directed towards benefits provision.

Tables 17–23 show the range and extent of

employee benefits offered by survey respondents.

They have been categorised this year under broad

headings which reflect key areas of benefits

provision. However, we accept that the broad

headings are not mutually exclusive and some

benefits could go under different headings.

Overall, results show that provision of benefits is

not only increasing in many areas but also that

in general provision is becoming more universal

and less dependent on grade/seniority. It is also

notable that compared with last year, far fewer

benefits are provided only through flexible or

voluntary schemes.

Career development While in many organisations career development

and reward management operate in separate

spheres, the total reward perspective encourages

HR practitioners to think about and express

employee development in reward terms. Table

17 shows that our respondent organisations

may well be thinking in this way as training and

career development as a benefit is provided to

nearly all employees. Rates of study leave, unpaid

sabbaticals and coaching/mentoring programmes

are also widespread, although far more

dependent upon employee grade/seniority.

Table 17: Provision of career development benefits (% of respondents)

Provide to all employees

Provision dependent on

grade/seniority

Part of a flexible benefits

scheme only

Part of a voluntary benefits

scheme only Do not provide

Training and career development

82.9 10.9 0.7 0.5 5.0

Study leave (paid) 47.6 22.3 1.4 3.3 25.4

Sabbaticals (unpaid) 39.8 10.4 1.7 2.2 45.8

Professional subscriptions (paid/part-paid)

37.4 36.2 0.7 0.0 25.8

Coaching/mentoring programmes

30.1 35.2 1.0 1.7 32.1

Sabbaticals (paid) 7.2 7.2 0.8 0.0 84.7

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Financial benefits/pay in kind Table 18 shows pension schemes top the list of

most extensive financial benefits provided by

respondent organisations and the 9% reporting

they do not currently offer a pension scheme will

no doubt be looking at introducing schemes over

the next couple of years to ensure compliance

with pension law changes. More information on

the 91% of respondents who do can be found in

the next section.

Other notable financial benefits include debt

advice/guidance/counselling, offered by nearly

half of organisations. This is the first year

the reward management survey has asked

respondents about this particular benefit, so we

cannot track whether its provision has increased

in recent years as personal debt has become

more problematic for many. This will be an area

to watch in future surveys. However, last year

we did ask about free financial advice/education

and its provision has increased greatly; offered

by 12.3% in 2012 to 26.5% of respondents in

2013 – perhaps due to pension auto-enrolment.

Another related benefit is a welfare loan for

financial hardship and we have seen a rise over

the year in the proportion of employers offering

this to all employees. We may see more employers

adopt such a scheme as the government raises

the amount of money that organisations can loan

interest free to employees. We can speculate that

in the future that some employers will start to

adopt a more joined-up approach to workplace

savings, investments and loans.

Table 18: Provision of financial/pay in kind benefits (% of respondents)



grade/seniority


scheme only



Pension scheme 83.8 4.9 0.9 1.4 9.0

Debt advice/counselling/guidance

48.2 0.7 0.0 2.1 48.9

Give as you earn 34.4 0.0 1.0 1.9 62.7

Free/subsidised canteen 29.2 0.7 0.0 0.0 70.1

Discounted own products/services

28.9 0.9 0.0 0.5 69.7

Discount cards 28.5 0.0 1.4 3.6 66.5

Free financial education/advice

26.5 0.9 0.2 0.5 71.8

Discounted shopping vouchers

20.8 0.0 1.7 3.6 73.9

Relocation assistance 19.0 32.8 0.5 0.5 47.3

Christmas hamper/vouchers/gifts

17.1 1.2 0.2 0.0 81.4

Welfare loans for financial hardship

13.0 1.4 0.7 1.0 83.9

Corporate wrapper workplace benefits

9.2 0.5 0.7 0.5 89.1

Christmas bonus 7.4 4.0 0.0 0.7 87.9

Credit union 7.0 0.0 0.0 0.5 92.5

Homeworker allowance 5.8 2.4 0.5 0.0 91.3

Luncheon vouchers 2.2 0.0 0.0 0.0 97.8

First-time buyer’s home deposit assistance

1.0 0.0 0.2 0.0 98.8

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2013Health and well-being benefitsOur health and well-being results (Table 19)

show a mix of benefits from insurance-based

schemes (death-in-service/life assurance being

the most common) to medical assistance (for

example flu jabs and on-site medical services)

and promotion of fitness/lifestyle facilities (for

example gym membership, on-site fitness classes).

Employee assistance programmes (EAPs) are now

offered by well over half of organisations in our

survey, a figure that is an increase on last year,

showing the growing popularity of such schemes.

The general nature of EAPs, providing tailored

services to employees (and often members of their

family/household), may be an attractive option for

employers looking for cost-effective ways to take

preventative measures against absenteeism and

staff turnover caused by well-being problems.

Leave, personal and family-related benefitsHelping employees maintain a healthy work–life

balance is another key component of the total

reward approach and our survey results show

high levels of paid leave in excess of statutory

requirements and, to a lesser extent, flexibility

in buying and selling leave allowances. Flexible/

homeworking remains a common feature of

benefits provision, use of which has increased this

year despite recent publicity indicating a possible

backlash in the USA. Family-friendly policies such

as provision of childcare vouchers and enhanced

maternity/paternity leave are also widespread. Just

under half of employers in our sample provide paid

leave to all employees on military reserve activities.

Table 19: Provision of health and well-being benefits (% of respondents)



grade/seniority


scheme only



Death in service/life assurance

68.7 6.3 3.7 4.7 16.6

Tea/coffee/cold drinks – free 66.7 2.8 0.0 0.0 30.5

Eyecare vouchers 62.9 2.8 1.4 0.9 32.0

Employee assistance programme

56.2 1.4 0.7 1.2 40.5

Flu jabs 27.0 3.1 0.7 0.9 68.2

Gym (on-site or membership)

23.6 1.7 3.8 4.5 66.5

Private medical insurance 23.0 23.9 3.5 4.9 44.8

Health screening 20.4 12.8 4.0 2.1 60.6

Permanent health insurance

19.4 10.1 3.3 1.4 65.8

Critical illness insurance 17.2 8.7 5.4 3.1 65.6

Free fruit 15.6 0.0 0.0 0.0 84.4

Workplace chaplain/equivalent

12.3 0.0 0.0 0.0 87.7

On-site aerobics/Pilates 13.2 0.7 0.2 2.2 83.7

On-site medical facility 13.1 0.0 0.0 0.5 86.4

Healthcare cash plans 11.6 2.4 4.7 9.2 72.1

Dental insurance 8.1 4.5 8.8 10.0 68.6

On-site massages 7.4 0.2 0.2 2.9 89.3

Personal fitness trainer 2.9 0.0 0.2 1.9 95.0

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Social benefitsTable 21 shows that catering for employees’

social needs at work is also an important aspect

of benefits provision, with social events such as

Christmas parties and company picnics popular.

Transport benefitsTransport is an area of benefits provision where

we do see differentials between grades of

employee, with car allowances, company cars and

fuel allowances predominantly provided according

to grade/seniority (Table 23).

