Making rewards count

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Salary expectations in Singapore are a growing source of tension between businesses and employees. With Singapore faring better than many other major economies, employees are on the lookout for opportunities to boost their salaries.

According to Hudson’s Salary and Employment Insights 2012 series of reports, salary is the top driver for 27% of candidates switching roles.

Andrew Tomich, Executive General Manager, Hudson Singapore, says that employers’ dilemma is how to attract the best candidates at a time when hiring budgets aren’t always able to keep pace with those rising salary expectations.

At Sennheiser Electronic Asia, a German family-owned electro-acoustic company, business and investment decisions are highly dependent on the company’s own financial means, as compared to fundraising or through external loans.

This financially-prudent approach has allowed the company to stay debt-free and enabled it to pursue business and make investments, including a flexible and competitive compensation and benefits structure in both good and bad times.

“Certain compensation and benefits executions can be held back due to very unfavourable economic or business conditions, for example the scrapping of business-class travelling during the 2009 global financial crisis,” says Goh Ban Ping, Head of Regional HR, Asia, Sennheiser Consumer Electronics. “But the company remained focused in protecting its assets including its people, which count among the industry’s crème de la crème.”

Performance-linked rewards

In order to contribute to business performance, HR has to ensure the fundamentals are built in correctly: competitive wages, performance-driving incentives, and a no-ceiling sales compensation plan, says Ellen Mai, Regional Director of HR and Corporate Affairs, Moët Hennessy Asia Pacific.

While rewards should be linked to good performance, the complication comes when the budget is under pressure. “The management and utilisation of the given budget then become paramount,” Goh explains. “The budget has to be prioritised and allocated to areas that give the most returns.”

For example, the priority areas could be to retain the top bracket of talents and to encourage team bonding. These areas are normally directly linked to the performance of an organisation. Once the priorities are organised, it becomes clearer what investment to put in to each of these areas to drive higher or maximum performance.

At Sennheiser in Singapore, HR has made driving overall company sales, building team work, and growing high-potential individuals its key priorities. “These have resulted in programmes and activities such as performance-based incentives, year-long company activities, and sponsorship of training and education for our people,” explains Goh.

HR in Moët Hennessy manages the Sales Incentive Scheme for sales people, aimed as a powerful tool to re-shape sales behaviour, achieve sales and marketing strategies, and attract and retain talents with the right skills and attitude.

The Sales Incentive Scheme includes not only quantitative measurements but also qualitative indicators to ensure sales people can better focus on brand strategies in addition to enhancing brand contribution. “The scheme also increases profitable growth in outlet operators’ contribution and sales channels handling trades,” says Mai.

Corporate governance

While having a total rewards plan is crucial, governing and controlling how a company is operated and how it handles remuneration is important, as this will protect the interests of all an organisation’s stakeholders.

“With economic uncertainty looming again, we have seen a number of clients conducting reviews of executive remuneration packages, and particularly incentive plans ,with a view to, for example, ensuring that compensation is aligned with prudent risk-taking, and that staff engaged in financial and risk control are independent and compensated in a manner that is commensurate with their key role in the company,” says Celia Yuen, Practice Leader, Freehills Employee Relations – Asia.

“We are not a financial institution; however, corporate governance is our focus to assure that the rights of shareholders are guaranteed,” says Mai. “Some people might say that corporate governance might deter organisational flexibility and restrain managerial opportunism, (but) reckless design of executive remuneration will become motivation for managers to extract private benefits of control.”

For Moët Hennessy, all executive remuneration is fully reported in annual tax reporting, with an internal audit that follows through on any concerns.

Rewards communication

Reward strategies may be futile if the full range of rewards and benefits available are not regularly communicated to staff.

According to the Chartered Institute of Personnel and Development (CIPD)/Benefex Reward Management Survey 2012, more than a third of companies in the UK plan to increase their spend on employee benefits this year, but few (17.8%) provide “total reward statements” and eight in 10 offer no financial education to help employees understand the value of their pensions and other financial benefits.

Charles Cotton, rewards adviser at the CIPD, comments, “Many employees will not look beyond their base salary and how far they can make it stretch from month to month.”

He added that by improving employee understanding and awareness around the value of the entire breadth of benefits they offer, employers are likely to reap the benefits in terms of recruitment, retention, engagement and productivity.

At Sennheiser, reward strategies are communicated regularly through annual sales kick-offs or meetings with the company president.

“Feedback from employees can be shocking as they do not know when certain reward systems have ceased, how a new reward system is beneficial to them, or how they can contribute and why a change was made,” says Goh.

“It is always good to collate feedback so as to develop concrete action plans. Action plans must be effectively communicated to employees at the right time and right place,” she adds.

Moët Hennessy adopts a total remuneration concept and educates staff about the importance of the aggregate of compensation and benefits, rather than just compensation alone. “To reinforce this, we have determined that it is our focus next year for HR to educate managers and staff about the concept of total remuneration,” says Mai.

“It helps our staff in understanding what the company has contributed to them on top of compensation and it is of particular importance in robust markets in Asia-Pacific where competition of talent is keen.”

Major legislation changes in Asia

Legislation

Changes

Social security

»        Social Insurance Law in China – effective 1 July 2011

Retirement and pension

»        Singapore Retirement and Re-employment Act –
effective 1 January 2012

»        Flexible options for employee pensions in South Korea

»        Various enhanced contribution rates for pensions across Malaysia, the Philippines, Singapore and Hong Kong

Minimum wage

»        Hong Kong Minimum Wage Ordinance – effective 1 May 2011

»        Malaysian National Wages Consultative Council Act –
effective 1 January 2012

»        Thailand National Minimum Wage – effective 1 April 2012

Source: Celia Yuen, Practice Leader, Freehills Employee Relations – Asia

 

Case study

Sennheiser Electronic Asia

Goh Ban Ping, Head of Regional HR, Asia, Sennheiser Consumer Electronics, describes pay and rewards at the company as a blend between German and local culture.

For instance, special discretionary leave was set up to manage cultural and racial differences and maintain fair and consistency across the organisation in Singapore. “All employees have 1.5 days of time off that they can take on any of the eves of public holidays. It cannot be combined with other leave types,” says Goh.

Sennheiser also covers all female employees, regardless of citizenship, race or religion for 16 weeks of paid maternity leave. Childcare leave of six days for parents with children below seven also covers all employees. For Germans who work at Sennheiser, they are granted similar benefits, although they have a separate policy in Germany.

“We pay individuals based on job position and not on where they are from,” says Goh.

Sennheiser pay and rewards strategy has four thrusts:

»        Paying the right wages for the right job

»        Incentivising performance

»        Bonding Team

»        Developing employees’ growth

 

Common benefits

The most common universally provided benefits in the UK are:

+       Paid leave in excess of statutory entitlement – 65.2%

+       Training and career development – 65.2%

+       Childcare vouchers – 62.7%

The most common benefits offered as part of a flexible benefits package in the UK include:

+       Dental insurance – 45.5%

+       Cycle to work scheme loans – 43.6%

+       Childcare vouchers – 41.8%

+       Health screening – 38.2%

Source: CIPD/Benefex Reward Management Survey 2012

 

 

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