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Making the most of every cent

Hong Kong HR Masterclass Series: 19th June 2020 Data Analytics for HR
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In trying economic times, organisations need to retain their most talented employees by rewarding them for their performance.

Jerene Ang speaks to award winners from the HR Excellence Awards 2015 – Singtel, Astro and more – to bring out the components of reward strategies that make employee retention worth every cent.

When sailing in choppy economic waters, it is increasingly important for organisations to attract and retain their talent in order to meet business targets. While more employees – especially Millennials – are placing more importance on non-monetary benefits, money is still a motivating factor in employees’ decisions to stay or leave.

According to the 2016 Hays Asia Salary Guide, the salary or benefit package is the top reason why employees look for a new job in Singapore (43%), Hong Kong (65%), Malaysia (53%) and China (41%).

However, with the economic instability of recent years, it is only natural businesses have tried to keep costs down, making it almost impossible for them to provide employees with unlimited benefits and a huge pay cheque. So how should organisations strike this balance between minimising costs and an attractive compensation and benefits plan?

To give HR leaders a guide on what compensation and benefits programmes work best, this feature showcases regional case studies of organisations rated the winners and finalists in the 2015 edition of the HR Excellence Awards.

Case one: Singtel (Singapore)

In 2012, Singtel announced a bold organisational restructure per customer segments instead of geographical lines in order to sharpen its customer focus. To drive business transformation, the right people were required, for which the right talent needed to be attracted, engaged and motivated through a sound compensation and benefits strategy.

Singtel’s compensation package now comprises not just the basic pay structure based on job roles, but also a variable component that links rewards to an employee’s contribution to business performance as well as their embodiment of Singtel’s core values.

The package is tied to Singtel’s four guiding principles – alignment of interests with shareholders and support of business transformation; fair and appropriate distribution of rewards; effective implementation to meet rigorous corporate governance requirements and ensure employee understanding; and clear line-of-sight to drive the right behaviour.

The rewards are communicated to employees at the point of employment through regular briefings as well as the company’s intranet.

With Singtel’s senior management taking staff performance and wellbeing seriously, these policies are reviewed regularly against feedback from its staff engagement survey, market trends and legislative changes. The management also actively seeks input from the Union of Telecoms Employees of Singapore (UTES), and maintains a strong management-union relationship.

In its efforts to continually improve, Singtel conducted a staff survey in early 2014. Results showed that employees perceived performance management as an onerous exercise, and performance discussions as heavily centred on performance ratings and bonuses, with little emphasis on career development.

Based on this, the team implemented a new performance management platform on its new global One HR system, HRCentral, in 2015.

HRCentral allows managers to cascade a business objective to the entire team or an individual, creating a clear line of sight for employees in what they have to deliver and how their goals contribute to the overall business success. The system also contains built-in training guides to help employees set measurable KPIs and engage in meaningful performance feedback and career conversations. The system is open all year round.

The employee-oriented company also further revamped its benefits programme in April 2014 following feedback from an employee survey in 2012. Its new benefits programme features enhanced medical and insurance coverage. Singtel also collaborated with its healthcare provider to review a list of panel clinics, introduced a clinic locator application, as well as constructed a new in-house clinic at NCS Hub.

The next step was to ensure employees were aware of the changes and the benefits they were entitled to. To achieve this, Singtel not only summarised its policies on the intranet, but also used animated videos and posters to bring across the value of these benefits. Briefing sessions and roadshows were also conducted.

This wasn’t the only thing on Singtel’s compensation and benefits agenda – in 2014, it launched the Singtel $300 programme, which provides an annual SG$300 bill rebate to offset against Singtel’s service subscriptions. In 2015, the firm renewed the Singtel collective agreement that guarantees base terms and conditions of employment for bargainable employees for the following three years.

In FY2015, Singtel saw a 4% increase in net business profit, and a steady increase in engagement scores from 75 in 2013 to 76 in 2014 to 78 in 2015. At the same time, voluntary attrition was low at 12% compared with an industry average of 14.4%, while the staff advocacy index has steadily improved from 80 in 2013 to 81 in 2014 to 82 in 2015.

Case two: SMRT (Singapore)

To build a high performance and engaged workforce in a complex operating landscape, SMRT designed its C&B schemes to be market competitive, and aligned to business performance along five strategic thrusts: improve operational performance, enhance the customer experience, strengthen workforce health, instil organisational excellence, and ensure sustainable growth.

“We leverage on our compensation and benefits schemes to power SMRT’s transformation and drive cultural change,” said Koh Teck Chee, deputy director of careers and rewards at SMRT.

In line with its pay-for-performance philosophy, the firm rewards performance and productivity – not just based on the performance of the individual, but also that of the organisation. This can be seen from its annual bonus allocation mechanism which comprises company and individual performance components. By establishing a common set of goals for all staff in the company, HR fosters greater collaboration and shared ownership across the organisation.

Recently, the company reviewed its rewards structures to meet the different requirements of its fare (that is, public transportation) and non-fare businesses. A greater emphasis was placed on operational performance for its fare businesses in trains and buses, while financial achievements were weighed more for its non-fare businesses such as advertising and commercial activities.

