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Benefits measurement essential to justify spend

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The failure by many organisations to measure the real contribution pay and benefits packages can add to business is leaving many HR and reward professionals unable to justify fully increased spend or changes.

That’s according to the Chartered Institute of Personnel and Development’s Annual Reward Survey 2007, which also reveals that two-fifths of organisation plan to increase their benefit spend and over one-third of public and voluntary sector employers will be making changes to pay structures this year.

The survey of 466 organisations finds only one-third have a reward strategy and only 55 per cent of these measure its effectiveness. Only 23 per cent of these organisations link measurement to business data – leaving most unable to show how their reward strategy achieves one of its main objectives of supporting business goals.

Charles Cotton, CIPD pay and benefits adviser, says: “Global competition is pushing employers to look for ways to cut costs and tax payers, investors and other stakeholders are demanding value for money.

“While the pressure is on to cut costs there is also the demand for better quality goods and services. This increases the pressure on pay and benefit specialists to manage the forces pushing costs down and the upward cost pressures so that stakeholders are satisfied and so that the organisation succeeds in attracting, retaining and motivating talent.

“But organisations could make the wrong decision and waste time and money on pay and benefits if they fail to measure the effectiveness of the reward strategy properly. HR and reward professionals should investigate measures, such as customer satisfaction and line manager feedback, to show the real value such packages can have on all areas of the business.”

The report reveals that 35 per cent of surveyed organisations have a reward strategy, with a further 40 per cent planning to create one this year. The main priorities of a reward strategy are cited as:


  • Supporting business goals – 79 per cent

  • Reward high performers – 67 per cent

  • Recruit and retain high performers – 62 per cent

The most popular benefits being introduced are the tax-advantaged childcare vouchers and bicycle loans. But the number of organisations offering flexible and voluntary benefits is set to almost double – with 32 per cent currently offering them and 28 per cent planning to introduce them this year.

Eight per cent of organisations plan to make the annual pay rise non-pensionable while 6 per cent intend to differentiate pay rises for staff in defined benefit and defined contribution arrangements.

In total, 20 per cent of employers are planning to make changes to their pension arrangements in 2007, with the most options being to increase employee contributions, introduce salary sacrifice arrangement and increase employer contributions.

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