Compensation & Benefits Management: Xavier Baeten

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Presentation by Prof. Xavier Baeten during the 8th editon of Vlerick HR-day 2011.

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Compensation & Benefits Management: Xavier Baeten

  1. 1. Compensation & benefits management:het beloningshuis van de toekomstVlerick HR Day - Xavier Baeten
  2. 2. “The changing face of reward” "Plato believed that no-one in a community should earn more than five times the pay of the lowest paid worker." “incentives will never be perfectly aligned with value-creation.” “One-quarter of the highest-potential people in your company Intend to jump ship within the year” “The Silver Tsunami” “work is becoming the new face of retirement in the 21st century”“SRIHRM” “Age management” “FFWP”
  3. 3. Trends & challenges1. Flexible rewards: pay-for-performance2. Family-friendly workplace practices3. Flexible rewards: choice4. Health benefits5. Corporate Citizenship6. Retirement and pension plans7. Employee value proposition© Vlerick Leuven Gent Management School
  4. 4. 1. Flexible rewards: pay-for-performance Less fixed, more variable 39% plan to increase the proportion of variable pay More differentiation Targets & measures Collective bonus Bonus deferral Some tips: Do not over-incentivise 5 – 10 – 15 Target setting Go beyond financial measures Flexibility& discretion© Vlerick Leuven Gent Management School
  5. 5. 2. Family-Friendly Workplace Practices Holidays: number & Total hours regulation worked per week Childcare subsidy Working from home Childcare flexibility Job Job switching sharing5| © Vlerick Leuven Gent Management School
  6. 6. 2. Family-friendly workplace practices Bloom, N., Kretschmer, T., & Van Reenen, J. (2011): Sample: 50-10.000 employees Countries: Germany, France, UK, US Findings: No relationship with firm performance No relationship with % female employees overall Positive relationship with female managers Positive relationship with ‘good management practices’ Operations Monitoring Targets Incentives6| © Vlerick Leuven Gent Management School
  7. 7. 3. Flexible rewards: choice Low flexibility High flexibility Low cost High cost Salary Core Plus Modular reduction • Core: basic Mix and options coverage • Premium Match • Choice: • Plus: flexible conversion different credits to • Flexible credits • Flexible combinations purchase spending of benefits additional account coverage Barringer & Milkovich (1998)7| © Vlerick Leuven Gent Management School
  8. 8. 3. Flexible rewards: choice Do not provide too much choice – most important: Time (holidays, leave) Mobility (car, public transport) Pension contribution Main barriers: Tax treatment Administrative burden Main effects: Employer reputation Improves knowledge of benefits8| © Vlerick Leuven Gent Management School
  9. 9. 3. Flexible rewards: choice What are the most popular ingredients of a cafeteria plan? Money for… Extra holidays Bigger car Holidays for… Sabbatical or early retirement Extra cash Extra benefits9| © Vlerick Leuven Gent Management School
  10. 10. 4. Health benefits Wellness programs Social, mental and physical health Food, fitness, stop smoking, stress, … Health risk appraisal Growing focus in the USA 74% use incentives (e.g., small cash awards, t- shirts, memberships in health clubs), up from 50% in 2008 J & J: return of $2.71 for $1.00 spent Positive impact on retention Clear signal about firm culture: culture of health10 | © Vlerick Leuven Gent Management School
  11. 11. 5. Corporate Citizenship CSR – PR = HR Research results: More than 90% of MBAs are willing to forgo financial benefits in order to work for an organisation with a better reputation for CSR and ethics (Stanford) 72% deciding between 2 jobs choose to work for the company that also supports charitable causes (Deloitte) Only 15% say their employer has an employee sustainability engagement policy (Brighter Planet)11 | © Vlerick Leuven Gent Management School
  12. 12. 5. Corporate Citizenship12 | © Vlerick Leuven Gent Management School
  13. 13. 5. Corporate Citizenship13 | © Vlerick Leuven Gent Management School
  14. 14. 5. Corporate Citizenship14 | © Vlerick Leuven Gent Management School
  15. 15. 6. Retirement & pension plans “In Europe, fewer older individuals work because public policies encourage them to step down and create job openings for younger employees Pension plans: Impact of economic crisis? People do not think enough about retirement ‘Older’ workers – some research results: Fewer sich days Less turnover Better interpersonal skills More engaged However… 13% actively recruit older workers15 | © Vlerick Leuven Gent Management School
  16. 16. 6. Retirement and pension plans Impact on Reward Management End-of-career is not an “on-off” switch - flexible retirement (4th pillar) Impact on job content Need for flexible rewards: Benefits: pension plan, mobility, holidays Bonus plans? Need for changes in social security and tax system16 | © Vlerick Leuven Gent Management School
  17. 17. 6. Retirement & pension plans17 | © Vlerick Leuven Gent Management School
  18. 18. 7. Reward Proposition Important Less important Financial rewards: Financial rewards: Pay structure Bonus How raises are determined Employee benefits Pay structure Non-financial rewards: Information Management approachability Non-financial rewards: Responsibilities Colleagues Security Career opportunities18 | © Vlerick Leuven Gent Management School
  19. 19. 7. Reward Proposition19 | © Vlerick Leuven Gent Management School
  20. 20. What are companies working on? Projects in reward management20 | © Vlerick Leuven Gent Management School
  21. 21. What are companies working on? Projects in reward management Benchmarking Bonus design: Simplification Collective bonus Bonus deferral Pension plans: from defined benefits to defined contribution21 | © Vlerick Leuven Gent Management School
  22. 22. “There is now more attention being paid to the balance between financial and non-financialperformance; it has been too financially oriented” “The trend will go to ‘one size fits me’” “Distilling the message and getting line managers to really buy it … is critical”

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