KPMG 2013 / 2014 HR & Reward Practices Survey. kpmg.com/ng

Transcription

1 KPMG 2013 / 2014 HR & Reward Practices Survey kpmg.com/ng

2 2 KPMG 2013 / 2014 HR & Reward Practices Survey Executive Overview Human capital is one of the most critical assets of any business. Many organisations strive to attract, motivate and retain the best talents in their business. Stakeholders, who understand that a business is only as good as the quality of its workforce, will also understand why it is imperative for the HR function to be well equipped to deliver strategic business value. The current business dynamics require HR to proactively put forth programs that are aligned to the business and employees needs. HR Practitioners must therefore have access to credible, robust and up-to-date information on HR and Rewards practices. The purpose of this survey, which is the second edition, is HR Reward Strategy Strategies for managing employee rewards Relationship between staff cost and companies revenue Strategies for communicating HR / Reward programmes Compensation & Benefits Pay differentiation on factors such as role criticality, job, family and location Prevalence and features of variable pay schemes Prevalence of Retirement Benefit plans Work-life Prevalence of work-life initiatives Administration of work-life programs Performance & Recognition Features of performance management schemes Features of recognition programs to provide information to HR Practitioners about selected HR & pay practices across all industry sectors in Nigeria. The findings will assist organisations in making informed decisions while developing and/or modifying their HR practices and reward programs. It will also provide a basis for engaging employees and business owners on HR and Reward practices in Nigeria. The question is always how much information to share with employees. It is always advisable to provide as much relevant information as possible to be able to influence employees perspectives. The survey scope remains unchanged, and is shown below: Employee Engagement, Development & Career Opportunities Measures for ensuring continued employee engagement and development Prevalence and types of Long service awards HR Policies Leave days policies - maternity and paternity leave The Human Resource Practitioners in the participating organisations provided the HR and Reward practices information summarised in the survey.

3 KPMG 2013 / 2014 HR & Reward Practices Survey 3 Participant Demographics HR practitioners from 86 organisations in different sectors of the economy participated in the HR practices survey. These organisations have turnover ranging about N1 billion to over N500 billion, based on their 2011/2012 financial results, while their staff strength ranges from about 100 to over 10,000 employees Less than 1 1 to less than 5 5 to less than to less than to less than to less than to less than 1000 Information not provided Survey Participants by Industry Sector Financial Turnover of Survey Participants (N Billions) Percentage () < Consumer Market Oil & Gas (Exploration) Oil & Gas (Non-Exploration) Financial services (Banking Institutions) Financial services (Non-Banking Institutions) Insurance 5 5 Healthcare & Pharmaceuticals Telecommunications 3 Conglomerates Others Industry sector Staff Strength of Survey Participants ,000-1,999 2, ,000-9,999 10,000 Information not provided

4 4 KPMG 2013 / 2014 HR & Reward Practices Survey Key Findings Generally, the conclusion we can draw from this year s survey results is that HR practitioners appreciate the usefulness of valid and accurate information sources as a basis for taking key decisions. Key findings from the second edition of the HR survey are summarised below: Not Applicable Purchase of market data 5 32 Organisations in the same industry / market segment are considered suitable comparators for market survey Majority of the organisations that conduct market surveys consider organisations in the same industry / market segment as suitable comparators for the purpose of the survey. Other factors considered in choosing comparator organisations include similarity in size and competition for talents. No defined basis Companies that you hire from or lose talents to Companies of same performance indices Companies of same size Figure 1: How organisations determine their pay market In-house conducted survey through informal phone calls Customized survey through consultant Information obtained during hiring process Percentage () Figure 2: How organisations obtain information about market pay levels and practices Companies in the same industry/segment Percentage () Over 60 of organisations rely on customised surveys in making pay decisions 63 of respondents obtain pay information from market surveys conducted by independent survey providers. This is in line with best practice and should be the norm for all employers. Some organisations, as an alternative, obtain market pay information informally by making phone calls to colleagues in other organisations to validate the competitiveness of their pay. This approach, although quick, may be unreliable, as the information provided may be limited, insufficient and inaccurate. Overall, the organisation s ability to pay as well as sustain future increases is very crucial and should be considered at all times.

