Reward priorities for 2025: Plan, purpose, practice
I had an excellent end to 2024 on the professional front, at the centre of a wonderful wealth of action-learning and knowledge on contemporary reward management.
First, I co-moderated a lively, at times angry, reward leaders’ roundtable at the jam-packed REBA Future Forum 2024. The most recent crisis relating to the ‘surprise’ increase in employers’ National Insurance contributions (NICs), on top of the impending hike in the National Living Wage in April, was at the top of everyone’s concerns.
Then I presented at a well-attended webinar, Transforming Higher Education workplaces: The power of Total Reward run by my good friends at the Universities & Colleges Employers Association (UCEA). The cost pressures on our universities are intense – but so is the very real global competition for the top research talent.
And finally in December, I facilitated our two-day total reward strategy masterclass programme, organised brilliantly as usual by E-reward.
So what would be my most important impressions on what this all says about the contemporary state of reward management in the UK?
We have certainly become expert in dealing with the immediate crises we have faced, since Covid struck in 2020. It was followed by a great resignation, then high inflation and the intense cost-of-living squeeze. And now we face pay cost pressures in a flat economy, amidst unwelcome bond market turmoil presaging rises once again in inflation, interest and mortgage rates.
Here are three key areas and directions of travel for reward professionals as they navigate through the crises:
1. Get more strategic and a reward plan
The surprise increase in employer NICs announced by Chancellor Rachel Reeves in late October’s Budget is just the latest unplanned ‘shock’ reward leaders are having to respond and provide our boards and leaders with answers to.
”We’ll cope…we have to” was the response, somewhat through gritted teeth, of one leader in our REBA roundtable.
But despite our successful responses and ‘fixes’, the need now for a more strategic approach seems to be a clear realisation for many of those I have been chatting with at these events. And it’s now driving more serious activity on reward strategies – a priority identified by 60% of the 7,000 reward leaders in Korn Ferry’s latest Global Total Rewards Pulse Survey.
This survey presents a range of responses, particularly to the intense skill shortages that the UK is still suffering from, a priority area for the Labour government as well as large employers.
These range from offering golden hellos, through to thrice-annual pay reviews for supermarket workers, and even retention bonuses for Father Christmases.
Such ‘quick fixes’ have their place in any reward toolkit. But used on a widespread basis they risk becoming dysfunctional, for example contributing to the common situation in recent months of new recruits being paid more than experienced existing staff.
They have also been the basis for some of the most well-known, successful equal pay claims, given their common heavily male-skew and lack of consistency and control in allocation.
There was a widespread consensus at the REBA event and in my workshop that it’s vital now to get more strategic and planned, if only to better prioritise and focus our work in such a tightly resource-constrained context. A talent/cost crunch, as one leader described it.
REBA’s Benefits Trends for 2025 Research, in partnership with Barnett Waddingham, finds that: "As organisations rise to these immediate challenges, the report indicates strong strategic responses to macro trends, such as adapting pay strategies to support greater flexibility and reskilling, enhancing employee value propositions by offering comprehensive benefits, and investments that promote demonstrable improvements in long-term health."
But in the current economic and employment climate, will even providing a clear strategic direction and detailed plan of activities suffice?
As Dana Strong, CEO at Sky, describes the key aspect of her role is to ”alter the culture of the first two decades” at Sky, so as to ”dial up collaboration and partnership”, in what has been historically “a friction-based culture”.
2. Align rewards with purpose, values and culture
What’s the future-facing ‘big idea’ driving your reward strategy, and how aligned are your pay and rewards with the culture and values of your organisation?
Traditionally employers could get away with vapid wish-statements of corporate values and cultures. But today inconsistencies with the reality in the organisation will be rapidly spotted and called out, by internal and external stakeholders.
We are seeing this most clearly now in the push-back in some major US employers, such as Starbucks and Meta, against their comprehensive, allegedly ‘woke’ diversity, equity & inclusion programmes (fortunately not yet apparently affecting the countervailing pressures from governments to report on pay gaps for disadvantaged groups in the workforce).
