Importance of employee compensation | Incentive&Motivation

Importance of employee compensation

When it comes to the importance of employee compensation, recent news shows that due to changing wages, your HR team need to be working with your reward and benefits specialists to offer real, competitive working packages.

A forecast issued today by the Hay Group division of Korn Ferry (NYSE: KFY) reveals that, adjusted for inflation, employees in the UK are expected to see a real wage decrease of 0.5 percent. With continued uncertainty following the Brexit decision wages in the UK are up just 2 percent – but, taking into account inflation of 2.5 percent, UK employees are set to feel the pinch. This is in contrast to 2017, when inflation-adjusted wages in the U.K. were up 1.9 percent.

As a result, smart businesses should be looking to retain top employees.

Slow economic growth sees talent shortages ahead

“Slower economic growth in mature economies keeps a check on pay raises,” said said Bob Wesselkamper, Korn Ferry Global Head of Rewards and Benefits Solutions. “In emerging economies, upskilling workers is crucial for companies to maintain a competitive advantage – and those skilled employees can expect to see wages rise as talent shortages in certain regions drive salaries upward.”

Korn Ferry pay experts recommend taking a holistic approach when determining pay.

“While inflation indices are a solid benchmark for reviewing market trends in pay, we recommend that companies take a broader perspective by defining and agreeing upon their own measures of cost drivers, business strategy and local trading conditions,” said Frost.  “Compensation programs need to be regularly reviewed to make sure they align with changing business and market conditions.”

France and Germany see wages increase

Employees in two of Europe’s largest economies, France and Germany, are forecasted to see real wage rises of 0.7 percent and 0.8 percent respectively. The extensive study, which analysed data from over 20 million employees across 25,000 organisations in 110 countries, found the importance of employee compensation as employees around the world are expected to see real wage increases of on average 1.5 percent*, down from 2017’s prediction of 2.3 percent and 2016’s prediction of 2.5 percent. This is the slowest increase in real wages the world has seen in five years.

UK organisations forced to make decisions about employee morale and motivation

In summary, Benjamin Frost, Korn Ferry’s Global General Manager – Pay, said: “In contrast to last year, UK workers will find themselves worse off than French and German workers when it comes to salary increases. 2018 is set to be a tough year for UK business. Companies need to think about how they target the limited money they have available for pay increases to the parts of the business where it will have the most impact on employee performance. Inflation is pinching wages internationally and Brexit elevating levels of uncertainty. UK organisations will be forced to make crucial decisions about where money can be best allocated to boost employee morale and motivation.”