When it comes to rewards, it pays to look at the bigger picture
While financial rewards are key to attracting talent into organizations, non-financial rewards can be essential differentiators when it comes to retaining talent. They can also enhance the physical, emotional, and financial well-being of employees, which, in turn, leads to a more engaged, productive workforce. That’s why taking a “total rewards” approach is a smart move.
Here are some of the more creative approaches we’re starting to see emerge:
- Overall financial well-being: Pension contributions have always been the focus of financial benefits but the most forward-thinking businesses are now looking at overall financial well-being. Some organizations in the US, for example, are giving younger employees with student loans the option of using their matching funding to pay down their debt rather than going directly to their defined contribution pension account (401k). Other organizations are paying off a part of the loans in lieu of a bonus or helping employees refinance their educational loans at a lower rate.
- Wellness: Gone are the days of a one-size-fits all healthcare plan. Increasingly, organizations are offering healthcare plans with a buffet of choices, designed to meet the needs of the individual. And the focus is proactive—keeping people mentally and physically healthy. Of the organizations we surveyed for our most recent rewards and benefits pulse survey, 27% offer a well-being benefit to take care of employees' mental, physical, and emotional health.
- Work-life balance: Just how dramatically benefits are changing can be seen in the emergence of a variety of gender-spanning, lifestyle-supporting perks designed to help employees better manage their work life balance. For example, caregiving, which began primarily as a benefit for working mothers, has been transformed into a more universal offering designed to help all employees, no matter gender or age, care for any dependent.
Non-cash rewards also go beyond benefits. For technical, professional and managerial employees, having clear career paths and plenty of developmental opportunities are key drivers for satisfaction and retention.
And the good news is that investing in individual development across the business is a win-win. Employees feel valued, and organizations benefit from a strong internal talent pipeline. Developing employees’ cognitive talents (agility, inclusivity, leadership) and technical abilities (sales, project management, people development) can deliver both employee engagement, and help meet strategic business goals.
Is your reward program working hard enough?
Given the transformative effects of the pandemic, organizations should not assume their total rewards philosophy and design are still aligned with what their employees will value the most. Employees are re-evaluating their personal lives, what they want professionally, and what they expect from the rewards their employer is offering.
What's important is that organizations listen and understand how their people have been affected, then weigh up potential changes to their rewards program to support them. This is an opportunity for leadership to think more creatively about reward, performance and talent management strategies.
The Korn Ferry Global Salary Survey
Since March, we have been tracking the impact of the COVID-19 pandemic on reward programs worldwide through a series of pulse surveys. We have combined these findings with our comprehensive Korn Ferry pay data, and our rewards expertise in local markets, to provide our clients with anticipated salary increases for 2021. This is, of course, subject to refinement as an uncertain business recovery takes shape in the months ahead.
So, what impact will the pandemic have on salary increases in 2021? The data shows two key trends:
More businesses are planning no raises for most employees.
The most significant shift in the anticipated salary increases for 2021 is that the percentage of organizations planning no salary increases for most of their employees is significantly higher than in previous years. A third of organizations are planning increases to less than 50% of their general employee population and more than three times as many organizations as last year are planning to skip increases altogether. Only 35% of survey participants said that 100% of employees will be eligible for increases in 2021. With the recent resurgence in COVID-19 cases across the globe resulting in an increase in government-imposed lockdowns, there is a possibility that even fewer employees will receive an increase.
Percentage of employees likely to receive salary increases globally
After the extreme volatility of the past nine months, organizations are understandably cautious, especially those in the industries that have been hardest hit. Our most recent pulse survey found that 91% of organizations in leisure and hospitality (along with 57% in non-essential retail and 44% in banking) expect a significant to severe annual revenue decline. GDP numbers around the world are down. And, despite encouraging news about vaccine trials, the fog of uncertainty created by COVID-19 is yet to lift.
