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HR on a budget: Reward in a cold climate

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ColdYes it’s bleak out there, but if ever there was a time for businesses to show their staff just how much they care, then this is it. Christiana Tollast reports on why recognition and reward could be the key to getting companies through to the other side of this economic cold spell.


Slashing budgets for many companies may be part of the survival plan to get through the recession but, argues Donna Sizemore, vice president European sales at OC Tanner, companies should think very seriously before cutting back on rewarding their people. “Typically, when companies are going through tough times, leaders initially ignore their people and focus on the numbers. But numbers are made by people, and it is the people that will see companies through to the better times.”

Andy Philpott, marketing director of Capital Incentives & Motivation, agrees and says companies that cut costs in this area are effectively cutting investment in their business. “Staff engagement and motivation levels are likely to be lower than they were 12 months ago, which will have a very detrimental effect on business performance. Instead of businesses saying do we or don’t we, they should be saying, how do we make our rewards work better?”

“Companies have to find unique ways of recognising the contributions of their people.”

Donna Sizemore, OC Tanner

Not only will cutting rewards de-motivate staff, but there are legal implications to consider too, as Charles Cotton, reward adviser at the CIPD, cautions: “The first thing companies must not do is make short-term knee-jerk reactions – firstly they need to look at what the contract of employment says. You can’t go round cutting people’s benefits without their agreement, or companies could find themselves in the courts.”

Employment lawyer Bob Fahy of law firm Matthew Arnold and Baldwin, explains that although many companies will have express terms in their contract saying they are entitled to vary an employee’s terms from time to time, employment tribunals take a very restrictive view of the extent to which they are allowed to do this.

“If the benefit can be characterised as wages, then there could be an unlawful deduction from wages claim, or more seriously it could be taken as a fundamental breach of contract, allowing employees to resign and claim that they have been unfairly dismissed.”

Low cost

There are many ways of rewarding employees financially and non-financially, and as Philpott points out: “All people to a certain extent benefit from a combination of both.” And although people are individually motivated by different things, he adds: “Simple recognition is a big driver for most people and it doesn’t have to come with any sort of financial association.”

When it comes to getting the most from financially skewed rewards Fred Jones, from Target chartered accountants, considers the company pension contribution scheme as one of the most tax efficient: “It is not taxable on the employee and there is no NI, but the downside is that the company has to pay throughout the year, so it is cash sensitive.

“Rewarding employees with shares or options in the company is becoming very popular, as there is no cash outlay for a business, and it proves a great incentive for people to commit longer term to the company,” he continues.

As for non-taxable benefits, Jones lists parking at an employee place of work, meals in a staff canteen, or childcare vouchers towards nursery care of up to £55 a week, as some examples.

No cost reward

But what if there simply isn’t the budget? “Companies have to find unique ways of recognising the contributions of their people.” says Sizemore. “A manager could wash an employee’s car – not only is it a no cost reward, but it also helps employees to see managers as human beings, in the fight with them.”

“The good companies that continue to use rewards as a strategic business tool will be the ones that come out stronger.”

Andy Philpott, Capital Incentives & Motivation

Sizemore also suggests managers try to find out at least one thing about individual employees as “this can lead to some wonderful ideas of how best to recognise their achievements”.

Another big motivator for many people is having a work-life balance as Tim Holden, managing director of Fluid Consulting, points out: “Organisations are looking at non-financial rewards to keep their people onboard and positive, and an example is the opportunity to work from home.”

Recognition for recognition’s sake is not going to achieve the impact a business wants, says Sizemore: “Many times there are multiple recognition programmes throughout a company but they are disjointed, there is no measurement to see if they are effective. Only if it [the rewards programme] is aligned to the corporate goals, is it going to accelerate what you wish to achieve.”

Philpott concludes: “If the reward and recognition element is taken away as a strategic tool in the business, then we will make things 10 times worse and it will take longer to come out of the situation. The good companies that continue to use rewards as a strategic business tool will be the ones that come out stronger.”


See also:
HR on a budget: Getting more bang for your e-buck


2 Responses

  1. Boost Morale & Productivity with Recognition
    I can’t put it better than my CEO, Eric Mosley, recently did when he said:

    “In a recession, the first thing that gets hit is productivity. As people worry about the economy and the stability of their jobs, recognition programs can help alleviate some of that worry. During these tough economic times when financial perks are being cut from budgets, some employers are turning to recognition as a way in which to keep employees happy. Recognition is a low-cost way of getting that return. You’re filling a gap and boosting their feelings toward the company. Over the past three years, we’ve seen recognition grow as an important tool in HR, and in the past months, we’ve seen the rate increase even more.”

    We actually track these rates on our recognition index. And they are indeed growing in the face of the recession. Results are here:
    http://globoforce.blogspot.com/2008/12/employee-recognition-sores-as-dow-jones.html

  2. Management of what exactly?
    Managers manage people to achieve things surely?

    To misquote:

    “Typically, when companies are going through tough times, leaders initially ignore their people and throw money at them”

    Sadly they do it in the good times too.
    It’s true people are de-motivated because of the lack of any motivation management.
    If your organisation is needing to cut costs what does it say to your people if you pay bonuses? It says get out quickly!

    People need to be managed. People need to feel personally valued. Failing to do this is a management failure.

    How bad does it have to be before you try to get astonishing performance from your people?

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