The Great Reward Debate – Bonus vs Pay Rise
Small businesses are supported by their employees, like a backbone. They are also the face, and often the voice that can directly impact how successful a business is. In order to project the future success of a business, it’s imperative that great talent is initially hired, and also retained. With regards to the attracting and keeping top talent, you need to strike a balance between the progression of salaries and offering both attainable, compensatory bonuses. In achieving the right balance, you are also able to maintain a healthy bottom line.
The reason that we all go to work is to get paid! While some may worry that this a reflection of their ethics and values – let’s be honest, we need to be able to support ourselves and our families. Of course, it’s the perpetual dream to be able to secure a role that we are also passionate about and enjoy, but in these roles, the fact still remains that we are paid. From the perspective of the employees, being paid more money is the goal, of course for many small businesses, this option isn’t always possible. It is for this reason that many businesses create financial compensation packages that are comprised of pay rises and periodic bonuses. Taking this approach allows business owners to reward their employees for great work and when pre-determined targets have been reached, whilst also providing them with the flexibility of reducing business expenses if conditions changes.
The average bonus is between 3 and 5% of the employee’s annual salary, or for upper-level management, this figure can reach between 15 to 50%. It is often deemed that bonuses are a more manageable financial expense because they are variable, and can be reduced when necessary in fact, bonuses are making up more than 12% of pay packages now. However, while this provides some peace of mind when it comes to business owners, it can prove to be detrimental when it comes to employee morale and productivity. If the prospect of bonuses suddenly becomes unreliable, employees may begin to seek employment elsewhere. When it comes to staff bonuses, employers must strive to communicate honestly and concisely to employees about fluctuations that may occur. Staff need to be aware that while changes to a bonus are far from ideal, reducing expenses in this way in tough times means that jobs can be saved. Bonuses allow businesses to maintain low fixed costs and remain competitive; however, to maintain staff morale and therefore, productivity, the goals for obtaining the bonuses must be reachable.
Another way of rewarding good work or achieving company targets, has been through awarding pay rises, typically around 1-3% across the board. In recent years, the turbulent economic landscape has meant that pay rises have been meagre, if they were still paid at all and HR experts believe that the impact they have on an individual’s lifestyle was little to none. This leads to employees striving for a promotion or switching roles to get that step up in salary they are looking to achieve.
Of course, pay rises aren’t always possible for businesses in tough economic conditions especially if they are trying to keep themselves afloat to avoid making any redundancies. Businesses are now exploring other benefits to reward employees.
One is to work closely alongside employees, providing regular feedback rather than having one annual review, that cultivates a way of working that increases efficiency and results – meaning that a more impactful raise can be given based on consistently impressive performance and habits being formed. Other benefits that businesses are exploring include health insurance, gym membership, paid time off and commuting subsidies. Millennials now make up more than one-third of today’s workforce and it has been reported that they favour short-term rewards and flexibility over long-term security. The cry for a better work/life balance has also been a driving force behind the seismic shifts that are creating meaningful reward practices that give employees valuable compensation and allow businesses to maintain a healthy bottom line.
Bradfield featured on Jobsite.co.uk
Caroline Griffiths, Managing Director of the Bradfield Group, was recently asked to comment on flexible working practices in 2017. In a time where businesses are largely technology driven, employees are now able to access their work from everywhere and anywhere.
Flexible working is also key when it comes to offering employees freedom to choose the hours they work or to fit in school pick ups, dental or doctors appointments.
Read what Caroline had to say about flexible working here.
HR Round Up October 2016
We have put together a quick round up of the latest HR case law as well as some topical HR issues in the news:
A recent court ruling in the Lock v British Gas case ruled that employers must include compensation for any results based commission that would ordinarily be earned while on holiday. This is important to anyone who runs a commission scheme or who makes payments in addition to basic salary for example overtime/stand by payments. Employers should check their current policies to ensure that they comply with this recent change.
