It’s that time of the year when most organisations are in the midst of performance cycles. With the spotlight on the rewards team to craft strategies to match both cost and workforce needs, Aditi Sharma Kalra uncovers the compensation outlook for 2015.
Gone are the days where companies had the luxury of tossing up money at the problems they faced. The world before the financial meltdown of 2008-09 was one characterised by excess, while the era since has been often classified as the new normal.
Low hanging fruit is harder to come by for organisations, which now have to go the extra mile in most geographies, product lines, or targeting consumer groups. Innovation – be it in the form of newer solutions or newer ways of doing things – is repeatedly proving to be the key source of competitive advantage.
The impact of all these developments has not been lost on those in charge of devising the best ways to attract, reward and retain an organisation’s critical talent. HR teams, and their compensation and benefits professionals, have been party to a sea change in their job descriptions.
Hay Group’s research on “The Changing Face of Rewards” identified managing costs as the top business challenge in 2010. This theme spilled over as a top driver of rewards as well, which the study identified as external benchmarks, performance management and cost management.
Is it about costs versus compensation?
Rather than being at opposing ends of the spectrum, costs and compensation have emerged as complementary. What that means for C&B professionals in 2015 is a continuing focus on defining what performance and productivity mean to the organisation.
Sai Yew Yeoh, AirAsia’s group head of rewards and people services, speaks of the environment in Malaysia, as well as across the region.
“With the currency deficit and the drop in oil prices, the market outlook is quite uncertain. Most companies are re-looking at their strategies and trying to minimise costs. Where possible, nice-to-have expenses will have to be worked on,” he says.
At the airline, performance of the off-ground staff is measured simply in terms of the number of flying hours.
“Our packages are exercised based on productivity. The reason is because our industry is quite volatile, so we try to minimise fixed costs as much as possible.”
That entails a greater focus on variable compensation, so that “the more they work, the more they get”. In fact, about two-thirds of the pay for cabin crew and pilot is made up of the variable of flying hours.
Most companies are re-looking at their strategies and trying to minimise costs. Where possible, nice-to-have expenses will have to be worked on.
– Sai Yew Yeoh, AirAsia’s group head of rewards and people services
However, this framework is not without its own share of complexity. With statutory requirements different across countries, each definition of performance varies slightly.
Sai Yew takes the example of medical leave, which has various country specific implications impacting productivity. The policy is straightforward in Malaysia and Singapore, where employees are entitled to a certain number of sick days in a year which they cannot exceed, dependent upon producing a doctor’s note.
However, Indonesia’s law provides for unlimited sick leave, while in Japan, it is unusual for employees to take sick leave at all. As a result, what defines and incentivises productivity has to be tweaked not just per statutes, but also the culture in each country.
Optimising the rewards spend
The “nice-to-have expenses” Sai Yew talks about implies that a better use of rewards spend is a priority for companies in 2015. And the first step to that is identifying what employees really want.
Over at Alstom Asia, the team has been looking at making better use of its benefits money.
Says Joanne S.Y. Chan, the company’s compensation and benefits director for East Asia Pacific: “Medical and insurance costs are going up by 10% to 20% in some of our own countries of operations, like Singapore and Malaysia.
“So we were working to get a better handle of what employees really want in terms of benefits. We were looking at ways to collect data from them through focus groups and such.”
The feedback it got was that while employees were satisfied with their own coverage levels, they wanted any additional benefits outlay to help them with better and higher coverage for dependents.
“We recognise that medical costs will go up, but it’s a matter of getting a better return on the money that we are spending.”
We recognise that medical costs will go up, but it’s a matter of getting a better return on the money that we are spending.
Joanne S.Y. Chan, the company’s compensation and benefits director for East Asia Pacific
Joanne Chua, account director at Robert Walters Singapore, helps to decode employees’ needs further.
“For markets with more entry to junior-level professionals, there should be a greater emphasis on the cash component. In markets which hire a more mature workforce, we see C&B strategies more focused on the benefits component such as setting up a pension fund or health insurance.”
Perhaps this consideration towards going back to what employees want most will minimise the element of risk, and make for a more responsible way to determine returns on reward spend.
What employees want most
At the end of the day (or year), all signs point to money as the reigning monarch to rule employees’ minds. The extent of financial compensation, be it though base pay, bonus or monetary incentives, is expected to be at the forefront of attraction as well as retention strategies in 2015.
Take Singapore, where more than two-thirds of employees are either quite or very likely to leave their current role this year, as reported in a new Michael Page survey. An increase in salary was cited as the second biggest reason for wanting to change roles, beaten off by career progression as the top reason, by close to a quarter of local staff.
The issue was sparked by rising costs of living, which more than half said was a big concern for them. In turn, if offered financial rewards, almost a third of respondents admitted they would remain in their current job.
Fifty-five per cent also said they were planning to ask their employers for higher compensation within the next 12 months.
In fact, signs point to compensation playing a key role in attracting overseas locals back to their home countries, in talent-short countries such as Singapore and Malaysia.
Another study, this one by Hays, found that almost half (49%) of Singaporeans currently either studying or working overseas will consider returning to the nation only if they can increase their salary.
Singaporeans are not the only ones motivated by increased salaries, as one-third of returning Chinese and 38% of returning Malaysians agree on this count, suggesting salary is a key motivator.
“Singaporeans looking to return are wary of the high cost of living and housing. For families with children, international schooling is cited as an attractive inclusion in a salary package,” noted the report.
Explains Nicholas Fernandez, HR manager at Robert Walters Malaysia: “From our experience, some companies are open to offering ‘expat packages’ to returning Malaysians. Companies who offer local packages in some form or way may also have additional benefits such as positioning the candidate at a higher end of the salary band or relocation allowances.”
Companies who offer local packages in some form or way may also have additional benefits such as positioning the candidate at a higher end of the salary band or relocation allowances.
– Nicholas Fernandez, HR manager at Robert Walters Malaysia
Adds Chua: “Compensation will be pegged to the level of the role. Hiring managers also need to be mindful that the tax rate in Singapore is lower than most developed countries. Hence, candidates should also not assume they will earn more than their local counterparts upon return.”
In such regions where skilled local talent has been hard to come by, the government has intervened with measures to make it easier to tap into the local workforce, such as Malaysia’s Returning Expat Programme, and Singapore’s Fair Consideration Framework.
Increasingly, compensation and benefits professionals, not just in large more established companies, are seeing their role evolving from that of a support system to a real enabler in tapping into the pulse of happy employees at all levels.
The best rewards practitioners will likely keep one eye on long-term business strategies, and the other on employees’ needs, for a delicate balance between the bling and the bucks.
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