Table 20: Provision of leave, personal and family benefits (% of respondents)



grade/seniority


scheme only



Paid leave for bereavement

92.9 0.9 0.0 0.0 6.2

25 days’ and over paid leave (excluding bank holidays)

73.0 19.7 0.2 0.0 7.0

Childcare vouchers 63.3 1.4 6.5 7.0 21.8

Allow Internet purchases to be delivered at work

59.5 3.4 0.5 0.5 36.2

Enhanced maternity/paternity leave

57.8 1.9 0.5 0.0 39.9

Paid leave for military reserve activities

50.4 1.2 0.0 0.5 48.0

Flexible/homeworking 44.2 32.2 2.3 0.0 21.3

Time off for voluntary work

33.6 2.8 0.5 1.9 61.2

Paid carer’s leave 28.9 1.2 0.0 0.0 70.0

Emergency childcare support

25.5 0.0 0.5 0.9 73.1

Emergency eldercare support

24.7 0.0 0.5 0.7 74.1

Ability to buy and sell additional days of paid leave

22.9 2.7 3.9 1.7 68.9

Paid leave to train and compete in sports events

13.5 1.7 0.2 0.5 84.1

Learning assistance (not work-related)

8.3 2.1 0.7 1.0 87.9

On-site crèche 5.2 0.7 0.0 0.0 94.1

Concierge benefits 1.9 0.0 0.0 0.0 98.1

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2013Table 21: Provision of social benefits (% of respondents)



grade/seniority


scheme only



Christmas party/lunch 66.9 2.1 0.0 1.1 29.9

Dress-down days 53.5 0.0 0.5 1.0 45.1

Company picnic/barbeque 29.3 0.7 0.0 0.7 69.3

Social club 23.4 0.0 0.0 2.4 74.2

Company sports day 12.1 0.0 0.0 0.7 87.2

Theatre/concert trips 11.5 0.0 0.0 2.6 85.9

Company choir/band 8.8 0.0 0.0 1.0 90.2

Table 23: Provision of transport benefits (% of respondents)



grade/seniority


scheme only



On-site car parking (free/subsidised)

59.6 15.9 0.5 0.7 23.4

Cycle-to-work scheme loan 46.7 0.7 4.7 4.9 43.0

Travel season ticket loan 31.8 2.3 1.6 1.6 62.6

Travel insurance 13.4 6.4 6.1 3.1 71.1

Fuel allowance 8.9 21.0 0.5 0.0 69.7

Car allowance 4.0 51.6 1.2 0.5 42.8

Car loan 2.9 6.0 .5 0.7 90.0

All employee car ownership schemes

1.2 5.6 1.4 0.9 90.8

Carbon offsetting/credits 1.2 0.5 0.7 0.0 97.6

Company car 0.2 37.6 0.7 0.0 61.4

Table 22: Provision of technology benefits (% of respondents)



grade/seniority


scheme only


scheme onlyDo notprovide

Home computers 4.4 20.4 1.2 1.9 72.1

Mobile phone (personal use) 4.4 37.1 0.7 1.2 56.6

Mobile phone (salary sacrifice) 1.0 7.2 1.0 1.4 89.5

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Table 24 breaks down the provision of benefits

to all employees according to sector. The lists

are similar; paid leave for bereavement is the

most common benefit in all sectors; training and

development, and provision of pension schemes

are also common to all sectors’ top lists; 25 days’

and over paid leave is present in all sectors except

private sector services.

Certain benefits seem to be more sector-specific.

For manufacturing and production, on-site

parking is in the top six, presumably because

production units will often be in out-of-town

locations. Free tea/coffee and cold drinks only

appears in the private sector services’ top six,

whereas enhanced maternity/paternity leave

and paid leave for military reserve activities

only appear in the more welfare-oriented public

services list. The third sector top six benefits

include childcare vouchers and allowing Internet

purchases to be delivered to work.

Table 24: Top six universal benefits offered, by sector (% of respondents)


Paid leave for bereavement 92.0


On-site car parking (free/subsidised) 81.6

Pension scheme 78.1

25 days’ and over paid leave 77.0


Private sector services


Tea/coffee/cold drinks – free 84.2



Pension scheme 73.1

Death in service/life assurance 70.2

Public services


Pension scheme 90.5



Enhanced maternity/paternity leave 74.3

Paid leave for military reserve activities 70.5



Pension scheme 91.4



Allow Internet purchases to be delivered at work 71.6

Childcare vouchers 69.1

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2013Most popular employee benefitsOur survey respondents were asked which

benefits are most popular with employees and

why. The results in some respects are not that

surprising: pension schemes feature very highly,

many commenting on the rarity of their final

salary schemes and high levels of employer

contributions, which make them attractive options

for employees. Other financial-based benefits

are also popular, particularly healthcare/medical

insurance. Similarly, work–life balance benefits

such as flexibility, enhanced leave and childcare

vouchers feature strongly, many respondents

making the connection with the profile of their

workforces. Interestingly, this is the area where

a number of respondents comment on lack of

provision versus the demand for it, for example:

‘Many employees have indicated that flexible

working or hours and enhanced paternity benefits

as well as childcare vouchers…would be valued.

The organisation does not currently provide these

though.’ (Private sector services SME)

However, perhaps the most telling aspect of the

question responses is the almost total absence

of career development and training support

cited as popular benefits among employees. One

respondent mentions ‘personal and professional

development’, another a ‘personal training

allowance’ and one other ‘sabbaticals’, but these

are the only mentions from over 400 responses.

There are various possible explanations here.

One is that employees and/or survey respondents

do not see training and development activities

as benefits per se; another is that training

and development is so universal (and often

provided for reasons not associated with benefits

provision) that it is not valued as highly as more

traditional benefits, which either provide a level

of economic security (pensions, health insurance)

or enhance the quality of work and family life

(flexible working, holiday entitlement, and so on).

Whatever the explanation, this is a noteworthy

finding, with implications for the study of total

reward and non-monetary reward generally.

It may also have a public policy implication if

employers cut back on training because they

think that skills development is a waste of money

because it is not valued by workers and instead

focus resources on particular employee groups or

firm-specific skills.

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Total reward statementsContinuing the total reward theme, Table 25

shows relatively few organisations currently

issuing total reward statements to employees,

although 8.6% of respondents are planning to

introduce them in 2013. Total reward statements

are more common in the private sector and in very

large organisations, presumably as the range of

financial benefits is more extensive here.

Flexible benefits and voluntary/affinity benefits schemesTable 25 and Figure 8 also show the levels of

usage of flexible and voluntary benefits schemes.

Again, neither is extensive and both appear to

have decreased significantly in the past couple of

years. Reasons for this are not readily apparent;

there may well be sampling effects or we could be

seeing a move away from these more expensive

systems during continuing economic austerity.

Table 25 also shows a level of variation according

to sector and size of organisation. Private sector

companies and large organisations are far more

likely to offer both voluntary and flexible benefits

schemes.