5 KPMG 2013 / 2014 HR & Reward Practices Survey 5 A 2011 WorldatWork Opinion Poll 68 of WorldatWork member organizations rely on 2 to 3 surveys when carrying out market remuneration survey or pricing analysis Many organisations rely on remuneration survey results in setting pay levels Remuneration remains one of the key tools adopted by organisations to attract, retain and motivate top talents, thereby enhancing business performance. It is therefore not surprising that organisations strive to remain competitive by utilising market pay information in making pay decisions. The survey results show that 86 of the respondents make use of some form of market survey in determining the remuneration of their employees. 40 rely on management s discretion while 32 adjust their employees remuneration by reference to changes in inflation. Figure 3: No defined basis 4 How employee pay levels are determined Inflation 32 Staff cost constitutes a huge percentage of organisations income Staff costs make up more than 25 of the total income in 34 of the surveyed organisations. This finding further emphasises why there is an increasing demand by business owners for HR to justify investments in HR and Rewards programs. HR Practitioners can only assess and or defend the need for these investments by adopting relevant metrics to demonstrate that the value-add by the relevant HR programs outweigh the related cost No Idea Management discretion Market survey Figure 4: Average percentage of staff cost to income in the surveyed companies KPMG KPMG Advisory Services, a a partnership registered in Nigeria in Nigeria and and a a member firm firm of the of the KPMG KPMG network of of independent member firms firms affiliated with with KPMGInternational Cooperative ( KPMG International ), a Swiss a Swiss entity. entity. All All rights rights reserved.

6 6 KPMG 2013 / 2014 HR & Reward Practices Survey Organisations appreciate the need for well-defined reward philosophy A reward philosophy is a statement that communicates an organisation s general approach to managing employee rewards, based on the organisation s mission, culture, business strategies etc. The philosophy sets the target market position at which the organisation should anchor its remuneration levels, as well as the usage of various pay elements in achieving corporate objectives. Consequently, a documented reward philosophy serves as a reference for ensuring that an organisation s reward strategy is adhered to. The survey revealed that 96 of respondents have defined reward philosophies. 46 of the respondents desire to position their pay above the 50th percentile of their defined pay markets. This is in alignment with the generally accepted reward norm that organisations need to pitch their remuneration at or above the 50th percentile before they are considered competitive. Most organisations who struggle with aligning to this norm are usually constrained by the ability to pay and sustain such pay levels. Most organisations adopt a mix of strategies for communicating rewards programmes The importance of effective communication of reward programmes cannot be over-emphasised. A reward programme, no matter how well structured, can only achieve its intended purpose when the objectives and other important details are well understood by the relevant stakeholders. Current trend shows that 97 of organisations adopt one or more strategies for communicating HR / reward programmes to employees. 58 of respondents disseminate information via the use of individual letters addressed to employees. Other prevalent means of communication include s and meetings with employee groups Through line managers Meeting with employee groups s Individual letters Do not communicate th Percentile 26-50th Percentile 51-75th Percentile th Percentile Not Defined Figure 5: Distribution of companies by pay philosophy 20 0 Figure 6: Strategies adopted by companies for communicating HR/ reward programs Increasing appreciation for measuring the effectiveness of reward programs 3 More organisations appreciate the need to measure the value derived from their investments in reward programmes, as well as demonstrate that the value derived from such investments outweigh the cost. Unlike last year when only 29 of organisations measured the

7 KPMG 2013 / 2014 HR & Reward Practices Survey 7 effectiveness of their reward programmes, the results for this year indicate that 55 of organisations now adopt various means for measuring the value derived from these investments. Metrics commonly adopted by the organisations include employee satisfaction index or survey, employee retention, earning per employee ratio, employee turnover and employee performance Yes No Being considered Every year Every 2 Years Varies as required Never Figure 7: Frequency of measuring the effectiveness of reward programs Being considered Figure 8: Pay differentiation on the basis of criticality of role Yes No Being considered Role criticality remains the most common basis for differentiating employees pay Critical roles are those that have the most significant impact on the organisation s bottom line. According to the survey results, 51 of organisations differentiate pay based on role criticality. This is similar to the results in the 2012 edition of the survey, where 50 of organisations used role criticality as a means of pay differentiation. These results indicate that organisations understand the need to adopt various rewards elements, such as Guaranteed and Variable pay, as tools for driving the motivation and retention of key talents in the business. On the contrary, less than 50 of organisations differentiate pay based on job family and location (40 and 30 respectively). Figure 9: Pay differentiation on the basis of Job family Yes No Being considered Figure 10: Pay differentiation on the basis of location

8 8 KPMG 2013 / 2014 HR & Reward Practices Survey Only 43 of respondents made at least target payouts from their incentive schemes Variable pay or Performance pay is used to recognise and reward employees differently based on their contribution towards the organisation s profitability, productivity, team work, safety or other defined metrics. Variable pay could be delivered in form of cash or equity. It could also be used to reward either long term or short term performance. 88 of respondents have one or more types of variable pay schemes in place for employees. However, 57 of these organisations claimed that the payout from the incentive scheme, based on their recent financial year, was nil or below target No payout 8 Below target payout Payout at target Above target payout 35 Figure 12: Payout from Variable Pay schemes Figure 11: Types of Variable Pay plans Bonus plans Profit sharing plans Equity based plans No incentive plan Defined Contribution Pension is the most prevalent retirement benefit plan. Retirement benefits are financial instruments designed to help individuals manage their expenses after retiring from work. The benefits could be statutory (pension), non- statutory (gratuity and retirement medical) or contractual (severance packages). The survey results show that organisations have one or more retirement benefit plans, amongst which Defined contribution pension is the most prevalent. Defined contribution pension is a plan in which the employer makes remittance into employees pension account based