To make the biggest impact with the limited funds available organizations need to target rewards at critical talent and the highest performers. Organizations we surveyed in our third global pulse survey in May told us that performance management was a top priority for them during the balance of the year and heading into 2021—and with good reason. If businesses are choosing to be more targeted in who they give salary increases to, rather than handing them out across the board, then it is critical that they can objectively identify the key functions and individuals who contribute to their success.
So, who gets a raise and who doesn't? There are two groups of crucial workers that organizations need to prioritize. They are:
- Talent key for today – such as front-line workers and those employees who are key to pulling the organization through the current crisis.
- Talent key for the future – people who are skilled at business transformation or who have the right capabilities to sustain the organization in the future.
Headline increases are lower than in previous years.
For those organizations who are providing salary increases, the headline figures are lower than this time last year. Expected salary increases are 2.5% for North America, 2.1% for Western Europe, and 2.0% for the Pacific, representing a decrease in year-on-year headline increases of 0.3%, 0.4% and 0.5% respectively. Last year, Eastern Europe’s expected salary increase was 6.2%, but this is down to 5.0% in the coming year. Africa has the largest year-on-year decrease, with a headline increase for the coming year of 5.0%, which is 2.9% lower than the previous year.
However, in countries where inflation is particularly low, employees may see an increase in their real pay—the UK is a good example. The 2021 headline salary increase is 1.9%, significantly lower than last year’s planned increase of 2.5%, but with inflation at only 0.4%, the 2021 ‘real’ increase is at 1.5% compared to 0.4% last year.
Market highlights
Data presented at headline (including inflation) and real (excluding inflation) values, both including and excluding organizations planning zero salary increases.
Again, it’s important to remember that these are planned and not actual increases. The data is a moving target dependent on recovery. If further COVID-19 waves hit, then actual pay hikes will likely be lower and fewer than anticipated.
Country salary increase data
Data including organizations planning zero increases, at headline median values
Data excluding organizations planning zero increases, at headline median values
Using the data to make informed decisions about pay
We are sharing this salary increase data to help you make better, more informed decisions about pay for 2021. But while the report’s data is an excellent place to start, it’s by no means the full story.
You should use the data alongside other efforts, thinking about business strategy, cost structure, and the employee base. And it is critical, given the sector-based impacts of the COVID-19 pandemic, that organizations evaluate decisions within the context of their specific talent markets and benchmark them against regional or country averages.
It’s also important to remember that salary isn’t everything. As we have seen, there are many non-cash-related levers that businesses can pull to make sure all their people feel valued, engaged, and committed.
How Korn Ferry can help
Korn Ferry is a leader in all areas of rewards optimization, from performance management programs to career frameworks and external pay benchmarking to total rewards strategy. Designed around the opportunities and challenges your organization will face over the coming years, our solutions can help you engage and incentivize your workforce, eliminate overspend, and attract and retain the world-class talent your business needs.
Contact us to find out more about optimizing your rewards.
10 steps to total rewards strategy optimization
Discover the key steps to developing a fit-for-purpose total rewards strategy during these turbulent and unpredictable times in our latest paper on total rewards optimization.
Survey methodology
Ensuring the accuracy of our data in uncertain times
With markets changing fast and the future looking increasingly uncertain, it is more critical than ever to provide organizations with salary trends for the year ahead.
We have refined and enhanced our methodology for the 2021 salary survey, combining the ongoing data we collect from 25,000 clients across 150+ countries with additional data gathered at key points throughout the year. This gives us several sources of information:
- Annual compensation surveys
- Local market pulse surveys
- Global rewards and benefits COVID-19 pulse surveys.
As some organizations have indicated they will not be providing salary increases in the coming year, we have also provided the data in two groups: all organizations (including those planning zero increases), and only those organizations planning for increases (which excludes those planning zero increases). To get a sense of how far the market will move next year, it is better to use figures that include organizations giving zero increases. However, organizations seeking to benchmark potential salary decisions will gain a clearer view of the increases other organizations are planning if they use figures that exclude those giving zero increases.
