New Year Resolutions
The New Year can be a great excuse to take stock and work out what to improve in the coming year, both personally and professionally. Yet depressingly, only 8% of people actually achieve their resolutions. Although most of us working in reward are busy working on annual reviews right now, it’s worth taking a few moments to contemplate what our reward resolutions for 2019 might be and how you can make sure they succeed.
Stop following the herd
2018 ended with record rises on wage inflation. In the US, the Labor Department reported wage growth at an annual rate of 3.1% in October, up from a rate of 2.8% the month before, and a nine year high. While in the UK, the Office for National Statistics reported pay, excluding bonuses, grew at a rate of 3.2% in the three months to September, up from 3.1% in the previous quarter and a 10 year high. So can we be optimistic that 2019 will be the year that our merit budgets start to increase? I think the answer is sadly no and we will still have to wait to see sustained wage growth. So we need to start thinking more creatively about how to leverage pay budgets to engage and retain key talent.
For me the frustrating thing is that when we are talking about 3% of your company payroll – that is not a small number. Payroll is frequently one of the most significant expenditures and in some industries such as the service sector , it is the largest cost, with most organizations targeting payroll expenses that fall between 15 to 30 percent of gross revenue.
Let’s take a look at how we sometimes approach the annual merit process. We set the budget by looking at what everyone else is doing, a slight generalization I know as most us of us do take into account affordability and market positioning; but often it is “OK the market is moving at 3%” or “our competitors are paying 3%” so that’s what our pay budget should be. In an attempt to differentiate pay for talent we push this budget through a merit matrix. Our high performers get 5% - how do they feel? Our lower performers get 0% or 1% - how do they feel? In fact who actually ever admits to themselves they are a low performer? With stalling budgets, is it time for a more radical approach? So in 2019, stop following the herd and think about what budget is needed to invest in the talent required for your own business and start considering salary increase budgets as a strategic investment tool?
Let’s all be equal
Pay equity and transparency were compelling issues for business leaders in 2018 and more new legislation planned in 2019. In the UK from January 1st, Corporate Governance Reform comes into play that requires companies with over 250 employees to publish executive pay gaps. This aims to highlight pay discrepancies in the same was as gender pay reporting. Also, at the end of this month, the UK Government’s consultation on Ethnicity pay reporting closes. So we may expect legislation to follow in the coming year. In the US, Oregon and Illinois kick of the year with new Equal Pay legislation with many other states sure to follow as the complex landscape of State based Equal Pay legislation continues to evolve. Many of us will be busy just keeping abreast of this legislation.
But I think the key trend that will emerge in 2019 will be large multinational employers starting to focus on gender pay on a global basis. McAfee, the device-to-cloud cyber security company, closed the year announcing it will achieve gender pay parity globally in early 2019. Global organizations are starting to think globally in terms of the initiatives they implement to tackle the causes of gender pays gaps. At Curo we are following this trend closely and will be launching our own Global Pay Equity reporting tool this year, so watch this space.
Let’s recognize our differences
In the UK, Uber closed the year by losing an appeal against a ruling that its drivers should be treated as workers rather than self-employed. Similarly in the US in California a law suit is pending with 12,500 drivers are accusing Uber of ignoring their request for arbitration. These cases highlight the need for new legislation that supports workers’ rights in the “gig economy” to ensure fair treatment for the rising number of self-employed workers. No doubt in 2019 we will continue to see the continuum of employment evolve and the number of workers employed on a contingent basis increase. Employers should be encouraged to address how to treat all types of worker fairly, even if employment law is lagging here. This year it’s time to take stock of the different types of talent you have and will need to drive business performance and growth and consider how to reward them. Addressing reward segmentation and considering greater personalization in reward should be on your to do list.
So, just a few ideas for resolutions or goals for 2019. If you want to keep up to date with emerging compensation trends this year do follow us on LinkedIn and Twitter, and make sure to watch out for upcoming webinars.
And if you are thinking more personally about your own career goals this year, have a read of Forbes magazine's The Ten Best New Year's Resolutions For Your Career.
From all of us at Curo we wish you Happy New Year.