compensation & benefits management: xavier baeten

Compensation & benefits management: het beloningshuis van de toekomst

Vlerick HR Day - Xavier Baeten

“The Silver Tsunami”

“SRIHRM” “FFWP” “Age management”

“The changing face of reward”

"Plato believed that no-one in a community should earn more than five times the pay of the lowest paid worker."

“incentives will never be perfectly aligned with value-creation.”

“work is becoming the new face of retirement in the 21st century”

“One-quarter of the highest-potential people in your company Intend to jump ship within the year”

© Vlerick Leuven Gent Management School

Trends & challenges

1. Flexible rewards: pay-for-performance

2. Family-friendly workplace practices

3. Flexible rewards: choice

4. Health benefits

5. Corporate Citizenship

6. Retirement and pension plans

7. Employee value proposition


1. Flexible rewards: pay-for-performance

Less fixed, more variable 39% plan to increase the proportion of variable pay

More differentiation

Targets & measures

Collective bonus

Bonus deferral

Some tips: Do not over-incentivise

5 – 10 – 15 Target setting

Go beyond financial measures

Flexibility& discretion


2. Family-Friendly Workplace Practices

5 |

Total hours worked per

week

Holidays: number & regulation

Childcare flexibility

Childcare subsidy Working

from home

Job switching

Job sharing


2. Family-friendly workplace practices

Bloom, N., Kretschmer, T., & Van Reenen, J. (2011): Sample:

50-10.000 employees

Countries: Germany, France, UK, US

Findings:

No relationship with firm performance

No relationship with % female employees overall

Positive relationship with female managers

Positive relationship with ‘good management practices’ Operations

Monitoring

Targets

Incentives

6 |



7 |

Low flexibility

Low cost

High flexibility

High cost

Salary reduction

• Premium conversion

• Flexible spending account

Modular options

• Choice: different combinations of benefits

Core Plus

• Core: basic coverage

• Plus: flexible credits to purchase additional coverage

Mix and Match

• Flexible credits

Barringer & Milkovich (1998)



Do not provide too much choice – most important: Time (holidays, leave)

Mobility (car, public transport)

Pension contribution

Main barriers: Tax treatment

Administrative burden

Main effects: Employer reputation

Improves knowledge of benefits

8 |



What are the most popular ingredients of a cafeteria plan?

Money for…

Extra holidays

Bigger car

Holidays for…

Sabbatical or early retirement

Extra cash

Extra benefits

9 |


4. Health benefits

Wellness programs Social, mental and physical health

Food, fitness, stop smoking, stress, …

Health risk appraisal

Growing focus in the USA

74% use incentives (e.g., small cash awards, t-shirts, memberships in health clubs), up from 50% in 2008

J & J: return of $2.71 for $1.00 spent

Positive impact on retention

Clear signal about firm culture: culture of health

10 |



CSR – PR = HR

Research results: More than 90% of MBAs are willing to forgo financial benefits in order to work for an organisation with a better reputation for CSR and ethics (Stanford)

72% deciding between 2 jobs choose to work for the company that also supports charitable causes (Deloitte)

Only 15% say their employer has an employee sustainability engagement policy (Brighter Planet)

11 |



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http://www.patagonia.com/eu/enBE/home



13 |

http://www.deloitte.com/view/en_US/us/index.htm



14 |

http://www.google.be/aclk?sa=L&ai=Cir3Q3QnmTaXcD8WGOpGthLgHrvL9ggG8vtDUHcukwwUIABABIJOs-wVQidqY6_n_____AWC5yMuA5AHIAQGpAl5YYhVbN7g-qgQZT9BrUSKa5RcxeIyQXGLlBr98wTbFmB7s9Q&sig=AGiWqtwMdvlKSr76eKljvxkMOKtX0LjFhw&adurl=http://adfarm.mediaplex.com/ad/ck/12378-76104-2056-27?mpl=60594158&secrid=7866108428&senetid=search&mpre=http://lt.dell.com/lt/lt.aspx?CID=40565&LID=1043570&DGC=ST&DGSeg=dhs&ACD=1237876104205627&ST=dell&DURL=http://adfarm.mediaplex.com/ad/ck/12961-95499-3840-1?


6. Retirement & pension plans

Pension plans: Impact of economic crisis?

People do not think enough about retirement

‘Older’ workers – some research results: Fewer sich days

Less turnover

Better interpersonal skills

More engaged

However… 13% actively recruit older workers

15 |

“In Europe, fewer older individuals work because public policies encourage them to step down and create job openings for younger

employees


6. Retirement and pension plans

Impact on Reward Management End-of-career is not an “on-off” switch - flexible retirement (4th pillar)

Impact on job content

Need for flexible rewards:

Benefits: pension plan, mobility, holidays

Bonus plans?

Need for changes in social security and tax system

16 |


Important

Financial rewards:

Pay structure

How raises are determined

Pay structure

Information

Non-financial rewards: Responsibilities

Colleagues

Security

Career opportunities

Less important

Financial rewards:

Bonus

Employee benefits

Non-financial rewards: Management approachability

7. Reward Proposition

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What are companies working on? Projects in reward management

20 |


What are companies working on? Projects in reward management

Benchmarking

Bonus design: Simplification

Collective bonus

Bonus deferral

Pension plans: from defined benefits to defined contribution

21 |

“The trend will go to ‘one size fits me’”

“Distilling the message and getting line managers to really buy it … is critical”

“There is now more attention being paid to the balance between financial and non-financial

performance; it has been too financially oriented”