Incentives on the rise to attract staff in tighter times
16 May 2012 7:28am
Continuing instability in the economy means employers are increasingly relying on the incentive component of remuneration to attract and retain staff, says Mercer head of reward Garry Adams.
Commenting on Mercer's recent remuneration survey results, Adams told HR Daily that the increase in overall remuneration in the 12 months to March is higher than the rate of increase in fixed pay.
"This suggests it's being driven by greater incidence of incentive plans and a higher level of incentives being paid in the market," he says.
"There's a bit of a shift from focusing mainly on base pay to looking a bit more at what we can do from an incentive perspective or variable pay perspective, in order to both reward performance on the one hand and manage costs on the other."
Overall, the results show remuneration is going up by about four per cent, and there is "not a great deal of variation from industry to industry", except for retail (moving a lot slower) and mining and related industries (where salaries are increasing at a more accelerated rate).
The rates of pay increases in the past year were five and 5.7 per cent respectively in Queensland and Western Australia, and four per cent in each of NSW, Victoria and South Australia.
(When construction, engineering and resources companies are excluded from the sample, the rate of increases drops to 4.3% in Queensland and 4.5% in WA.)
The impact of employers paying more to attract people into mining and mining services is being felt much more broadly - for example in construction - where workers are moving from CBD-based roles in residential construction to working on large-scale infrastructure projects outside of capital cities in WA and Queensland, Adams notes.
"When there's a skills shortage you tend to find base rates get bid up pretty quickly for new entrants to the company. Then for those currently engaged by the company, you tend to see market movements are somewhat ahead of the overall market because organisations are concerned to retain the skills that they have," he says.
Approach rewards like an asset manager
In order to get their rewards strategies right, employers should take an asset-management approach, Adams says in a podcast for HRD+ subscribers.
Regardless of whether a business is struggling or performing well, HR professionals should segment the workforce before planning where to spend the budget, he says.
"Think of your remuneration budget as a portfolio of reward investments. An asset manager will manage their portfolio to maximise returns and manage risks over a defined investment timeframe. And if we think about our remuneration programs in a similar vein, that will help us to make good decisions regarding how we allocate scarce resources, and to focus our plan designs on the segments of the workforce that matter most.
"It also helps us to avoid overpaying in a hot market for roles that are not that critical to the business."
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