Salary reviews and competitive benchmarking are also conducted regularly as part of a bigger plan to enhance the career development and progression of all employees.

In addition, performance-linked incentives are purposefully scheduled on both a long-term and short-term basis to maximise staff motivation to induce better performance and higher productivity. SMRT also utilises non-monetary measures to complement monetary rewards by applauding individual and team excellence, and celebrating company successes at key events.

The company’s competitive rewards and compensation packages have enabled HR to grow SMRT’s headcount by 30%, despite a tight labour market. SMRT successfully attracted and grew its engineering headcount by more than 100% to about 400 today, despite Singapore’s acute shortage of engineers. The firm was also able to attract a pool of experienced global talent to kick-start a new subsidiary, Singapore Rail Engineering, in 2014.

Voluntary attrition rates halved to reach a low of 5.3% this financial year (ending in March). Employee engagement scores are at best-in-class levels, with nine in 10 staff being proud to serve at SMRT, and 86% of staff being sustainably engaged – a noteworthy increase from the 82% score in 2013, which places the company way above the Singapore norm of 80%.

Customer service levels and network reliability have also improved. The compliments-to-complaints ratio improved by 25% over the past year; train delays of more than five minutes have dropped from a peak of 1.8 incidents per 100,000 km to 0.7 now; and the number of trains being pulled out of service dropped from three per 100,000 km to less than one now.

In addition, the firm’s profits remained resilient despite big increases in spending on maintenance and the renewal of ageing rail assets. This is partly attributed to productivity gains even as wages grew – economic value added per employee increased 6.5% from FY14 to FY15.

Moving ahead, SMRT will continue to review its compensation and benefits strategy to shape workforce culture and provide meaningful careers for its employees.

Case three: Astro (Malaysia)

Integrated consumer media entertainment group Astro knew that to achieve its five-year growth strategy of becoming Malaysia’s leading source of consumer entertainment, it needed to attract and retain both on-air and off-air talent. It set out to build an employer brand that catered to the future workforce needs and embraced diversity as a source of competitive advantage.

Part of building an attractive employer brand is having benefits that meet employees’ diverse needs, based on what stage in the employment life cycle they are at. Astro decided to implement a customisable benefits plan – myChoice@Astro – in 2011, the aim of which was to empower employees to choose their benefits according to their priorities, be it cash rewards, training and development or medical needs. Additionally, it provides employees with a comprehensive range of reimbursable items to suit each individual’s needs.

MyChoice@Astro has five components, which include a benefit allowance based on salary and job grade, allowing staff to top-up the flexible spending account, and an option to upgrade core health insurance and medical coverage. The core benefits of the plan include annual leave, meal allowances and free pay-TV subscription. On the other hand, optional benefits include health and wellness, financial benefits and transport benefits, including a new vehicle maintenance component.

The plan also includes four upgrades: encashment which converts unutilised annual leave and outpatient coverage into flexi points and allows employees to earn additional points by staying healthy; enhancement – allowing the user points to improve core health and medical benefits; enrichment – an optional portable and personal hospital and surgical top-up insurance coverage; and a leave depository – which allows staff to deposit annual leave into a leave bank for extended leave use in the future or on family care emergencies.

Astro communicated this new plan through various channels, including its intranet, online portal for employee self-service, e-newsletters, as well as the annual total rewards statement which breaks down the components for compensation so employees can understand what they are getting – both tangible and intangible aspects.

“Employees were initially sceptical of the benefit offerings when introduced to mychoice@Astro. There was also a need to manage legacy benefit offerings that were in place prior to myChoice@Astro,” said Paul Thomas Kannimmel, senior vice-president of human capital at Astro Malaysia Holdings.

“Having said that, moving away from a one-size-fits-all C&B model won over our employees from diverse backgrounds.”

Since the launch of myChoice@Astro, the company’s employee satisfaction rate has increased from 54% in 2011 to 63% in 2013. At the same time, the attrition rate has decreased over the years, remaining consistently below the Malaysian norm.

Furthermore, there has been an improvement of employees’ overall health with the average number of sick leave used per year dropping from 2.98 days in 2011 to 2.43 days in 2014 as employees are incentivised with additional flexi points for low sick leave utilisation.

Moving forward, Astro plans to enhance the myChoice@Astro programme in two ways – by growing the list of reimbursable items, as well as introduce an employee assistance programme to improve their physical and psychological health.

Case four: Avnet (Hong Kong)

For Avnet Technology Hong Kong, in the business of supply chain of electronic component solutions, having great people is a strategic differentiator. Hence, “inspired and engaged people” is one of the core components of its strategic framework.

In the past couple of years, however, Avnet noticed the employee turnover at its logistics centre was particularly high, especially among its distribution centre (DC) assistants. Hence, in October 2014, it formed a project team within HR to address the persistent high turnover in this function.

In January 2015, the team introduced an engagement bonus programme to its DC assistants. It works by giving 90% of DC assistants a bonus at the end of the FY in July, based on the employee’s individual performance rating as well as the percentage attained of the perfect attendance allowance. The top 20% of DC assistants receive a bonus of about 67% of the average monthly salary, the top 21% to 90% employees receive around 53%, while the bottom 10% do not receive the bonus payout.

