The laws of supply and demand impact what we pay for everything. But when it comes to remuneration there are additional, subtle factors at play — things like cost of living, the economy, political (in)stability and our society and culture.
Remuneration trends change so rapidly it can be hard to keep up, but if you don’t, you run the risk of losing your competitive edge. Unfortunately remuneration trends are strongly linked to the economy, which in turn is currently being adversely affected by politics.
Set out below are some remuneration trends to consider in 2017.
The approach to merit increases will changeOrganisations are seeking ways to change merit increase programmes to increase meaning and impact. Reason: The job market is no longer soft. In order to remain competitive and attract top talent, organisations feel the need to do more than align salary raises with the rate of inflation.
Cash bonuses will increaseRelated to the first trend, more people will receive cash bonuses, such as referral bonuses, sign-on bonuses, spot bonuses, and retention bonuses — often more than once per year. Reason: Studies show that bonus programmes positively impact employee engagement, performance, and satisfaction.
Top performers will continue to receive larger salary increases than average performersHighest performers in 2016 received an average salary increase of 6% this year, while the lowest performers received increases of less than 1%. This approach will hold steady in 2017. Reason: Organisations are still trying to find ways to keep top talent in a tightening labour market.
The hiring of “boomerang” employees will continue to riseAccording to a study done by Kronos and Workplace Trends, 76% of managers are more likely to hire former employees than they were five years ago. Reason: Hiring boomerang employees minimizes the cost of the hiring and onboarding process. In addition, they can have a more immediate impact because they are already familiar with the organisation.
Companies will address the gender pay gapBut there will be no easy answers. As the national discussion on equal pay continues to take root, companies will struggle with how to identify and respond to pay inequalities. Reason: Correcting issues will cost money and could be seen as an admission of “guilt” — neither of which is a desired outcome for companies trying to do the right thing.
Millenial remuneration will undergo philosophy changesOrganisations will continue to experiment with pay, benefits, perks, time off, and true values in an effort to effectively reward millenials, but will eventually come to the conclusion that there is no one-size-fits-all solution. Reason: Different types of organisations attract and retain different types of millenials.
Structurally high unemployment/underemploymentThis risk has been identified by IRMSA as one of the most important risks South Africa faces today for many years in a row. The trend of structurally high unemployment/underemployment will continue for the foreseeable future, especially whilst the South African school education system is in tatters. Mitigating this risk will require new and bold leadership who can show serious thought leadership and commitment to our education system – including resolving the fees must fall campaign, which by the way, I support. I disagree with the methods adopted and uncivilised behaviour, but the cause is noble. Funding it may be as simple as fixing all the political cadre deployment leading to fruitless and wasteful expenditure – and that money would fund every student (even those from families earning more than R600 000) for the next 10 years. At last the minister of basic education wants accountability – viva!
In the meantime, HR needs to consider diverting CSI spend in this direction, increase the training and development spend and consider educating “beyond their gates”.
SimplificationWe need to take simplification seriously in 2017. Starting with policies in plain English, processes that ordinary folk can understand and visible application benefits. Disclosure of top executive remuneration will be simplified in 2017, so that everyone can see what they earn. My strongest suggestion is to put in a good few paragraphs explaining what they did to earn their money.
Performance management – rebootWe have now all benchmarked this to death and alas – there is no rabbit in the hat! We will not be throwing it all out lock stock and barrel, but we will be making positive amendments along these lines: 1. From twice a year to more frequent conversations 2. From the paper chase to a meaningful interaction 3. From a stick only to lots of carrot 4. From backward looking to forward looking.
Cost controlWith shocking economic growth, stealing at a grand scale and more job cuts coming – managing costs effectively might be the most important trend of all. HR and Reward executives can definitely earn their seat at the boardroom table this year by coming up with innovative cost saving plans that do not lose jobs. You will get the CEO’s attention. The senior leaders and highest earning public office bearers accepted a zero percent pay increase for the coming year. Business and SOE leaders will take note of this and exercise prudence when making pay decisions. This trend will also put pressure on increasing governance. Salary surveys need to be reputable, audited and comparator selection for benchmarking purposes needs to be realistic and with organisations of similar size and complexity,
The challenges for 2017 are as big if not bigger than 2016 due to very strong economic headwinds and political instability. They need to be tackled with political will, CEO commitment and HR/Reward executive guts. The Reward profession will be tested to the limits and need to be innovative and impactful. We need to tackle 2017 with all the business acumen we can muster. I wish you good luck and hope that 2018 will bring some better fortune amidst exceptional political leadership.
Dr Mark Bussin is the Executive Committee Member, South African Reward Association and Chairperson: 21st Century.