• Poor marks for pay policy

In October and November 2008 Vlerick carried out its third large-scale remuneration survey. On this occasion the respondents were employees across all levels, including managerial staff and senior executives. One striking fact to emerge is the respondents’ dissatisfaction with pay policy – and remuneration levels were not even the main source of discontent.

“In contrast to the 2002 and 2005 remuneration surveys, more public-sector employees (33%) took part this time,” explains Xavier Baeten (Manager of the Centre for Excellence in Strategic Rewards), who conducted the survey with researcher Charlotte Vande Walle. “Our aim was to consider both financial and non-financial rewards, and how those rewards and the associated pay policy are perceived.”

Here are a few significant findings:

1. Determination of pay: public-sector pay is mainly determined by the pay index, salary scale and length of service (seniority), whereas pay index, length of service, performance and skills are the key factors in the private sector. Performance is more likely to be rewarded in companies with 1,000+ employees.
2. Bonuses: bonuses are more prevalent in the private sector than in the public sector. “However, ignorance about the bonus system is staggering,” comments Baeten. “47% of staff and 38% of managers don’t actually know how their bonus is calculated! Many people are also unsure about insurance-related benefits too. Most know whether they have hospitalisation insurance and/or supplementary pension, but when it comes to accidental death or disability insurance…"
3. Pay satisfaction: by and large people are satisfied with the level of autonomy and responsibility in their job, with their colleagues, the flexibility of the working hours and annual leave system, plus the fringe benefits offered. The main problem area, however, is pay policy, which does not promote a sense of justice. Baeten: “This is mainly to do with the lack of information provided by companies about how pay is worked out. Don’t forget that, of all the HR tools available, financial remuneration has the highest emotional value. Procedures also need to be properly considered, which brings us to performance management and leadership/coaching. Incidentally, we see a clear positive link between the pay rise system and satisfaction with financial and non-financial rewards, proving that companies that introduce performance-related remuneration systems are on the right track. But a company has to be mature enough to do this, otherwise the result is just greater uncertainty and dissatisfaction. Companies without the ability to follow through schemes such as performance management would be better opting for seniority-based remuneration.”
4. Inadequate pay policy is an important motive for changing jobs: bonuses and fringe benefits have limited value in terms of retaining personnel. “That’s important for the HR policy of many companies,” comments Baeten. “In the current economic climate they can afford to worry less about how to hold onto workers, but things could change quickly once the economy starts picking up again. And then there’s still the problem of the rising average age of the working population.”