Benefits transparency Following on from last year’s investigation into

pay transparency in organisations, for 2013

we asked respondents about the approach to

transparency of benefits specifically and the extent

to which organisations are prepared to disclose

to employees information about pensions and

employee benefits and how individuals or groups

of employees are treated the same or differently.

Table 25: Types of benefits offered (% of respondents)

Total reward statements

Voluntary/affinity benefits

Flexible benefits

All 15.0 15.5 20.3

2012 17.8 24.7 24.2

2011 N/A 45.1 34.0

By sector


19.0 15.7 25.6




12.8 11.4 10.0

By size

SME (<250) 12.8 8.6 12.4

Large (250–9,999) 15.2 19.4 23.5

Very large (10,000+) 27.3 30.3 44.1

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2013

Table 26 shows that overall most respondents

agree that a transparent approach to employee

benefits policies and practices exists in their

organisations, that is, that benefit policies,

practices and outcomes are made public with the

intention that all benefit information across all

grades is as transparent as possible.

This is in direct contrast with last year’s findings,

which indicated most organisations prefer to

keep pay confidential rather than promote

transparency. While there could be a level of

movement in approach following the Equality

Act’s prevention of employers using punitive

measures to enforce pay confidentiality clauses

in employment contracts, it is unlikely that such

attitudes have shifted so far and so fast. It seems

more likely that there is a distinct difference

in approach to pay as opposed to benefits; the

conclusion being that while a culture of secrecy is

more often favoured where pay is concerned, in

the pensions and benefits arena the approach is

more open and transparent. This seems a logical

assumption given that pension and benefits

provisions tend to be more harmonised or, at the

least, standardised according to grade, compared

with the often individualistic nature of base pay

management (see Tables 3, 4 and 6). Indeed, it

could be viewed as surprising that as many as

26% of respondents agree that their organisation

prefers a more secretive approach to employee

pensions and benefits.

Just as with the 2012 data on pay transparency, we

see a sectoral difference in benefits transparency

this year. Once again, more public and third

sector organisations than private companies tend

towards more transparent approaches, whereas

rather more private sector firms than public

services/voluntary organisations tend towards the

more secretive approaches. While employers are

more transparent about benefit provision than

pay, not many of them communicate the value

of benefits and the value of whole employee

proposition through total reward statements.

2013 2012 2011

50

40

30

20

10

0Voluntary/affinity

benefitsFlexible benefits

Figure 8: Flexible and voluntary benefits schemes in past three years (% of respondents)

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Table 26: Approaches to benefits transparency (% of respondents)

Approach to benefits transparency

Somewhat agree/ strongly agree

Neitheragree nor disagree

Somewhat disagree/strongly disagree

This organisation actively makes its benefit policies, practices and outcomes public with the intention that all benefit information across all grades is as transparent as possible to all employees.

All 68.2 10.0 21.7





78.8 10.0 11.3

This organisation actively makes its benefit policies, practices and outcomes public with the intention that all benefit information is as transparent as possible, but may not release to all employees certain information regarding senior grades.

All 60.6 8.8 30.6





58.4 9.1 32.5

This organisation allows its benefit policies, practices and outcomes to be disclosed to employees but does not actively promote disclosure.

All 37.1 22.2 40.7





35.1 23.4 41.6

This organisation prefers details about benefit policies, practices and outcomes to remain confidential but provides employees with relevant benefit information when asked in specific circumstances.

All 31.4 16.3 52.3





18.7 17.3 64.0

This organisation believes that information on benefit policies, practices and outcomes should be a private matter between individual employees and the organisation but it will comply with requests for relevant benefit information if required under legislation (for example, in response to an equal pay questions form).

All 26.0 16.7 57.3





20.3 18.9 60.8

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2013

Table 27: Actual proportions of total spend on employee reward (% of respondents)

AllManufacturingand production



100% benefits 0.9 0.0 0.7 1.3 1.6

10% pay/90% benefits 0.3 0.0 0.0 1.3 0.0

20% pay/80% benefits 0.3 0.0 0.0 1.3 0.0

30% pay/70% benefits 0.9 0.0 2.1 0.0 0.0

40% pay/60% benefits 0.3 1.4 0.0 0.0 0.0

50% pay/50% benefits 1.4 1.4 2.1 1.3 0.0

60% pay/40% benefits 2.0 4.2 2.1 1.3 0.0

70% pay/30% benefits 10.3 8.5 13.5 10.5 4.8

80% pay/20% benefits 26.0 26.8 25.5 23.7 29.0

90% pay/10% benefits 43.1 45.1 43.3 36.8 48.4

100% pay 14.6 12.7 10.6 22.4 16.1

Total spend on employee reward (pay and benefits)Table 27 shows the composition of total reward

spend split between pay and benefits. The most

common split is 90% pay/10% benefits (43.1%),

followed by 80% pay/20% benefits (26.0%).

The results by sector show a broad similarity in

approach, although interestingly public services

respondents are more likely than any other sector

to say they spend 100% on pay. It is unlikely that

nearly a quarter of public sector organisations don’t

spend on benefits at all. While the public sector

may not provide many pay-in-kind benefits such as

company cars or private medical insurance, other

benefits such as enhanced annual and maternity/

paternity leave and contributory pensions (often

defined benefit schemes) are more widespread,

so this result is most likely due to definitional

issues. What is included in the term ‘benefits’ can

be open to interpretation. Another issue may

well be that, when it comes to pensions, public

sector respondents find it difficult to calculate the

actual size of their employer pension contribution,

especially if the scheme is ‘pay as you go’.

Table 28 shows that while the 90% pay/10%

benefits split reflects the ideal combination for

34.2% of respondents, more would like to see an

Table 28: Ideal proportions of total spend on employee reward (% of respondents)

AllManufacturingand production



100% benefits 0.6 0.0 0.8 0.0 1.8

10% pay/90% benefits 0.6 1.5 0.0 1.4 0.0

20% pay/80% benefits 0.6 0.0 0.8 1.4 0.0

30% pay/70% benefits 0.3 0.0 0.0 1.4 0.0

40% pay/60% benefits 0.3 0.0 0.8 0.0 0.0

50% pay/50% benefits 3.1 4.5 3.0 4.3 0.0

60% pay/40% benefits 3.7 1.5 3.8 5.8 3.5

70% pay/30% benefits 17.2 17.9 18.9 15.9 14.0

80% pay/20% benefits 30.8 32.8 31.8 21.7 36.8

90% pay/10% benefits 34.2 37.3 31.8 36.2 33.3

100% pay 8.6 4.5 8.3 11.6 10.5

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Table 29: Prediction for changes to total spend on employee benefits in 2013 (% of respondents)

Increasespend Stay the same Decrease spend

All 30.9 55.4 13.7

By sector




Voluntary, community, not-for-profit 33.3 63.0 3.7

By size

SME (<250) 35.1 58.1 6.8

Large (250–9,999) 29.6 53.7 16.7

Very large (10,000+) 14.3 54.3 31.4


Mainly UK-owned organisation 30.7 55.3 14.1

Division of mainly UK-owned organisation 40.0 50.0 10.0

Division of internationally owned organisation 28.6 57.1 14.3





Non-profit 32.7 63.4 4.0

80%/20% or 70%/30% split than is currently the

case. What might be preventing organisations

from shifting some of their total reward spend

from pay to benefits is not clear, although we

could assume market visibility (or lack of visibility)

of the total package might play a role as well as

the challenge of changing terms and conditions

through the contract of employment. This is

perhaps an area to investigate further in future

survey rounds. It is also interesting to note that

despite the economic slowdown, employers are

not planning to switch limited resources from

benefits to pay, but the other way around.

