What’s happening in compensation and benefits this year?

As every year, Informa hosted the 2-day-long Compensation and Benefits Forum in Dubai last week. For us, it was an opportunity to reconnect with former colleagues, meet new friends and share the latest compensation and benefits trends with you!

The employer trends report

Prior to the actual event, we supported Informa in creating their 2018 employer trends report. Participants reported being challenged by the fluctuating economic conditions across the region. As such, 20.36% of participating companies are planning to implement modest pay increases of up to 3.5%. In contrast, 6.04% of participants are proposing increases of 6.0% or higher in 2018.

The labour market is currently in favour of employers, yet, there’s always an opportunity for high performers. More than half of participating companies are experiencing an attrition rate of 5.0% or less while almost 1/5 of participants report over 10.0%. It was surprising to find out that over 11% of companies are unaware of their attrition rates.

The implementation of VAT (value added tax) has also kept rewards professional busy. For most companies, no special adjustments will be made for salaries or benefits. Employers are taking the view that VAT is part of life and the burden cannot be taken off employees’ shoulder. This comes as a mindset change. Historically, this region has provided various allowance like housing, transportation and schooling to help (expat) employees with the cost of living.

2018 challenges

2018 offers to be an exciting year. Conservative and innovative approaches need to balance business needs and employee expectations. Participants reported the following three areas as the most important ones on their agenda:

  1. Increased employee engagement
  2. Manage cost
  3. Retain employees

The challenges are interlinked and are no longer answered by HR Business Partners or HR Generalists alone. Rewards professionals are being asked to create solutions to complex HR topics.  Some of the attendees at the Compensation and Benefits Forum described their challenges as “thrilling”, “not sure how to manage everyone’s expectations” and “a big step towards where we should be”.

Automated analyses

AI is everywhere these days and HR can no longer hide from it. Yet, not every company is prepared or ready for the digital transformation. Mohammad Salman Hashim from Nielsen suggested taking a data-driven approach for your rewards spend. Before starting, look internally and take stock. Which reports are currently available and which ones of these do you utilise?

Hashim advised to review these reports critically. Many HR Generalists still struggle to interpret the data and need to become more comfortable dealing with numbers. Nonetheless, reports can be set up with insufficient segmentation which can obscure the story for HR Generalists.

A regular activity for rewards professionals is to simulate various scenarios. To advise any business leader, they need to be given a full overview of options and the long-term impact of each proposal. For Hashim, this area is where HR and rewards teams can contribute substantially to the business: Predicting the impact before taking any actions. Business leaders can be stopped making a decision based on gut feeling that may end in financial loss or reputational damage.

Short-term incentive (STI) schemes

Discussing the regional application of STI schemes, Dr. Sabeeh Ghugharia, Regional Corporate Human Resources Manager at Mediclinic, emphasised the need to include the patient (or customer) experience to the performance matrix. The traditional components like company sales and individual performance can no longer be the driving factors in the bonus equation.

Sachin Bajaj, Head of Performance & Rewards, NEMEA at Takeda Pharmaceuticals, took it even a step further. Instead of offering a convention STI, he proposed employees opting for up to 100% bonus. While this is more common for sales roles, it would be a radical move for support staff. Companies would need to improve setting realistic targets and enabling employees to be able to reach their goals when implementing such an approach.

For most attendees, this was an approach too far out of the box for them to warm up to. Nevertheless consensus in the forum was that every employee should be incentivised for the part they play in an organisation’s success. STI schemes may need to become a profit sharing schemes for roles where the direct impact may be harder to measure. With that, the forum recognised the importance of incentives to engage and also retain employees.

Sustainable rewards

Oluyomi Okunowo carried on with this thought and he sees STI schemes as a cost-effective way to manage change. As STI schemes only pay out when results have been achieved (i.e. self-funded), the STI design can thus become inspiring and targeted while optimising its spend.

All too often, it’s the individual who gets rewarded on their own merits. Their interactions with other team members may not be fully taken into consideration during the STI design. To optimise the STI spend, Okunowo suggested a renewed focus on team-based initiatives.

Consistency

Consistency is key in 2018. Companies are required to create more strategic approaches to their rewards and overall HR activities. While economic conditions are favourable for companies, this may change and employees will dictate the rules. Organisations are to build employee loyalty now, as Okunowo urged. “How will you get loyalty when 40% of Americans will be Gig employees by 2020?”

Are you set to tackle the 2018 challenges in your company? Call us on +971-52-2516322 and find out how we can help you optimise your rewards programmes to engage and retain your employees while balancing your company’s budget.

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