Shared Parental Pay
Employers who pay mothers different rates of shared parental leave to fathers could find themselves guilty of sex discrimination. In the Snell v Network Rail case, Mr Snell was awarded almost £30,000 in a sex discrimination ruling when the employer refused pay him the same as his wife while on shared parental leave. He only received statutory pay during that period. Network Rail has since introduced a new family friendly policy in which mothers and their partners are paid the statutory – rather than the enhanced rate, mothers used to receive – shared parental pay. Employers should review their own policies in case they are discriminating against one sex or the other when it comes to shared parental leave.
The European Court of Justice (ECJ) recently ruled in the Sobczyszyn v Szkota Podstawowa w Rzeplinie if sickness prevents a worker from taking annual leave due to sickness, then his or her annual leave can be carried forward into the next holiday year.
The Working Time Directive (WTD) must be interpreted as precluding national legislation or a national practice from refusing an employee, at the end of convalescence leave, the right to take his or her paid annual leave in a subsequent period.
The purpose of the right to paid annual leave is to enable the worker to rest and relax which is in contrast to the right to paid sick leave which enables the worker to recover.
The Court ruled that a worker has the right to take annual leave during a period that does not coincide with the period of sick leave. However regulation 13(9) which says that statutory annual leave can be used only in the year to which it relates and therefore cannot be carried forward into the next year is incompatible with other interpretations of the WTD.
The 10th October saw World Mental Health Day which was recognised across the globe. This important day highlighted how employers can better support their staff’s mental wellbeing. Mental ill health is the third biggest cause of absence in the workplace and presenteeism accounts for 1.5 times more lost productivity than absences. Absence costs employers around £26 billion per year.
There is still a certain stigma surrounding mental illness and more should be done to encourage open discussions about mental health in the workplace. Organisations should consider investing in mental health training which could help to identify signs of mental illness and guide people towards the right support. Employers should provide provisions for employees who are experiencing a mental health issue and be on the lookout for behavioural changes.
If you’d like some advice on how Bradfield’s HR Advisors could help you on any of the issues mentioned or anything else HR related then please call us on 0207 977 9200 or email us [email protected]
October employment law update 2016
How will the latest employment law changes affect you and your employees?
As the bi-annual employment law update approaches, what is on the agenda this Autumn and what does that mean for your business and your employees?
1. National Minimum Wage increase
The National Minimum age will increase for certain age bandings. These include:
- Workers aged 21-25 years old will see an increase to £6.95 per hour
- Rate for those aged 18-21 years old rises to £5.55 per hour
- Those under 18 years old who are no longer of compulsory school age will see a rise to £4.00 per hour
- Apprentice rates will increase to £3.40 per hour
2. Employers caught illegally employing foreign workers will face closure
A closure notice will be served to those companies illegally employing foreign workers. This will prohibit access to the premises for a maximum of 48 hours. A further order can be made to prohibit access for up to a further 12 months.
3. Skills charge to be implemented for migrant workers
In a bid to reduce reliance on migrant workers, the Government will impose a visa levy on organisations who sponsor workers outside the European Economic Area. This is expected to be implemented in April 2017.
4. Trade Union Law reformed
Changes are to be made to Trade Union Law via the Trade Union Act 2016. The changes include rules on industrial action, introducing voting thresholds.
5. Introduction of tax free childcare scheme
In families where both parents work and where each parent earns less than £100k per year and they have a minimum weekly income equivalent to 16 hours at the rate of the National Minimum Wage, the Government will pay 20% of annual childcare costs (capped at £2,000 per child). This only applies to parents with children who are under 12 years old.
Personnel Today, http://www.personneltoday.com/hr/employment-law-changes-2016-october-and-beyond/
Breakfast Briefing on the benefits of outsourcing
Come along to our free breakfast briefing
We would be delighted if you could join us for our next breakfast briefing on Thursday 20th October at 8.30am at our Central London office. We will be serving delicious pastries, fresh fruit, juices and fresh coffee and tea.
We will be talking to you about outsourcing your HR function, how this can benefit your organisation and hearing from an organisation which has gone ahead and done just that. Find out how they have found the experience and ask them questions about what is involved.
At the end of the session there will also be an opportunity for you to have a FREE consultation with our Head of Outsourcing and Consultancy, Aisha Oakley, about any current HR or people related issues your organisation might be facing.
Places are on a first come first served basis. So sign up now to secure your place.