Employee benefits – predictions for 2013Table 29 shows 55.4% of respondents predict

their organisation’s total spend on employee

benefits will stay the same in 2013; 30.9% predict

it will increase and 13.7% predict it will decrease.

Figure 9 illustrates the breakdown by sector.

Public services organisations are the least likely

to predict an increase in spend for reasons, we

presume, associated with continued budget

restrictions. Manufacturing and production

companies are much more likely to predict

increased spend on benefits and far less likely to

be decreasing spending in 2013. The third sector

is the sector least likely to be decreasing benefits

spending over the next year. The picture overall

shows respondents representing all organisation

types predicting a relatively stable benefits

environment, with no changes in spending.

Increases in the costs of benefits is the most


employee benefits, while reductions in money

available for the benefits budget is the most

common driver of decreasing total benefits spend

(Table 30). Once again we see the ‘other’ category

for decreased spending is relatively high. As

Figure 9 shows, the public sector is more likely to

be cutting spending on benefits and therefore it

seems likely that government budget restrictions

are responsible for this result.

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2013

51.7

41.4

6.9

Manufacturing and production Private sector services

Public services Voluntary, community and not-for-profit

Stay the same

Increase spend

Decrease spend

12.9

53.2

33.9Increase spend

Stay the same

Decrease spend

28.6

56.2

15.2

Increase spend

Stay the same

Decrease spend

63

33.3

3.7

Increase spend

Stay the same

Decrease spend

Figure 9: Prediction for changes to total spend on employee benefits in 2013, by sector (% of respondents)

Table 30: Drivers of predicted changes to total spend on employee benefits in 2013 (% of respondents predicting the change)

Drivers for increasing benefits spend Drivers for decreasing benefits spend

Increases in the cost of benefits 60.6 Reductions in the money available for the benefits budget

67.2

Employing more staff 58.4 Reductions in the cost of benefits 26.2

Introduction of auto-enrolment 47.4 Other 23.0

Increases in the cost of benefit administration

16.8 Reductions in the cost of benefit administration

14.8

Other 14.6 Less need to maintain/increase attractiveness to employees

13.1

Skills shortages 6.6 Easing of skills shortages 1.6

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PENSIONS

Mandatory auto-enrolment of eligible employees into contributory pension schemes has taken effect for many of our respondents this year and is on the horizon for many more. Our respondents report the challenges of auto-enrolment centring on cost, organisational capacity to deliver and communication issues with employees and third parties.

Pension schemes Table 31 shows 90.5% of organisations currently

offer to contribute to an employee pension scheme,

broadly in line with our findings last year. Once

again, results show differences by sector, size and

ownership of organisation. In general, public and

third sector employers are more likely to contribute

to pension schemes, as are very large organisations

and those which are UK-owned divisions. In

contrast, private sector services, SMEs and UK-

owned organisations are the least likely to offer

contributory pension schemes. Over the next couple

of years, as auto-enrolment regulation extends

to more organisations, we would anticipate the

number of organisations not currently offering

schemes to grow smaller and smaller.

Table 31: Organisations contributing to a pension scheme (% of respondents)

Increasespend

All 90.5

2012 89.2

2011 98.9

By sector

Manufacturing and production 88.5

Private sector services 84.2

Public services 97.1

Voluntary, community, not-for-profit 97.5

By size

SME (<250) 81.2

Large (250–9,999) 97.7

Very large (10,000+) 100.0


Mainly UK-owned organisation 89.8

Division of mainly UK-owned organisation 100.0

Division of internationally owned organisation 91.4

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2013Table 32 and Figure 10 show the type of

pension schemes currently operated in our

survey organisations. Defined contribution (DC)

schemes continue to be the most common, with

defined benefit (DB) schemes and contributions

to personal pensions largely accounting for

the remainder. The year-on-year decrease in

DC schemes and increase in DB schemes is most

likely due to sampling differences across years.

This year’s sample has a greater representation

of public services than previously, where DC

schemes are uncommon. The sectoral split remains

constant; open DB schemes are now largely absent

from the private sector, while they are still the

prevailing type of scheme in the public sector

notwithstanding sweeping reforms coming into

force over the next few years.

Table 32: Open pension schemes (% of respondents operating pension schemes)

Defined contribution

Defined benefit

Contribution to an

individual’s personal pension Other Hybrid

All 55.2 28.1 24.9 4.5 2.5

2012 63.9 22.0 23.5 2.5 2.0

2011 69.4 25.4 15.5 2.0 1.6

By sector

Manufacturing and production 66.7 10.3 28.7 2.3 4.6


Public services 15.2 74.3 8.6 1.0 1.0

Voluntary, community, not-for-profit 63.0 23.5 25.9 4.9 1.2

Contribution to personal pension Defined benefit

70

80

60

50

40

30

20

10

0Manufacturing and

productionPrivate sector


Public services Voluntary and not-for-profit

Figure 10: Open pension schemes, by sector (% of respondents operating pension schemes)

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Defined contribution pensions schemesFocusing specifically on DC pension schemes, Table

33 shows a relatively low level of organisations

auto-enrolling employees, with only 34.3%

currently doing so. As may be expected, rates

of auto-enrolment are far more common in the

public sector, where it has been standard practice

for some time, and very large organisations, which

have been in the first wave of employers subject

to pension reform (see Figure 11). Indeed, the

staging date from which organisations employing

more than 10,000 were due to action auto-

enrolment was 1 March 2013, so it seems a fairly

large proportion of organisations may not have

started enrolling employees into their pension

scheme until after they had completed our survey

questionnaire.

Table 34 shows there are high levels of employee

membership reported by our respondents, with

membership levels of 70% plus being the most

common. There is clear sectoral variation here;

public services are much more likely to have higher

membership, while for the voluntary, community

and not-for-profit sector, membership levels are

more likely to be between 10% and 30%. Figure

12 shows a direct association between whether

or not an organisation auto-enrols employees

into DC pension schemes and membership levels,

with the highest membership levels found

in organisations using auto-enrolment and,

predictably, the lowest levels of membership in

organisations without auto-enrolment. This is a

clear indication that pension regulation changes

making auto-enrolment mandatory will encourage

pension scheme membership.