We are seeing total rewards ideas expanding to more explicitly encompass values and cultures, as well as covering the development and career progression opportunities which so many employees value most highly.
Head of reward at the RSPCA, Sarita Coleman, for example, explained at my UCEA webinar that the total rewards offer communicated to employees at the RSPCA covers five categories: pay, benefits, employee development, culture and lifestyle.
This trend is particularly evident in the increasing numbers of employers with an Employee Value Proposition (EVP).
Olivia Farley, programme manager at NHS Employers for example, explained that the 10-year NHS Long Term Workforce Plan sets out that all NHS trusts should work with their stakeholders in developing a clear EVP. And this should be promoted across the workforce for maximum impact on retention and engagement.
Potentially this expansion in the model of total rewards offers a more powerful and performance-enhancing approach to reward strategy.
But it is also one which is proving to be even more difficult to deliver in practice.
3. Focus on reward practice and the employee experience
Despite the successful initiatives of many reward professionals in reacting to the succeeding crises of the 2020s, the challenging economic context has meant many people don’t feel, and are not, better off. Such that even using the term ‘total rewards’ in some employers has become toxic.
Average pay awards are thankfully ahead of price inflation again now, boosting real incomes once more.
But the real pay cuts of the last decade are far from being made up for key groups of workers, which has driven many of the public sector pay disputes that we saw last year.
And benefits programmes which you can’t put into practice as intended are never going to be effective.
Take wellness. My IES colleague Jonny Gifford’s research on UK workplace health draws out the sticking plaster nature of many wellbeing benefits. One of my clients described it as throwing a wide range of new health and wellbeing provisions and products ‘like spaghetti at a wall’ and ‘hoping some of it sticks’.
Hastily introduced new wellbeing benefits can fail to address the underpinning drivers of ill health derived from poor job and work process design.
Ignoring the real-life experiences of your employees means you are also ignoring their engagement.
Gallup’s State of the Global Workforce (2024) found only 10% of their UK workforce sample was fully engaged, compared to their global average of 23%. They estimate the economic cost of this engagement crisis to the UK to be £257 billion.
My reward strategy group demonstrated that employers are much more focused now on assessing and demonstrating the effectiveness of their interventions.
They are especially keen to understand employee engagement, which is such a key driver of the much-needed but still elusive recovery in corporate and national productivity.
Having been less than happy with their previous attempts at an EVP, Nationwide explained at the REBA Future Forum 2024 how their external market repositioning is being supported internally with their new people narrative.
It is focused on its people’s actual experiences at every point in the employment journey; and is less about the design of shiny new programmes, much more about their execution and delivery.
This rightful re-emphasis, on the implementation and experience of pay and benefits policies, is reinforcing great work by colleagues on their communications to employees and management.
To give just a few examples:
- Manchester University NHS Foundation Trust implemented trained employee reward champions to help improve reward communications, the staff experience, and health and wellbeing
- The RSPCA has implemented a host of new communication initiatives to improve benefits education, including: a highlighted benefit of the week; benefits posters with QR codes; and improving their reward intranet pages
- A public sector agency schedules regular HR clinics for line managers to deal with specific difficult issues that emerge during their annual pay review process
- Another charity has introduced a line management panel, which discusses any proposed changes to HR/reward arrangements before their implementation.
Putting strategically planned, purposeful rewards into practice
The sheer energy, innovation and tremendous range and depth of work in the current UK rewards landscape is perhaps the most abiding and positive impression of my experiences at these various reward events and with my clients.
After their amazing crisis responses, many reward leaders recognise the need to be more forward- rather than backward-thinking, more purposeful rather than crisis-driven, to plan out a reward strategy that can provide:
- a clearer statement of reward direction and purpose
- a definition of what ‘good’ in reward means and looks like in their organisation
- a clearer picture and justification of budgeted reward costs and how they are to be spent, showing how your rewards investment can best be used to generate maximum returns in terms of employee recruitment, retention and engagement
- an integration of the multifarious range of pay, benefits and non-financial rewards now operating in organisations, so as to maximise peoples’ understanding and perceived reward from them all.
