Around the world, the start of 2021 is looking remarkably like the end of 2020. And that’s generally not a good thing.
In many countries, the pandemic continues to break daily infection records. In the Asia Pacific, containment measures remain in force and in many cases are working well. But clusters still emerge and the threat will continue to linger until vaccination numbers bring about the long-heralded herd immunity.
The fact is, 2021 will be another incredibly challenging year for individuals and organisations. And both will feel the pinch of continuing restraints on rewards with a just released Korn Ferry survey revealing the percentage of organisations planning no salary increases for most of their employees is significantly higher than in previous years.
While the capacity to spend on increases is severely curtailed, the need to invest in your people is as important, if not more important, than ever before. This means organisations will need to become more creative in how they distribute rewards – and in what form.
Reward trends in APAC
Reward trends across APAC are expected to mirror those seen globally, with three times as many respondent organisations as last year planning to skip salary increases altogether. A third of global respondents will provide increases to 50 percent or fewer of their employees. Only 35 percent of respondents expect to provide 100 percent of their employees with salary increases.
Data presented at headline (including inflation) and real (excluding inflation) values, both including and excluding organisations planning zero salary increases:
Across the Pacific, the forecast headline increase is 2.0 percent (including zero) and 2.4 percent (excluding zero). This is down from a headline increase of 2.5 percent last year.
Even where increases will be provided, the amount of the headline increase is expected to be lower than previous years. In Asia, the forecast headline increase is 4.4 percent when including organisations not planning an increase (including zero). This represents an almost 1 percent decrease from last year’s forecast of 5.3 percent. The 2021 forecast headline increase lifts slightly to 4.8 percent when excluding organisations not planning an increase (excluding zero).
Given the continuing uncertainty, actual increases could still fall below these forecasts.
Making rewards work for your people in 2021
Even pre-pandemic, non-financial rewards have played an essential role in engaging and retaining talent. With the restraints on financial rewards in 2021, the potential of your total rewards strategy needs to be fully and creatively deployed to enhance the physical and emotional wellbeing of employees, as well as considering their financial needs.
This isn’t just a matter for remuneration experts however. There are three key considerations for organisations going into 2021 that will best position organisations to engage their people, mitigating the impact of the freeze on financial rewards.
1. Performance management matters
With such limited funds available, APAC organisations need to target rewards at critical talent and the highest performers. This means objectively identifying and then prioritising two key groups of crucial workers:
- Talent key for today – such as front-line workers and those employees who are key to pulling the organisation 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 organisation in the future.
Organisations we surveyed in our third global pulse survey in May 2020 told us that performance management was a one of the top priorities for them during the balance of the year and heading into 2021. But optimising performance management is an ongoing challenge, particularly in uncertain times. Organisations need to start with strengthening these two fundamentals:
- Redefining and clarifying team and individual performance to focus on what matters most now: Changing market conditions may mean changing goals is necessary. When clearly communicated to well-enabled employees, new goals can help focus your people on the most urgent priorities.
- Use multiple and differentiated rewards for recognising employees: Non-financial rewards really do hold sway when it comes to engaging and retaining employees. The challenge here is in ensuring managers are adequately equipped to have the type of wide-ranging and meaningful discussions with their people, tapping into the value of the non-financial rewards on offer.
2. Re-wiring rewards where necessary
Multiple and differentiated rewards are only possible where the organisation truly embraces a total rewards mindset. This means not only ensuring that your reward strategy encompasses a broad range or tangible and intangible rewards that reflect your employer brand but also developing tools for managers so they can effectively reward employees beyond baseline compensation and benefits.·
Successfully rewiring your rewards offering requires:
- Recognising the need for flexibility through creating the option for tailoring total rewards to workforce segments.
- Bring inclusive and involving managers and employees in the rewards design and launch.
- Communicating the value of what you have, considering both tangible and intangible rewards.
3. Leadership (purpose) matters
Especially in times of uncertainty it’s critical that leaders create a trusting, inclusive, and inspiring climate to bring out the best in their people and teams. A strong and clearly communicated purpose can create a rallying point, particularly with limited financial reward incentives on offer.
The pandemic has in some ways given people a common sense of purpose, but individuals will continue to experience this purpose in their own way. Aligning non-financial rewards to each individual’s circumstances will help to bring out the positive energy that a shared purpose can enliven, leading to a more focused, optimistic, and successful workplace.
With the ongoing uncertainty in early 2021, organisations will face another challenging year and rewarding your people is an integral part of this challenge. But even in these conditions it is possible for organisations to creatively reward their people in a way that enhances their wellbeing and leads to a more engaged and productive workforce.