Table 33: Organisations auto-enrolling members to DC pension schemes (% of respondents)


All 34.3

By sector





By size

SME (<250) 26.8

Large (250–9,999) 35.7

Very large (10,000+) 60.6

Table 34: Membership levels of open DC pension schemes (% of respondents with DC schemes)

10–30% 31–50% 51–70% Over 70%

All 20.1 21.0 23.2 35.7

By sector

Manufacturing and production 24.3 25.7 15.7 34.3

Private sector services 22.0 22.8 28.5 26.8

Public services 4.3 8.6 24.3 62.9

Voluntary, community, not-for-profit 29.2 26.2 20.0 24.6

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2013

70

80

60

50

40

30

20

10

0

Manufacturing and production Private sector Public services

SME (<250) Large (250−9,999) Very large (+10,000)

Voluntary and not-for-profit

Figure 11: Organisations auto-enrolling members to DC pension schemes, by sector and size (% of respondents)

Auto-enrolment

10−30% 31−50% 51−70% Over 70%

No auto-enrolment

70

80

60

50

40

30

20

10

0

Membership

Figure 12: Pension scheme auto-enrolment and membership levels (% of respondents)

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Table 35 shows the average (mean) contribution

rates to open DC pensions are 7.9% employer

contribution and 5% employee contribution.

There are far higher rates of contribution from

employers and employees in the public sector

(and therefore public sector services and divisions

of UK-owned organisations) and the lowest

rates of contribution in private sector services,

private sector firms which are privately held,

and internationally owned organisations (see

Figure 13 for structural ownership breakdown).

Contribution rates are also linked to membership

levels (see Figure 14). Membership levels increase

where employer contributions are higher and

membership levels are more frequently lower

where employer contributions are lowest,

indicating that employees are more likely to join

a pension scheme which offers a high employer

contribution.

Table 35: Employer/employee contributions to DC pension schemes (% mean contribution)

Employer Employee

All 7.9 5.0

By sector




Voluntary, community, not-for-profit 7.9 4.9




Division of internationally owned organisation 6.6 4.4


Private sector (privately held) 5.6 4.1

Private sector (publicly held) 7.7 4.6

Public sector 13.3 7.6

Non-profit 8.5 5.2

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2013

Employer

Private sector(privately held)

Private sector(publicly held)

Public sector Voluntary andnot-for-profit

Employee

25

20

15

10

5

0

Figure 13: Employer/employee contributions to DC pension schemes, by structural ownership (% mean contribution)

Figure 14: DC pension scheme membership levels and mean employer contributions (% of respondents)

0−5% employer contribution 6−10% employer contribution

70

80

60

50

40

30

20

10

0

11−15% employer contribution

10−30% 31−50% 51−70% Over 70%Membership

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Defined benefit pension schemesTurning to look at the status of defined benefit

pension schemes, Table 36 shows the majority are

already closed or in wind-up, with only 45% still

open to new members. Once again, the variation

across sectors is apparent; manufacturing and

production, private sector services and the not-for-

profit sector all have more schemes closed than

open, whereas in the public sector 81.3% have DB

schemes open to new members. Presumably these

schemes will be subject to many changes in the

forthcoming years as the seemingly irreversible

trend away from the use of traditional final salary

pension schemes continues.

Table 36: Status of defined benefit pension schemes (% of respondents with DB schemes)

Open

Closed to new

employees but not future

accruals

Closed to new employees and future

accruals In wind-up

Total closed or in wind-

up

All 45.0 23.9 25.9 5.2 55.0

2012 42.1 30.1 24.1 4.6 58.8

By sector

Manufacturing and production 21.4 31.0 40.5 7.1 78.6


Public services 81.3 10.4 6.3 2.1 18.8

Voluntary, community, not-for-profit 40.4 34.0 23.4 2.1 59.5

Table 37: Organisations planning pension changes (% of respondents)

All 48.0

2012 39.8

2011 41.4

By sector





By size

SME (<250) 41.3

Large (250–9,999) 50.7

Very large (10,000+) 8.0

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2013Pension changes in 20132013 is set to be a busy year for reward and

pension specialists. When asked about pension

changes, 48% of respondents report that their

organisation is intending, or is required, to

make changes to its pension arrangements or to

introduce a pension for the first time in the next

12 months (Table 37). Large organisations and

those in the not-for-profit sector are most likely to

be making changes.

Table 38 and Figure 15 show the types of

changes being made and, unsurprisingly, it is

auto-enrolment that dominates, with 90% of

those making changes to pension arrangements

changing to comply with auto-enrolment

requirements. Increasing employee contributions

to both DB and DC pension schemes feature in

the top five changes, although not as strongly as

last year. Indeed, aside from reducing employer

contributions to DC schemes and closing DB

schemes, the incidence of all other types of

changes has decreased this year as auto-enrolment

is set to divert attention from elsewhere.

Table 38: Organisations making changes to pension schemes, by sector (% of respondents making changes to pensions)

2013

2012

Man

ufa

ctu

rin

gan

d p

rod

uct

ion

Priv

ate

sect

or

serv

ices

Pub

lic s

ervi

ces

Vo

lun

tary

, co

mm

un

ity

and

no

t-fo

r-p

rofi

t

Comply with auto-enrolment requirements 90.0 50.3 95.0 93.9 71.1 97.7

Increase employee DB contributions 13.3 21.6 5.0 3.7 33.3 18.6

Introduce salary sacrifice 12.4 16.8 20.0 11.0 11.1 9.3

Reduce the value of the DB plan 7.1 12.0 0.0 2.4 22.2 7.0

Increase employee DC contributions 6.7 15.6 7.5 4.9 13.3 2.3

Amend the DC default investment options 5.7 3.0 7.5 6.1 4.4 4.7

Other 5.7 9.6 7.5 4.9 8.9 2.3

Shift from RPI to CPI 5.2 12.0 5.0 1.2 11.1 7.0

Increase employer DC contributions 5.2 6.0 12.5 4.9 2.2 2.3

Close defined benefit (DB) scheme to new staff but not existing members

5.2 4.8 2.5 1.2 8.9 11.6

Introduce a defined contribution (DC) pension with employer contributions

4.8 10.8 5.0 1.2 8.9 7.0

Reduce employer DC contributions 4.8 2.4 0.0 4.9 2.2 11.6

Increase employer DB contributions 3.8 4.2 2.5 0.0 4.4 11.6

Close DB scheme to future accrual 3.3 4.8 0.0 1.2 8.9 4.7

Reduce employer DB contributions 2.9 3.0 2.5 0.0 6.7 4.7

Reduce employee DC contributions 1.9 N/A 0.0 2.4 2.2 2.3

Reduce employee DB contributions 1.0 2.4 0.0 1.2 0.0 2.3

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Challenges of pension auto-enrolmentWhen asked what they thought the biggest

challenge would be (or has been) to their

organisations in successfully implementing

automatic enrolment, respondents provided some

really interesting responses in open-text format,

again allowing us to see the nuances of this

complex subject.

The overriding theme to emerge from the answers

was a concern about organisational capacity to

meet the requirements of the pension changes.

