Getting fatter? A look inside 2011’s pay packet

After nearly two years of downsizing and restructuring, the current economic upswing is clearly noticeable. Yes, there are finance implications to take into account, contingency plans for exigencies in the future to be designed, and new and innovative talent management strategies to be rolled out; yet employers are also ready to release their purse strings a little. That’s allowing them and their HR teams to become more strategic with their compensation and benefits packaging. It is also giving greater space to reward and recognise the human capital that has stayed with organisations through the downturn, and to further ensure that they remain while the market is regaining its buoyancy. Naturally, HR needs to facilitate the next phase of growth by effectively managing how it remunerates, compensates and motivates employees.

Cautious optimism

Whilst expectations were reserved at the beginning of 2010, it seems that employees are now starting to expect some financial rewards for the hardships of the last 12 to 18 months. The results of the Randstad World of Work Salary and Benefits Research indicate some interesting findings: of those surveyed, 38% have received, or are expecting to receive, an increase of up to 4% in their base salaries. 26% are expecting a 5% to 10% increase and a further 21% expect an increase in excess of 10%.

The results show salaries are coming back in to line with employee expectations, but there are some concerns for HR. Karin Clarke, regional director, Randstad Singapore and Malaysia, says 16% of employees are not expecting a pay rise at all, which highlights that uncertain economic times particularly within the US and Europe, and budget restrictions are still top of mind for many employers.

Around the world, the mindset is one of “cautious optimism”. There is growing reluctance in parts of Asia and the Middle East to sustain the double-digit base pay increases that have been expected by many employees. Towers Watson’s “pulse” survey, conducted in August, predicts Singapore’s labour force will see an overall salary increase of 4% in 2011. Yvonne Cox, managing director, Southeast Asia, Towers Watson, says the trend will continue higher as the upturn strengthens. “We forecast that there will more upward bias on this 2011 projection as the global economy continues to improve with US and Europe recovering further,” she tells HRM. In addition, this projection may also be influenced with the continuing improvement in the Singapore talent market.”

Towers Watson says staff turnover has increased significantly this year – with the average rate growing from 8.3% to 12.3% over the last 12 months. Cox says this shows that companies are hiring again and employees are also more confident to move and seek better opportunities.

Bonus expectations

While many understood the need for tight budgets this time last year, most employees (84%) are expecting a return to “normal” bonus levels at the end of 2010. Still, even this is tempered somewhat – bonus expectations in late 2007 were significantly closer to 100%. What is changing is the nature and timing of bonus payments.

A key to attracting younger Generation Y staff, many compensation and benefits units are spacing bonus payments across the year. Sign-on bonuses are also becoming popular, HR pundits share. “Competitive pay is required to attract Gen Y workers,” Cox says. “It’s not only the amount of pay, but the internal and external equity in which pay is administered, and the manner in which pay and benefits are communicated to employees that keeps the talent group satisfied.”

She advocates moving away a “one-size-fits-all” approach in order to attract the typical Generation Y employee. By providing these employees with choices for their benefit plans, they can ensure better employee engagement and satisfaction.

In the same way, performance-based pay is another issue HR will need to carefully consider in New Year. Mercer’s Compensation Strategy 2011, says organisations need to carefully analyse their position and consider new options. “Don’t jump back into business as usual,” the report advises. “The recession led your organisation to new strategies and tactics, so consider which ones should remain and which ones should not, such as putting more pay at risk or making base pay increases only every two or three years as job responsibilities change.”