Pensions selection, governance and financial education
Auto-enrolment has significantly increased workplace pension participation rates. However, there is a growing concern that the working-age population is still not saving enough to secure an "adequate" retirement income.
The introduction of pension dashboards is likely to highlight this issue further, as individuals will be able to view all their pension savings in one place. While this transparency is beneficial, it can also be a double-edged sword, revealing that many employees have not saved enough for retirement. This may prove to be an issue for employers, particularly in relation to employees who choose to retire much later than planned and/or those who may query or challenge the value of workplace pensions arrangements they have been admitted to by their employer.
For those employers currently providing pensions arrangements which meet auto-enrolment minimum contributions obligations, changes to thresholds and eligibility are under active consideration by the Government. These will need to be closely monitored to ensure compliance with requirements is maintained.
In response to these challenges, we have advised many employers who are proactively introducing digital advice platforms as part of their pension offerings. These tools offer actionable insights and strategies, helping employees to be better informed on their options and the impact of their lifetime savings behaviours. This helps them better prepare for retirement before pension dashboards become widely available.
In addition, recent and planned changes to the tax landscape, including for high earners and in relation to Inheritance Tax on pensions, are likely to result in changes in requirements and behaviour, particularly for higher earners.
Find out more about how we can support you in developing a strategy around your pension and wider reward offering >
Strategic workforce management
Employers need to ensure that rewards drive behaviours and outcomes that align with the organisation's objectives and culture. To achieve this, they must navigate complex challenges to ensure their reward propositions are both fair and legally compliant.
Succession planning
By placing employees with the right skills in the right positions and ensuring continuity in critical roles, employers can improve overall productivity and the success of the business. However, effective succession planning can be challenging in the context of a “super-ageing” population and evolving workforce dynamics.
Employers must navigate these issues and ensure that the strategies support workforce management while tackling age discrimination. This involves creating inclusive policies, providing equal opportunities for training and career advancement and developing comprehensive plans for leadership transitions. In doing so, employers can maintain stability despite demographic shifts.
Gender, ethnic minority and disability pay and wealth gaps
Evidence suggests that women, ethnic minorities and people with disabilities face greater financial insecurity in retirement as a result of pay gaps and occupational segregation. Ethnic minority women in the UK are likely to experience a double disadvantage, highlighting the need for targeted policies to address these inequalities.
Efforts to close these pay gaps include promoting equal pay, supporting career advancement for underrepresented groups, and implementing measures to tackle workplace discrimination.
Further, conducting regular audits and developing inclusive policies are essential to ensure that reward strategies promote equality and do not favour one group over another.
Employers should be aware of the existing legislative requirements around gender pay gap reporting and the forthcoming ethnicity and disability pay gap reporting legislation.
Performance management
Performance management is increasingly being integrated with reward packages, ensuring that employees are compensated based on their performance. This ensures that rewards are distributed fairly based on merit, reducing the likelihood of bias and discrimination.
There has also been an increase in companies introducing ESG performance targets for their executives through share schemes and reward. Employers can incentivise employees and executives through tax efficient share scheme structures and incentive arrangements (long term incentive plans or bonus arrangements) and have been adding performance conditions into a company's share plan that test performance against the company's ESG targets and then issue rewards accordingly.
Flexible working arrangements
Many employees have different expectations of traditional work structures, prioritising flexibility in working hours, the option to work from home and the ability to work from abroad when needed. Flexible working arrangements are recognised as valuable non-financial rewards which often foster a positive culture and work environment.
Benchmarking
Employers should conduct salary benchmarking to compare their compensation packages against industry standards. This is a critical component of strategic workforce management, particularly in addressing pay gaps, areas for improvement while ensuring alignment with industry standards.
We are strategically positioned to offer expert guidance and support through necessary market adaptions.
Find out more about how we can support you in developing a strategy around your reward offering >