Cost, time and administrative burden, whether

existing or new systems/technology could deal

with the required level of complexity and concerns

about maintaining compliance, particularly

dealing with ‘anomalous’ workers (for example

zero-hours contracts) were all factors mentioned

by respondents. For example, ‘understanding the

most efficient, least risky and bureaucratic way

to link up the HR and payroll data for monitoring

eligibility and fitting the increased workload into

already busy payroll team’ (large private sector

services company) was a typical response.

The second key theme identified internal

communication issues as a challenge. A small

number mentioned difficulties in engaging senior

management support for auto-enrolment. The

majority, however, had concerns about not only

communicating and explaining the requirements

to employees but also about employee or trade

union resistance to the changes. Our respondents

clearly expressed the emotive nature of auto-

enrolment; they talked of employee ‘disgust’,

‘concern’, ‘apathy’, ‘objection’, ‘reluctance’,

‘resentment’ and ‘distrust’. Many felt it was their

role to overcome employee concerns, mentioning

‘gaining staff buy-in’, ‘persuading’, ‘convincing’

and ‘encouraging’ employees to become

Figure 15: Organisations making changes to pension schemes 2012 and 2013 (% of respondents making changes to pensions)

2013 2012

70

80

90

100

60

50

40

30

20

10

0Comply with

auto-enrolmentrequirements

Increase employee DB contributions

Introducesalary sacrifice

Reduce the valueof the DB plan

Increase employee DC contributions

Amend the DC default

investment options

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2013members or just ‘coping with staff resentment’.

One respondent’s words seem to sum up the

sense of HR/reward practitioners being caught

in the middle of an enforced change: for them

the challenge is ‘making the business and the

individuals happy when neither really wants this’

(large manufacturing and production company).

Third parties also get a mention in the answers

of some respondents. Finding suppliers, ensuring

good communications with existing pensions/

benefits providers and using external providers

for systems and/or administrative support were all

listed as challenges, experienced or anticipated.

On a more positive note, a good proportion

of respondents confidently asserted that they

had not experienced, or did not anticipate

experiencing, any problems in successfully

implementing auto-enrolment, either because

auto-enrolment was already ‘well embedded’

in the organisation, that pension scheme

membership was typically very high or that they

were well prepared. More worryingly, some said

the challenges were unknown or that it was not

relevant to their organisation yet or even that

they did not understand the question. Considering

the variety and scale of auto-enrolment

challenges expressed by many of our respondents,

organisations would do well to start planning for

auto-enrolment sooner rather than later.

Case study – McDonald’s UK

For a great example of a large organisation managing pensions auto-enrolment successfully, look no further than McDonald’s UK, which was required by workplace pensions reforms to auto-enrol employees from 1 January 2013.

McDonald’s directly employs 35,000 hourly paid and 2,000 salaried staff in 400 restaurants across the UK.

Consultation In preparation for auto-enrolment, Neal Blackshire, Benefits and Compensation Manager, explains that a consultation team was formed in late 2010 including key stakeholders from the business, Towers Watson (McDonalds’ pensions consultant) and two representative franchisees (staging from 1 September 2013). The consultation team sought views from the Pensions Regulator, NEST (National Employment Savings Trust) and other pensions providers.

By August 2011 they were able to make a recommendation to the business that all qualifying salaried employees should be auto-enrolled into a stakeholder scheme provided by Friends Life and hourly paid staff into a NEST scheme.

Implementation The implementation of auto-enrolment of 1,100 salaried staff was based on two key principles: first, that employees who had previously shown no interest in joining a pension scheme should have a level of choice beyond being opted in or out; and second, the long-held principle that the DC scheme should replicate the type of employer contribution progression employees would see in a DB scheme as they get older and accumulate longer service.

Therefore, the new scheme to which salaried staff are now auto-enrolled meets the legislative requirement for McDonald’s to contribute 1% of qualifying earnings, but employees can opt up and join the enhanced scheme, which provides 3% employer contribution, life assurance at four times’ salary and long-term disability benefit. The scheme is also structured in three tiers

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of contribution matching so that the company pays in more depending on age and length of service, up to a maximum of a 2:1 ratio (that is, for every £1 of employee contribution the employer matches it with £2) and 10% of earnings.

For hourly paid employees, simplicity and flexibility were the priorities. In the NEST scheme, both employee and employer contribute 1% of qualifying earnings. If employees want to put more in, they set up a direct debit.

CommunicationsFor Blackshire, effective communications with a large, dispersed workforce was always going to be central to the success of auto-enrolment. He was impressed by NEST’s approach to communications – de-mystifying pensions and jargon-busting – using practical, everyday language. Another important investment was finding the right means and provider of regulatory communications – it had to be as simple and clear as possible, so an automated email system provided by JLT Benefit Solutions was chosen.

When it came to communicating the changes with employees in the months preceding auto-enrolment, Blackshire’s approach was to be factual and straightforward. Through the employee portal, ourlounge.co.uk, a weekly cascade email, links to DWP webpages, notice board and payslips, employees received the information they needed in a range of formats that were simple but effective.

Opt-outsMcDonald’s has seen extremely low opt-out rates so far. For salaried staff, just 3% have opted out as of 1 May, but nearly as many have opted up to the enhanced scheme.

For hourly paid employees, the rate is even lower; of 10,500 auto-enrolled, only 2.4% have opted out. Blackshire attributes these low rates to a number of factors: for many employees auto-enrolment has performed a task long deferred and they are content to remain in the scheme; the tiered contributions of the salaried scheme, which starts low and builds up over time, helps people to adjust to the outlay; and also, inevitably, an element of inertia – some employees have not opted out just as others previously put off opting in.

However, that the vast majority of auto-enrolled employees are staying put is also a testament to the investment McDonald’s has made over the previous two and a half years: in consultation, in designing appropriate pension schemes and in processes and employee communication – a good lesson for any organisation with auto-enrolment on the horizon.

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CONCLUSIONS AND IMPLICATIONS FOR REWARD MANAGEMENT

In this final section of the report, Stephen Perkins and John Shields draw together some of the key themes emerging from the survey data and reflect on the implications for reward management in a milestone year for the CIPD.

This is the CIPD’s centenary year, prompting

reflection on the ways in which reward

management might have been understood 100

years ago compared with today. What’s the same

and what’s changed?

What is the same is that there is a relationship

that may be thought of as a legal contract,

related to an economic exchange: employee’s

time for payment of a wage or salary. On the

other hand, with organisations looking to

encourage their staff to see themselves as having

a stake in the organisation’s success that goes

beyond the economic or legal, there is a more

profound relationship at stake. This is one in

which employee choices extend not just to an

economic contract but to a ‘psychological’ or

unwritten contract between the parties. This

perceived ‘deal’ reflects the fact that, in terms of

the ‘value’ on offer, the employment relationship

is indeterminate.

What employers offer is now commonly referred to

as ‘the employee value proposition’. What employees

offer in terms of work effort is neither fixed in

advance nor unchanging: they may choose to adjust

their contribution in line with changing experiences,

expectations and attitudes. Alternatively, they may

choose to contribute more than their material effort

in a pay bargain; they may co-operate willingly in the

functioning of the business where more and more

depends on judgement and choices made at the

front line with customers.