9 KPMG 2013 / 2014 HR & Reward Practices Survey 9 on a defined contribution rate. The other type of pension, Defined Benefits (DB), involves defining in advance, the amount of pension to be paid in retirement, usually with reference to the employee s salary at exit and qualifying years of service. The survey results show that DB plans are not popular, due to the huge liabilities involved. Only 12 of organisations have DB schemes Figure 13: Prevalence of Retirement Benefit schemes Work-life initiatives are widely used in optimising employee performance. Programs that are designed to support employees in achieving success at work and at home are usually termed Work-life initiatives. These initiatives are key to organisations seeking to improve productivity levels and retention, by helping employees achieve the balance between work and home and enhancing their quality of life. Management therefore has to show a real commitment to creating an environment for Work-life initiatives. From the survey results, 51 of respondents have one form of work-life initiative in place for employees while another 25 are considering introducing work-life programs. Sporting facilities and Flexible work hours are the most prevalent work-life program across all surveyed organisations. Other key initiatives include provision of financial counselling and social clubs. Yes No Being considered Gratuity Defined benefit pension Defined contribution pension Retirement Medical Severance package 24 Figure 14: Prevalence of work-life programs

10 10 KPMG 2013 / 2014 HR & Reward Practices Survey 2013 US based survey finding The Society for Human Resource Management (SHRM) conducted a survey in 2013 on the State of Employee Benefits in the Workplace and found out that more organizations offer flex work to a broader scope of their payroll 57 of organisations 100 performance. 96 of respondents have a formal performance management system in place for employees while 2 are considering introducing one. However, only of the organisations believe that their organisation s performance management system promotes fairness and equity Yes No Being considered 0 96 Flexible work hours Pay sabbaticals Sporting facilities Company Creche Remote work policy Others Figure 16: Prevalence of Performance management systems Figure 15: Types of work-life initiatives Performance management system still needs improvement The importance of an equitable and effective performance management system cannot be over emphasised when it comes to achieving the organisation s business goals consistently. Employees perception on the credibility and transparency of performance management can have a big impact on the success of the organisation s entire rewards program. The survey results show that most organisations appreciate the significance of performance management systems in optimising employee and business

11 KPMG 2013 / 2014 HR & Reward Practices Survey 11 Individual employee performance is the most prevalent type of performance measure. The survey however, revealed that most organisations use more than one measure of performance. In terms of performance levels, 50 of the organisations have at least five (5) performance levels for managing employee ratings or less Figure 18: Number of performance levels measured Individual performance 31 Team performance 29 Business unit performance Company performance Figure 17: Types of performance measured Most organisations encourage employees through recognition program Generally, Recognition programs are adopted to acknowledge employees who have gone the extra mile to support organisational goals, culture and values. By recognising employees, organisations are able to reinforce desired positive behaviours, thereby improving the general work culture KPMG KPMG Advisory Advisory Services, Services, a a partnership registered in Nigeria in Nigeria and and a member a member firm firm of the of KPMG the KPMG network network of of independent member member firms firms affiliated affiliated with with KPMGInternational Cooperative ( KPMG ( KPMG International ), a Swiss a Swiss entity. entity. All rights All rights reserved. reserved.

12 12 KPMG 2013 / 2014 HR & Reward Practices Survey Excerpts from WorldatWork 2013 Trends in Recognition Survey 88 of organisations have recognition programs in place Most organisations set aside 1 of payroll budget for recognition. 82 of respondents have Recognition programs in place while 12 are considering introducing such schemes. Recognition awards are typically provided in form of money, certificates, plaques and gift vouchers. Other Yes No Being considered More than half of organisations have succession planning in place Succession planning involves identifying and developing potential successors for key business leadership positions. An effective succession planning enables organisations to adequately fill in each role from within, when required. 54 of respondents have succession planning in place while 26 are considering introducing the programme. Yes 26 No Figure 19: Prevalence of Recognition schemes Being considered Money Gift Pay Plaques Certificates Others Vouchers/ sabbaticals Items Figure 21: Prevalence of succession planning Measuring employee engagement Engaged employees are those who are fully absorbed and enthusiastic about their work and as such take positive action to enhance organisation s reputation and interests. According to the survey results, over 90 of organisations measure employee engagement via instruments such as employee satisfaction surveys, exit interviews and informal feedback. Figure 20: Forms of recognition awards