The programme was approved by senior management and the team partnered with line managers to communicate it to employees via face-to-face meetings.

When devising the new programme, the team made sure the coverage of the targeted group was wide enough to engage performing employees – and also making sure the payout amounts were calculated fairly while being significant enough to motivate staff. Other considerations included the cost-benefit analysis, time and duration, senior management buy-in and collaboration with line management.

The programme saw huge success in reducing the turnover rate for the DC assistants – from 26% in FY14 to 5.7% in FY15, leading to a drop of the overall turnover rate from 23.9% to 9.3% for the logistics centre, far below the target of 18% set by management. Other than improving the turnover rate, the programme also improved employee attendance by an average of 6.2%, brought about cost savings of US$$300,000 per year, and reduced the number of quality issues from 30 in the first half of FY15 to 11 in the second half.

What challenges does the future hold?

After looking at these award-winning programmes, one might be tempted to take the easy way out and simply replicate these existing programmes. However, every day poses a new challenge and there is a need for these policies to evolve to keep up with the ever rising demands of employees.

“Despite the weak economic outlook, there is still an intense battle for talent with niche skill sets, especially in areas such as data analytics, cyber security and Smart Nation,” says Ng Kian Khar, director of group rewards at Singtel.

“We will need to be nimble and respond quickly to market changes to ensure our rewards are competitive in attracting and retaining the best talent.”

Astro’s Kannimmel agrees and adds: “In view of the current economic sentiments, there is a substantial challenge to keep employees motivated with minimal impact on the organisation’s expenses.”

Both Ng and Kannimmel feel that in times like these, it is especially important to focus on rewards based on performance, so the better performers are motivated to stay with the firm.

In Hong Kong, the main challenge is an increase in medical insurance expenses.

“The balancing of medical expenses with an employee’s expectation is especially trying during periods of business downturn,” says James Tan, senior vice-president of human resources at Avnet Asia Pacific and the Asia regional HR centre.

Tan says that wages have been escalating and with each increase, the productivity levels of employees have to rise in tandem. To justify the rising wage costs, Tan feels there has to be a closer link between merit and productivity.

Evolving to overcome challenges

To tackle these challenges, how should compensation and benefits programmes be modified?

Singtel’s Ng feels that companies need to think about redesigning compensation policies to better motivate different segments of the workforce, including those working on a part-time or project basis, as well as encouraging mature workers to continue contributing beyond the retirement age.

“Telecommuting and flexible work arrangements will be more prevalent, and companies will be looking at introducing new and innovative benefits, such as having game rooms or even concierge services for employees in order to differentiate themselves and enhance the employee value proposition.”

Astro’s Kannimmel sees two main changes that need to occur in terms of C&B for companies to win the war for talent.

“Companies need to have current C&B data without having to wait for periodic survey data to be made available. Speed of access to data and the ability to make sense of it will be a key differentiator,” he says. Additionally, “the ability to further differentiate C&B offerings based on talent segments will be crucial”.

Avnet’s Tan feels that companies will require a forward-looking compensation strategy to ensure employees are remunerated competitively with a greater emphasis on variable pay to achieve consistent performance, especially in a tough or slowing business environment.

At the same time, to counter the rising costs in medical insurance expenses, it is important for them to implement programmes that also focus on employee wellbeing.

“Starting a couple of years back, we have developed and implemented a strategy focusing on the importance of wellbeing and linking this to employee engagement and retention,” Tan says.

“We have since established an innovative wellbeing framework that not only targets the physical consideration, but also covers the financial, social and community aspects as well.”

Tips for building a top compensation and benefits strategy

  • Regularly review your compensation and benefits using feedback from employee surveys.
    Stay in touch with what your employees want by conducting regular surveys to gain your employees’ feedback on your C&B policies and find out what they really want.
  • Pay-for-performance and productivity.
    One way to ensure that your top talent doesn’t leave you is to pay for performance. When doing so, be sure to link rewards to performance – not just the performance of the individual, but also that of the organisation in order to avoid breeding harmful competition among employees. This method can also be used to drive cultural change by placing an emphasis on desirable traits and rewarding employees accordingly.
  • Think flexible when it comes to benefits.
    A one-size-fits-all benefits package is unlikely to satisfy the masses. To satisfy the highest percentage of employees, implement a flexible programme which allows employees to use credits to redeem benefits they need and want. This also keeps the costs down as you won’t be forking out money for benefits they either don’t want or don’t need.
  • Overall wellbeing is important.
    When implementing a benefits programme, be sure to consider the full spectrum of the employee wellbeing – physical, financial, social and community.
  • Get to the root of the problem before trying to solve it using a compensation and benefits programme.
    When trying to solve problems such as a high attrition rate, pinpoint where the attrition is as well as finding out what the employees want before implementing the programme. Remember there can be a perception gap between what employees want and what employers think they want.

Image: Shutterstock

Hong Kong HR Masterclass Series: 19th June 2020 Data Analytics for HR
Become a true strategic partner to the business by leveraging data and analytics to make strategic talent decisions.
Register now here

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