And in line with the notion of the ‘psychological

contract’, employers now typically offer different

‘value propositions’ to different types of employee.

As we have seen in the survey findings, strategies

of differentiation between categories of employee

are being applied – and these carry both upside

prospects and risks in the contemporary context.

Science and sensibilityOne hundred years ago management as a

discipline was itself in its infancy, with the notion

of bringing ‘science’ to bear through time and

motion study and linking pay to production

of ‘pieces’ on the production lines epitomised

by those created by Henry Ford in his US car

manufacturing plants.

With manufacturing in the most advanced economies

today balanced and sometimes outflanked by the

service industries, the question of what that ‘piece’

(of work) would be, how it should be incentivised

through rewards, and what effort employees should

be expected to contribute to produce it becomes

ever more complex. And the array of reward types

on offer adds further complexity to the challenge

of designing, communicating and monitoring what,

since the 1990s, has been referred to as the ‘total

reward’ approach.

Yet, for all of the apparent promise of ‘scientific’

piece-payment, it is also the case that employers

have long had to wrestle with reward system

complexity and the challenge of how best to

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configure ‘the employee value proposition’.

To illustrate: providing magazines for workers’

relaxation time and cakes for ‘girls’ leaving the

workforce (compulsorily) at the time of marriage

colourfully described in the ‘Bagatelle, baths

and total abstinence’ article on the Institute’s

centenary webpages,1 non-cash ‘benefits in kind’

featured in what employers were putting on the

table even in the early twentieth century.

The biggest issues today seem to be ones that

are at once of longstanding significance in British

workplaces: enhancing productivity (through what

people do as well as the capital investment to

enable or replace raw labour) and fair distribution

– albeit with a particularly contemporary twist. At

a time when the Rich Riccis2 of the upper echelons

are still commanding daily headlines, and with

ratings agencies looking negatively at the British

economy’s prospects of lifting performance, these

twin and hypothetically intertwined themes prevail.

For those who, while not clinging to the remnants

of scientific management in the strict sense

associated with its American ‘father’ Frederick W.

Taylor, nonetheless still wish to apply a scientific

logic to reward management, the related

questions are straightforward.

How do we develop and apply a strategy for

building a common sense of engagement in the

economic enterprise (whether for profit or not),

muting any sense of inequity other than justified

by individual and/or group contribution to the

corporate project?

And how do we extend that engagement

beyond one that is simply marking time, or

passionate without being productive, to one that

is continuously innovative, and adding value to

organisational effectiveness?

Engagement or disconnection?The opposite of reward is punishment: the

proverbial carrot versus stick – sometimes

applied in combination. Rather than physical

punishment, people in employment relationships

can perceive themselves punished or at least

negatively motivated when aggrieved at a sense

of inequitable treatment. In the literature, that

reasoning stretches back to the writings of John

Stacey Adams in the 1960s. At one level, research

has shown that people make their comparisons

for equity of treatment in employment situations

to those nearest to them – to co-workers. But

with the media attention given to high-profile

business failures and allegations that things such

as a ‘bonus culture’ in banks and financial services

are to blame, there is a heightened sense of

awareness on the part of individuals as groups of

less-well-rewarded employees that this is wrong. As

a consequence, it can be hypothesised that some

workers go into the employment relationship pre-

motivated to feel negative and relatively ill-treated.

On the other hand, this may be something more

generally related to how people feel as citizens in a

society that it is sensed is increasingly stacked against

them in terms of their capacity for social mobility

(through work and its rewards), compared with a

privileged few. So this may only serve as a very broad

backdrop to how individuals approach their own

employment relationship, the way in which they

attribute meaning to what they see as rewarding

within that relationship and the manner in which

they respond attitudinally and behaviourally.

What have we learned in 2013 and what should managers do about it?What, then, do the 2013 results tell us about

how these questions are being dealt with as

evidenced in this benchmarking survey? And what

managerial implications flow from these findings?

1 http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2013/02/25/cipd-centenary-eight-hr-stories-that-changed-the-world.aspx

2 http://www.guardian.co.uk/business/2013/apr/18/barclays-rich-ricci-retires

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2013The interplay between managing pay flexibly

at the individual level and overall concerns for

internal equity of treatment across groups shows

through in the survey report. In particular, while

management of pay contrasts markedly between

the for-profit and not-for-profit sectors, similarity

of treatment of groups within sector is visible

in the survey data. Somewhat contradicting

this finding, however, evidence of active

differentiation in the treatment of those in broad

groupings (managerial and professional roles, on

the one hand, compared with other employee

groups, on the other hand) highlights the scope

for tension. This can be seen in the juxtaposition

of market trends and ability to pay, when

comparing and contrasting these broad employee

groupings, for example. The sense communicated

is that engagement is particularly sought among

those whose skills and influence is regarded as

highly significant for the business.

But is engagement to be understood only in terms

of retaining ‘key capability’ employees? What

about seeking to encourage corporate citizenship

behaviours – putting the organisation’s interests

first – at every level in the hierarchy? Risks arising

from such an orientation may be low if theoretical

arguments regarding points of reward comparison

by employees hold true. On the other hand, unless

organisations find ways of scripting behaviours

among those who, despite having skills that

may be learned fairly quickly, still serve at crucial

customer interface points, managers may need to

be alert to the negative consequences of lower-

level employees feeling relatively undervalued.

While we caution in the report that differences in

sampling between the current survey and those

undertaken in 2011 and 2012 mean there is a

need for circumspection in generalising, it could

be that the rise in narrow-graded pay structures

represents an attempt to mitigate the risk. This

is especially so when considered in combination

with the accent this year on pay progression

related to competencies and skills. If employees

below managerial and professional grades see

the path to progression more explicitly mapped,

this may mitigate the potential for grievance and

disengaged behaviour.

The tendency to underpin market rate-informed

pay determination by job evaluation may also be

seen as a form of risk management – especially

in efforts to protect employers against equal pay

for work of equal value claims. Although pay for

performance in some form remains a core feature

of the UK pay management landscape, rewarding

inputs (competencies and skills) rather than solely

outputs in a targeted manner is, we have argued,

suggestive of an attempt to remain competitive

under still-sluggish economic conditions. It may

also reflect stated frustrations among responding

organisations about realising the promised

productivity gains when applying the range of

available pay-for-performance plans. Further, the

accent on combination awards revealed in the

survey results may reflect a growing sensitivity to

the alleged dysfunctional nature of stand-alone

individual bonus schemes.

These findings reinforce the conclusion that

employers must continuously balance market

competitiveness in pay management with

cashflow constraints, accentuated when the

economy has yet to turn the recessionary corner.

The ongoing dynamics of these factors shows

through in the survey findings that the projected

2013 pay review expectations broadly replicate

those applying in 2012. While these actions

may be viewed as part of a deliberate strategy

in privately and publicly owned organisations

alike, in the latter case the strategy may be seen

as one driven more by the political ‘owners’, in

the form of government policy to constrain the

public sector pay bill. Managers have to determine

pay outcomes within that strategy rather than

initiating it as part of an organisationally specified

plan to focus employment-related resources.

