PwC Reward trends snapshot survey 2011

New Survey reveals around half of Irish businesses plan to give pay increases during 2011, with the vast majority of the remaining companies freezing pay and a small number implementing cuts.

A higher proportion (60%) of companies are predicting increases in 2012, but with variations across employee groups and industries for both years.
For those companies signalling increases, the typical planned pay increase is 2% in 2011 and 2012.
Over a third (35%) are reviewing their incentive and bonus plans in 2011/2012.

PwC today launches its latest Reward Trends Snapshot Survey report – examining salary movements from 2010 to 2012. As almost three quarters of companies complete their salary review process by mid-year, most of the salary adjustment decisions for 2011 had been or were well advanced at the time of the survey. This survey also reviews key drivers of pay decisions, and the prevalence of various types of incentive plans and benefits provided including any plans to change these. The survey was undertaken in May 2011 amongst the HR and Finance Leaders of Ireland’s top companies across all sectors and had over 150 participants.

Key findings in the survey include:

60% of survey respondents expect a return to salary increases in 2012, typically at middle management and professional levels. This is up from just over a half (51%) in 2011 and just over one third (36%) in 2010.
While salary freezes remain more prevalent for executives and production employees, less than half (47%) of respondents expect to freeze salaries for these employee groups in 2012. This is down from 60% for these employees in 2011, and two thirds (67%) for executives and 77% for production staff in 2010.
According to the survey, very few organisations expect salary decreases in 2011 or 2012.
The survey revealed that fewer banking and construction related companies (43%) expect to provide salary increases in 2012, compared to a higher prevalence of increases in ICT & Telecommunication companies, medical devices and pharmaceutical companies (100%).
According to the survey, where providing a salary increase, companies expect this to be 2% in 2012. Levels of pay increases, where given, were similar in 2010 and 2011 and there was little variation across sectors and employee levels.
Despite continuing high unemployment levels, the survey suggests that organisations are experiencing salary pressure for certain employee segments. This is primarily driven by skills shortages in roles such as risk & compliance, experienced specialists in technical areas (e.g. software, engineering) and senior roles in IT, finance and sales.
Despite the recent reduction in the pension cap (and the penal taxation that applies where the cap is exceeded) only 6% of participants either have a strategy in place or plan to review the process for dealing with impacted employees./li>

The survey confirms that most organisations link salary increases to company performance, individual performance and external benchmarking rather than CPI/inflation levels.

The survey highlights a lot of change where reward, incentives and performance management is concerned. For example, nearly half (48%) of participants are reviewing their reward programmes. The main reason for so doing is to strengthen links to performance or to identify potential cost savings or both.

Launching the survey, Edwin O’Hora, Head of HR, United Drug, commented:

“As our organisation expands internationally, we are aligning our reward strategy to support our corporate growth goals and ensuring that we are getting the best return on our investment. A central tenet of our strategy is to continue to strengthen the link between all aspects of individual remuneration and corporate performance.”

According to the survey, nearly two-thirds (61%) of businesses have a performance management system in place (for tracking employee performance against agreed targets). Of these companies, one fifth (20%) are reviewing their system in order to align performance more closely to business strategy, improve the process and to enhance the emphasis on learning and development initiatives.

Over three-quarters (70%) of respondents have flexible working arrangements (such as working from home) in place with some companies reviewing this. Eighty one percent of participating companies said that they provide paid maternity/paternity leave.

Velma Roberts, Senior Manager, PwC Reward Advisory Services, said:

“With tighter budgets available, we have seen a greater use of flexible working arrangements and other non-cash reward such as training and development to manage costs and motivate key talent. Companies are focusing on retaining and motivating the top performers and talent. To do this they are targeting spend appropriately by identifying these individuals through effective performance management processes.”

Bonuses and incentive plans in the spotlight
An overwhelming majority (81%) of survey participants said that they provide either an annual bonus or long term incentive plan. However, more than a third (35%) of these companies are changing these arrangements. According to the survey, most organisations (91%) link the bonus award to performance.

Mary O’Hara, PwC Human Resource Services Partner added:

“Remuneration design, including the mix between fixed and variable, short and long-term pay, is under the spotlight in many organisations. We have seen a trend in the market towards increasing the link to individual performance and aligning key targets to their longer term business plans.”

ENDS

Notes to Editor

Source: PwC Reward trends snapshot survey 2011.
The survey research was carried out in May 2011 amongst 155 organisations in Ireland across all business sectors.
The following table shows the forecast salary movements for 2012 (where companies know what they are forecasting to do):
For information on ordering the survey report contact johanna.dehaene@ie.pwc.com or call Johanna on 086 810 6542.

Other Notes:

The contents of the report include:

Actual or expected salary increases for 2010, 2011 and 2012 for executives, senior management, management, professional employees, administration/support employees and production/hourly employees.
Drivers of salary increases and compensation philosophy.
Information on the prevalence of annual bonus plans, long term incentive plans, employee share plans, benefits and other reward elements.
Information on changes to annual bonus plans, long term incentive plans, employee share plans, benefits and other reward elements in 2011 and 2012.

PwC’s recent CEO Survey published on 30 May 2011 revealed:

The lack of skilled resources was a barrier to business growth.
Developing/motivating and retaining key talent was a top priority for the year ahead.

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