PwC Breakfast Session HR Disruptions: Revving your game with Strategic Rewards

Transcription

1 HR Disruptions: Revving your game with Strategic Rewards

2 6 Strategic Reward: Benchmarking for Success Let s get the conversation started What is your greatest value proposition as an employer? 1. Your brand name and market reputation 2. Your employee cash pay 3. Your employee benefits 4. Your organisation culture (including leadership culture) 5. We have not clearly defined our employer value proposition 6. Two or more of the above 2

3 6 Strategic Reward: Benchmarking for Success The world of work as we know it is changing Today s workforce HR Capabilities Want to be part of something bigger than profit making 64% of year olds want to work flexibly Just 34% of CEOs think HR is prepared for the challenges ahead Only 0.5% of available data is analysed to generate insights Workforce of the future HR Challenges 75% of the workforce will be millennials by % of year olds do not expect to work at one place for up to 9 years? 2 billion of the jobs that exist today will disappear by % of CEOs are concerned about availability of Key skills 3

4 1 Disruptions are here and HR needs to change its game Disruptions are here and HR needs to change its game 4

5 2 Insert Banner Some global trends disrupting the HR space Economic Instability & Shrinking markets Digital Technology & Data Analytics Rise of the Extended Workforce (GIG Economy) Global Talent Mobility Scarcity of Specialist skills due to changing business models Demographic and Social Changes Increased adoption of Workforce Automation (Smart machines) 5

6 2 Insert Banner Closer home, some major disruptions with critical implications for business and HR are happening BUSINESS NEWS THURSDAY 10 NOVEMBER 2016 Disruption everywhere! What is our economic policy? CBN in damage control on forex: Low access to forex for businesses Inadequate government funding Mobile operators grow subscriber base - Increasing access to telecomsdriven services $41bn oil revenues at stake: As export revenue and reserves decline Partial liberalisation of sectors Growing adoption of social media Digitisation of services & growth of e-commerce Implications for HR Shrinking organisational budgets and appetite for HR spending Increased demand for strong business cases on initiatives Heightened employee reward expectations Increased public scrutiny and demand for more corporate accountability Increased demand for specialist and new skills Increased talent mobility (cross-carpeting, lower tenures) Widening communication and engagement gaps between organisations and their staff Increased demand for technology-savvy functional skills including HR Increased demand for online, real time insight for decision making 6

7 2 Insert Banner The Way Forward: Priorities for Action Rebuild trust and redefine employer purpose Prepare for the workforce of the future Create digital talent exchanges Rethink skill development and capacity building Digitise work and the workplace Embed Human Capital Analytics Rethink and redesign your compensation / reward models 8

8 3 Rethinking Strategic Reward Rethinking Strategic Reward 9

9 4 Insert Banner Redefining Strategic Reward - What makes your reward model strategic? Business Purpose, Aims and Values Business Strategy HR Strategy Reward Strategy Talent Management Strategy Performance Management Pay Levels Reward Structure Talent Acquisition L&D Initiatives Benefit Plans Recognition Non-Cash Rewards Succession Planning Leadership Development 10

10 4 Insert Banner Traditional reward practices are no longer attractive What do employees value? What really makes a difference? Aligning reward more closely with value creation Providing enhanced choice & opportunity to structure own benefits bouquet Rewarding real value Rewarding Outcomes Ensuring fairness & transparency Providing flexibility Getting rewarded for the value they bring and not just monetary results Recognising contribution to the delivery of business aims / goals Providing clarity on the basis for evaluation and reward Demonstrating objectivity Adopting a globally consistent evaluation framework/ process across all roles 11

11 4 Insert Banner What should HR do differently to ensure an effective reward strategy? Rewarding: Individual performance Short-term results Rewarding: Team performance Long-term results Lead the way in establishing a reward culture that is transparent and which promotes the sustainability of the organisation and society Guide leadership to establish the right relationship between pay and performance management without eroding the quality / losing the value of meaningful performance discussions Managing High Performers Negative impacts on Development Define the right links between Rewarding High Performers Negative impact on Retention 12