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Benefits and total rewardFinally, this ‘balancing’ imperative shows through

when considering benefits within a total reward

approach. Here, willingness to increase spend

seems more related to ‘benefits inflation’

than steps actively to add additional value to

employees. And while there is as yet little evidence

of a rebalancing of pay to benefits, respondents

do appear to have an appetite to do so where the

conditions are favourable. We raised the question

last year as to whether or not employers were

doing more to establish if reward investment was

hitting the target in terms of what worked best

for employees. If anything, the limited use of total

reward statements and apparent retrenchment in

offering flexible benefits provision suggests the

contrary.

Findings on benefits this year have raised a

number of key questions that deserve attention in

future research:

• Is debt counselling something of short-term

interest, related to recessionary times?

• Will trans-Atlantic employers adopt markedly

different approaches in different operational

locations, given apparent trends in relation to

tolerance of flexible/homeworking?

• Are employers missing a trick in failing to

convince people of the long-term career

benefits – assuring employability during

turbulent times – accruing from corporate

investment in development and training?

Or is this an indication that employees are

taking an instrumental approach in the face of

immediate uncertainties, preferring benefits

that deliver economic security or enhanced

quality of life beyond the job?

• What changes would apply in practice were

employers to achieve their stated aspiration

to shift the total reward mix more in favour

of benefits, despite the uncertainties in some

quarters associated with pensions auto-

enrolment?

A final question warranting attention emerges

from the attention in this year’s survey to the

transparency–secrecy mix in benefits provision.

As we note, compared with the cognate findings

in last year’s survey, when we investigated

transparency and secrecy regarding pay per

se, there would appear to be less of a ‘culture

of secrecy’ surrounding benefits. But there is

sufficient indication of a counterpoint to give

pause for reflection as to what is going on: more

than a quarter of this year’s respondents indicated

that they would prefer employee benefits,

including pensions, to be a matter between

individuals and the employer alone. Employers

may wish to ask themselves whether narrowing

the range of universally offered benefits would

help to overcome such concerns.

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2013

BACKGROUND TO THE REPORT

This is the twelfth annual survey of reward

management by the CIPD. The main aims of the

survey are to:

• inform the work of the CIPD on reward

management

• provide readers with an information and

benchmarking resource in respect of current and

emerging practice in UK reward management.

The research was carried out between February

and March 2013. The survey was sent out to senior

reward/HR practitioners in the public, private and

voluntary sectors. The number of respondents to

the survey was 444 in total.

The following tables provide a breakdown

of percentage of respondents by sector, by

ownership and by size of organisation (number of

employees).

In comparison with last year, the sample has a

stronger representation of public sector and not-

for-profit organisations, although private sector

services still remains the largest group (Table 39).

Last year we gave respondents the option of

indicating that they operate in multiple sectors,

although due to the small numbers that this was

relevant for, we have reverted back to the main

four sectors for 2013.

Table 40 shows geographic ownership and that

the vast majority of our survey respondents

provided responses relating to mainly UK-owned

organisations.

For the first time this year, to complement the

sectoral and geographic ownership breakdowns,

we also asked our respondents to categorise

their organisations’ structural ownership (Table

41). The majority of organisations in our survey

are from the private sector and privately held,

although there is good representation from other

ownership structures too. It is interesting to note

that the proportions of public sector and non-

profit organisations do not align exactly with

Table 39: Survey respondents, by sector (%)




19.6 38.5 23.6 18.2

Table 40: Survey respondents by ownership (%)

Mainly UK-owned organisation



71.5 4.6 24.0

cipd.co.uk/rewardm

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REWARD MANAGEMENT

public services and voluntary, community and

not-for-profit in Table 39 above as we may have

expected. This may be indicative of increasing

complexity in the public sector, as increased

involvement of private and other external not-for-

profit organisations blurs the sectoral divisions.

Table 42 shows that our sample of respondents

is fairly evenly split between small and medium-

sized organisations (fewer than 250 employees)

and large organisations (between 250 and 9,999

employees), with quite a small number from very

large organisations (more than 10,000 employees).

For the second year running, the survey asked

respondents to answer questions regarding the

demographic breakdown of the employee groups

in their organisations. However, the question

was asked in a different way this year, allowing

respondents a multiple-choice response, which

has greatly improved the response rate for this

question.

Table 43 shows that in most organisations female

managers/professionals are in the minority

and that there is a substantial proportion of

organisations where women make up the majority

of other employees. Managers/professionals under

30 are in the minority as are younger workers

generally. However, graduates make up half

or more of the management and professional

employee group in most organisations.

Table 41: Survey respondents, by structural ownership (%)

Private sector – privately held

Private sector – publicly traded

Public sector (local or national

government) Non-profit

41.1 17.2 19.0 22.8

Table 42: Survey respondents, by organisation size (number of employees) (%)

SMEs (<250) Large (250–9,999) Very large (10,000+)

43.2 48.9 7.9

Table 43: Survey respondents, by demographic composition (%)

None Minority About half Majority

Female employees (Management and professional) 0.9 43.2 36.0 17.3

Female employees (Other) 0.9 23.4 31.8 34.0

Under age 30 (Management and professional) 11.7 65.3 14.2 3.2

Under age 30 (Other) 3.4 48.4 26.8 10.4

Graduate employees (Management and professional) 7.7 31.5 21.2 32.7

Graduate employees (Other) 7.2 52.0 14.4 12.4

The team that helped to design the questionnaire, carry out the analysis and write the report were: Sarah Jones from the University of Bedfordshire, Liz Marriot and Stephen Perkins from London Metropolitan University and John Shields from the University of Sydney.

We would like to thank all the reward professionals who helped inform the questionnaire and report as well as those who completed the survey. Special thanks to those who contributed to the case studies appearing in this report.

OTHER TITLES IN THIS SERIES

LEARNING AND TALENT DEVELOPMENTThe annual Learning and Talent Development survey provides valuable commentary on current and future issues and trends. It explores employer support for learning, talent management, employee skills, managing and evaluating coaching and training spend. The latest report is brought to you in partnership with Cornerstone OnDemand.

2013

ABSENCE MANAGEMENTThe annual Absence Management survey provides useful benchmarking data on absence levels, the cost and causes of absence, and how organisations are managing absence. The latest report is brought to you in partnership with Simplyhealth.

EMPLOYEE ATTITUDES TO PAYThe annual Employee Attitudes to Pay survey investigates employee attitudes and expectations towards pay and bonuses. This survey is carried out by YouGov and focuses on employees in the UK.

RESOURCING AND TALENT PLANNINGThe annual Resourcing and Talent Planning survey contains valuable information on current and emerging trends in people resourcing practice. The report provides benchmarking information to support employers on resourcing strategies, attracting and selecting candidates, labour turnover and employee retention. The latest report is brought to you in partnership with Hays.

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