Reward levels for compensation and benefits professionals have begun to edge upwards as employers slowly loosen constraints after the recession, says Debbie Lovewell
Employee Benefits surveyed 466 people responsible for managing compensation and benefits in their own organisations for the Employee Benefits Salary Survey 2010. The majority (80%) of respondents were from the private sector, 17% from the public sector, and 3% the voluntary sector.
Overall, compensation and benefits experience continues to be highly valued by employers. Salary levels for these specialist titles tend to be higher than for generalist HR posts. This could reflect the higher status and importance many organisations have given to reward functions, along with the complexity of the issues facing professionals in this area.
This year, the mean salary for respondents stands at £51,073 – a rise on last year’s £48,436 and the £47,946 received in 2008. With the UK officially coming out of recession this year and the tough economic conditions gradually easing, albeit slowly, many employers are starting to lift pay freezes put in place during tighter times. This may account for the slightly larger increase year on year.
However, there are still significant differences between the salaries of men and women across the board. The mean salary for men (£60,208) is now more than £14,000 above the mean salary for women (£46,019), although this is a slight improvement on last year’s £16,000 differential. There is also a marked difference in the amount the mean salary for each gender has risen year on year. Since last year’s survey, the mean salary for females has increased by £3,031, but men have seen a rise of just £674.
After further equal pay measures were introduced in October’s Equality Act, it will be interesting to see if this trend continues. As it stands, it is a little concerning that the people who are responsible for implementing and complying with equal pay and discrimination legislation in their organisation are still not being treated fairly themselves.
Compensation and benefits professionals receive relatively generous holiday allowances. Just 12% have fewer than 25 days a year (excluding bank holidays), and 15% are entitled to 30 days a year.
But it would be interesting to know how many practise what they preach to other staff and take their full entitlement, given their heavy workload.
Just under two-thirds (64%) of respondents have had a salary review in the past 12 months. This is a rise on the 51% who said the same this time last year, which suggests employers are beginning to loosen the restraints put in place during the recession. This is also borne out by the fall in the percentage of respondents who said they had not received a salary review in the past 12 months because of a pay freeze within their organisation.
This year, 23% of respondents said this was the reason they had not had a salary review, down from 41% in 2009.
Where respondents have had a review in the past 12 months, the most common reason for this was as an annual review in their existing job (82%).
The changing economic conditions can also be seen in how respondents’ expected salary increases a year ago have played out. In 2009, 15% said they expected their salary to stay the same in the following 12 months, but just 2% of this year’s respondents who have had a salary review in this time said they had not received an increase. Last year, just 1% predicted they would receive an increase worth more than 15% of salary, but, in the event, more than 6% said they actually received this amount.
As predicted, the most common increases were in the region of 1.1%-3% of salary.
Just over two-thirds (67%) of respondents receive a cash bonus. The most common bonus criterion is company performance, which may be a primary factor in respondents failing to earn their full potential bonuses, given the economic climate over the past year. For example, 12% did not earn any of their potential bonus in the past 12 months. At the other end of the spectrum, just over half of those who could have earned more than £25,000 actually achieved this.
Overall, the most common bonus pots, in terms of both potential and actual earnings, were in the range £2,501-£5,000.
Given that compensation and benefits or reward professionals are most often those responsible for promoting an organisation’s pension scheme(s) to the rest of its workforce, and educating employees on the advantages of joining a scheme and saving for their retirement, all may be expected to follow their own advice.
So it is surprising that 9% of respondents to this year’s survey do not practise what they (or their close colleagues) preach and have so far failed to join their organisation’s scheme.
This is one group that cannot plead lack of knowledge or understanding of pensions to explain their failure to join a scheme, so other factors may be behind the issue.
Affordability could be one such reason, particularly among more junior employees in analyst or administrator roles. Just over one-third (35%) of those who are not active members of a pension plan are in such positions.
However, this does not account for the 58% of non-members who are at compensation and benefits or HR manager level or above.
The proportion of respondents who are still fortunate enough to belong to a defined benefit (DB) pension arrangement has fallen slightly year on year – down to 33% this year from 38% in 2009.
This may be attributable to the number of scheme closures to future accrual that have taken place in the past 12 months. However, of this group, the vast majority (85%) still enjoy final salary benefits.
As defined benefit pension schemes have continued to close to both new members and future accrual, new defined contribution (DC) arrangements have replaced them. Just over 60% of respondents who are active members of a pension scheme now belong to a DC arrangement. Of this group, 54% are members of a group personal pension plan, while 22% belong to a trust-based DC arrangement and 20% to a stakeholder scheme.
These figures have changed little in the last two years, reflecting how slowly the pensions landscape changes despite many headlines about DB scheme closures leading to increased DC membership. This may also be because employers are holding back from any major scheme changes as they assess how to prepare for the 2012 pension reforms. Factors such as auto-enrolment mean the reforms are expected to result in increased DC scheme membership.
The reforms will also introduce compulsory contributions for employers and employees. Respondents must realise the need to save for retirement, so it is surprising the percentage who do not contribute to their DC plan is up from 7% in 2009 to 12% this year.
Almost 30% of respondents hold shares or share options in their employer. Of these, 50% received shares or options granted to them as part of their remuneration package or through an employee share scheme.
All-employee share plans remain the most popular way of distributing shares among this group. The percentage of organisations offering shares through all-employee sharesave has changed little year on year.
However, the basis on which employers offer shares through a share incentive plan (Sip) has, once again, changed slightly. Just under one-fifth (18%) now offer partnership shares through a Sip (where employees buy the shares themselves), up from the 12% that did so in 2009. This is now the second most common way for employers to offer shares through this type of scheme, leapfrogging schemes offering free shares.
Offering shares through a long-term incentive plan has also increased in popularity, rising to third place this year. This may be attributed to many employers looking at putting deferred reward and incentive schemes in place because of the tough economic conditions.
The recovering economic climate is reflected in the rising value of the shares or options held by respondents. For example, 27% hold shares or options worth £20,001-£50,000, while 15% say theirs are worth more than £50,000. This compares to 17% and 4%, respectively, in 2009.
At the other end of the scale, 8% of respondents hold shares or options worth less than £1,000, and just 1% hold some to the value of £1,001-£2,500. Last year, 16% of respondents held shares worth each of these values.
The percentage of respondents that are provided with a car or car allowance either as a business driver or perk driver as part of their reward package has continued to increase year on year. This year’s 41% is up slightly on 39% in 2009 and 28% in 2008. The vast majority of respondents who receive the perk are at manager or director level, indicating cars and car allowances are perceived as a valued status perk, as well as a powerful recruitment and retention tool among more senior employees.
Of this group, 35% receive a company car as opposed to a car allowance.
In addition to salary, bonuses, pensions, shares and cars, compensation and benefits and reward professionals receive a number of other perks paid for by their employer. Just under one-third (30%) receive perks via a flexible benefits scheme, while 66% have access to a voluntary benefits plan.
Overall, just under three-quarters (71%) of respondents are satisfied to some degree with their benefits package (excluding salary, but including shares, pension and bonus payments). This is up from 63% who said the same last year.
While the percentage who said they are somewhat satisfied has changed little year on year, those that say they are highly satisfied has risen to 23% – up from 18% in 2009. This is good news for employers that are looking to retain their top talent as the UK emerges from the downturn.
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