12 5 Tax Efficient Reward Tax Efficient Reward 13

13 5 Tax Efficient Reward Strategic rewards and tax All bets are off playing it safe on pay Only a minority (28%) of executives would choose to gamble on a potentially higher bonus versus fixed pay if they had a choice. 28% 5 13

14 5 Tax Efficient Reward Strategic rewards and tax Employees want higher pay now rather than later Employers are interested in delivering maximum value of reward to employees in the most cost and tax efficient manner Employer Employee Reward strategies need to take advantage of the tax planning opportunities that exist within the tax laws to increase the net reward delivered to employees Attracting and retaining value Planning needs to be a balancing act 14

15 5 Tax Efficient Reward Short term benefits Tax optimisation Employee benefit Impact on ETR BIK v Cash Redistribute income Relocation, Basic, Housing, Transport Reimbursements Employer considerations Lower tax 19% versus 1% Pension, ITF, NHF Administrative burden Tax impacts project costs and shareholder value. 15

16 5 Tax Efficient Reward Long term benefits - Share schemes Recognise superior performance Aid retention Align employees to long-term business goals and shareholder interests Tax advantages. Also consider tax leakages Maintain competitive advantage for recruitment Increase engagement between employee and company When employees are able to own shares in their own companies, they are clearly more interested in the way the business works and are more committed to its long term success. Lord Marshall, Chairman, British Airways 16

17 5 Tax Efficient Reward Share schemes - illustration Grant date 2004 Service Period when is tax payable? Service Period the period over which the employees are giving service. Often also the period over which the performance criteria must be satisfied. Vesting date 2012 Exercise period 2013 Expiry Date Recharge date Vesting Period the period between the grant date and the date when the sharebased payment is released Employee Grant vs exercise Employee benefit circa 20% Dividends 0%, 10%, or 20% Capital Gains 0% What if shares vested early? Shares exercised in a different jurisdiction Double tax? Employer When is IFRS 2 charge deductible? Social security contributions? Recharge Considerations Foreign exchange issues Withholding tax Excess dividend tax 17

18 5 Tax Efficient Reward Terminal benefits Taxable or Exempt? One month in lieu of notice Gratuity Golden handshake Can we structure these better? Compensation for loss of office 18

19 5 Tax Efficient Reward Strategic rewards and tax In summary - Cost of compliance - Manage risk through payroll processes Cost Reduction - Avoid missed deadlines - Penalties and interest - Planning considerations - Structure rewards: Long versus short term - Employee: Higher disposable income, low tax ETR, long term benefits Manage Risk Employment Compliance Process Efficiency - Employer: Pension, Gratuity cost, Social security contributions, 19

20 6 Strategic Reward: Benchmarking for Success Strategic Reward: Benchmarking for Success 18

21 6 Strategic Reward: Benchmarking for Success REMchannel a 24/7 Salary Survey System that delivers high quality results Value Proposition Unfettered Access interactive web-based survey too Flexibility - choice in defining comparator market, submitting data & generating customized reports Stringent job matching and data validation process and regular audit to maintain data quality Access to more than one survey results Percentile Comparison Industry Comparison Trends in Salary & Wage Movement Survey Scope Grade Based Executive Pay General Staff Job Based Current benchmark data to design competitive compensation strategy 21

22 6 Strategic Reward: Benchmarking for Success REMeasure our Job Evaluation System Value Proposition Access anywhere, anytime 24/7/365 Results can be correlated to other JE Systems Objective and accurate sizing of positions Series of balanced questions for evaluating all jobs Access to market benchmark data (REMchannel) Free up HR time to pursue strategy REMeasure Scope All jobs including executive jobs Can be used for large multi-national organisations Various industries 22

23 6 Strategic Reward: Benchmarking for Success REMbenefit Survey Access to large range of rewards Customised (Industry, benefit type, employee levels) Qualitative Assessment to understand psychological principles underlying each benefit. Trends Ready access to mode of policy implementation How does it work elsewhere Best Practice Guide Data collation Dec 2016 Launch date Feb 2017 Effective administration + management buy-in. 23

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