• Adrian Tüscher, Partner |

How to incentivize staff without stretching salary budgets

Attracting and retaining talent is a key success factor for companies today. It’s also a major cost factor – so it pays to invest strategically in incentivization. In a world of transformation, HR leaders also need to ensure that they’re ploughing resources into the right skills and technology.

Amid all the disruption of digital transformation, there is plenty to be positive about. In KPMG’s recent Compensation & HR Management Survey, 44% of respondents predicted that their overall business situation would remain stable and 46% even expect their situation to improve over the next six months. Despite this bright outlook, companies are cautious when it comes to salary increases, with a 1% raise apparently the most employees can expect.

What can organizations do to incentivize staff without stretching salary budgets?

Get creative

When it comes to incentivization, nothing motivates like money. Employees are most interested in the bottom line – the amount that ultimately lands in their bank account. Fortunately, there are ways to get more value from pay, but 25% of the employers polled still do not believe that their overall compensation is structured tax-efficiently.

Companies should investigate the most tax-efficient ways to structure compensation programs. For example, lump-sum expense allowances can be granted tax-free, boosting the employees’ pay packet at no extra cost. They may also want to investigate alternative benefits. Equity-based compensation can work wonders in the long-term, while cryptocurrency might appeal to key employees at fintech firms or startups.

Plan for certainty

These days, compensation and benefits come in many forms. Organization should ensure that they have a full understanding and legal certainty for all aspects. With 71% of survey participants using equity-based rewards to link performance with compensation, equity-based compensation is a popular long-term performance incentive. However, its treatment for tax purposes can vary. Companies that seek a tax ruling benefit from planning certainty, which can help them offer more competitive compensation or free up funds for other compensation elements.

Improve performance measurement

Tracking, measuring and managing employee progress and performance is an ongoing challenge. New tools and technology have not yet caught up with the demands of HR people managers; 62% of the participants are only moderately satisfied or actively dissatisfied with their performance management system.

It will be interesting to observe how this trend develops, but it is worth noting that for some aspects, the future of HR could be as much about maintaining a human-centered approach as it is about leveraging the power of technology.

Embrace disruption

Today’s employers face an array of challenges as they speed into a digital economy that’s already transforming businesses and the traditional HR functions that serve them. Disruption in the HR landscape is reflected not only in the growing place of technology in daily HR business management, but also in the escalating demand for tech-savvy employees.

Companies can pave the way for future success by investing now programs that support future skills; 37% of the respondents are already focusing on this. It’s a win-win situation: employees reward attractive development opportunities with loyalty, and organizations safeguard the right skillsets for tomorrow’s world.

Seek support

As practitioners navigate compensation decisions and HR management planning for 2019, benchmarking and market analysis can prove a helpful tool to assess a company’s relative strengths and weaknesses.

Our selected survey insights are a useful starting point for HR practitioners as they navigate compensation decisions and planning for 2019.

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