13 KPMG 2013 / 2014 HR & Reward Practices Survey Employee Job Satisfaction and Engagement research report 59 of employees rated opportunities to use their skills and abilities at work as a top contributor to their job satisfaction Employee satisfaction surveys 25 Exit Interviews Informal feedback Not applicable Less than 1 week 22 Up to 1 week weeks weeks None Figure 22: Ways of measuring employee engagement Figure 24: Duration of Paternity Leave More appreciation for both Maternity and Paternity leave This year s survey results reveal that the proportion of organisations providing a 4-month maternity leave has doubled from 6 in 2012 to 12. Similarly, there has been a slight increase in the number of organisations providing paternity leave to new fathers i.e. from 35 last year to 37 in this survey Figure 23: Duration of Maternity Leave months 3 months 4 months Above 5 months

14 14 KPMG 2013 / 2014 HR & Reward Practices Survey Conclusion The survey findings indicate that more Nigerian organisations are taking active steps to align their HR and Reward strategies to international best practices. Organisations appreciate that their ability to stay ahead of competition is dependent on being able to weave a competitive advantage around their people. The focus on effective people management should continue in the future as HR becomes more strategically positioned to attract, motivate and retain top talents, as well as provide measurable support to enable organisations achieve business goals.

15 KPMG 2014 Open Reward Training Programs 14 May 2014; 11 Nov 2014 Fundamentals of Base Pay Structure Design Jun 2014; 8-9 Oct 2014 Pay-for-Performance: Strategies for Driving Employee Engagement 17 June 2014; 15 Oct 2014 Analytical Skills for HR and Reward Practitioners 9-10 Jul 2014 Managing Total Rewards for Value Creation 16 Jul 2014 Implication of IFRS Adoption for HR & Reward Practitioners 12 Aug 2014; 18 Nov 2014 Optimising Value from Compensation Surveys 19 Aug 2014 Designing Reward Strategies that Drive Business Objectives Click here for further details. KPMG 2014 Open Tax Training Programs 17 April 2014; 18 June 2014 Tax Implications of International Financial Reporting Standards 9-10 April 2014; Oct 2014 Introduction to Nigeria taxes May 2014; July 2014; November 2014 Review of Petroleum Profits Tax 14 May 2014; 15 October 2014 Managing Personal Income Tax 13 August 2014 Managing Corporate Taxes 16 July, 2014 Managing Transaction Taxes 11 June 2014; 19 November 2014 Managing Tax Audits/ Investigations Click here for further details.

16 16 KPMG 2013 / 2014 HR & Reward Practices Survey How we can help KPMG C&B Practice assists clients to weave reward strategies that deliver competitive advantage and promote employee engagement. Year after year, we have assisted many of our clients in making key decisions towards their investments in Total Reward and HR at large. Our multidisciplinary team of human resource professionals, tax advisers, accountants, pension consultants, performance and reward professionals provide value-adding services tailored to the uniqueness of each organisation. We have extensive experience in the areas of: Remuneration and HR Strategy Support Remuneration Committee Support Variable Pay Scheme Design Pay Structure Design Market Intelligence Merger and Acquisition Support Equity Incentive Scheme Administration War for talents is fuelling the compensation war. It is therefore important that organisations are fully equipped to play to win this war. KPMG can provide your HR team with the resources that will help your organisation enhance your employee value proposition KPMG Advisory 2014 Services, KPMG Advisory a partnership Services, registered a partnership in Nigeria registered and a member in Nigeria firm and of a the member KPMG firm network of the of KPMG independent network member of independent firms affiliated member with firms KPMGInternational affiliated with KPMGInternational Cooperative ( KPMG Cooperative International ), ( KPMG a Swiss International ), entity. All a rights Swiss reserved. entity. All rights reserved.

17 Contact Us Adewale Ajayi Partner, Tax, Regulatory & People Services KPMG Nigeria adewale.ajayi@ng.kpmg.com Boluwaji Apanpa Group Head, Compensation & Benefits KPMG Nigeria boluwaji.apanpa@ng.kpmg.com Eniye Alile Manager, Compensation & Benefits KPMG Nigeria eniye.alile@ng.kpmg.com Henry Uche Ogbonna Manager, Compensation & Benefits KPMG Nigeria henry.ogbonna@ng.kpmg.com Interact with us on Social media kpmg.com/ng 2014 KPMG Advisory Services and KPMG Advisory Services, partnerships registered in Nigeria and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Printed in Nigeria. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative ( KPMG International ).