Pay challenges of 2016

Together, CEOs, FDs and HR professionals can address the challenges of this year. The most important trends that will shape your HR and pay strategy this year are set out in this article. I acknowledge CIPD’s predictions for 2016. This article consolidates so many other great and plausible thoughts.

 Gender pay gaps under scrutiny

With compulsory gender pay reporting set to come into force this year in the UK, employers should start preparing now. Under new UK government rules, organisations with more than 250 employees will be required to run gender pay audits and publish the results. An exact implementation date has not yet been announced, but the changes are expected during the first half of 2016.

Government action is long overdue, say some, as women have consistently been paid less than men for the same work. Data published in November 2015 showed the gap between men’s and women’s pay for full-time work was 9.4%. Campaigners say this disparity means women effectively worked for free from 9 November until the end of the year. In Africa, this gap ranges between 15% and 25%, which means women may have worked for free from 1 October.

Employers can determine what their gender pay gap is by setting up a special project team. This should include a statistical analyst, an employee from finance or payroll, an executive board member and a legal adviser to ensure data confidentiality. This team will also be able to research and benchmark the organisation against employers in the sector and see what other businesses are doing to narrow the gap.

Reduce inequality

Reducing inequality is the cousin to the first trend but is far more wide-reaching than just pay. It refers to equitable access to all resources. The front end of this trend makes its appearance in the press as an “exorbitant” executive pay relative to the pay of the general worker. Even if the pay of all CEOs in South Africa were halved, this would not solve the problem. It requires a serious structural overhaul of budget setting and using every Rand for what it is intended. Wastage and fruitless and wasteful expenditure added to corruption amounts to billions. The political will to put an end to this is required. HR should be the foremost lobby group to achieve this for the good of all our citizens. This trend implies that HR should get involved outside the company gates to ensure a better place for all to work.

“Invisible problem” revealed

In-work poverty (IWP) – which already affects up to 20 per cent of the UK workforce – could become even more widespread following sweeping reforms to universal credit which, the Resolution Foundation estimates, could cost working households £1,000 on average in 2020, and possibly up to £3,000 for some.

“It’s an invisible problem,” says James Richards, Associate Professor in Human ResourceManagement at Heriot-Watt University, who has conducted new research into IWP. “State support is shrinking and employers, to some extent, are going to have to fill that role. We’re talking about poverty at levels where people struggle to pay rent, pay bills, buy food – even to come to work. Think about the long-term effect this has on morale, and on their productivity.”

This trend is similar in Africa, where many of our staff just cannot afford to live off their salaries. Debt is rising steadily and the consequences are disastrous. Employee assistance programmes may not be that passé after all – consider doing a household expenditure survey for all your employees to engage the extent of the problem.

HR can start to tackle the problem simply by getting the issue on managers’ radars, and opening up space for people to talk about financial matters. Other proactive steps include setting up credit unions, offering advances on wages in emergency situations and working closely with specialist organisations which can assist with this.

Cyber security hots up

Improving an organisation’s cyber security could be the most important thing HR does this year. With a string of recent high-profile data breaches and one employer, Morrisons, facing a legal claim from 2,000 staff whose data was leaked by a disgruntled colleague, the potential damage this can inflict is huge.

When Sony Pictures was hacked in 2014, staff salary data and addresses were leaked, as were internal communications that contained embarrassing revelations about what staff thought of some of the firm’s biggest stars.

And the threat is only increasing, as virtual incursions into workplace systems grew by 38 per cent during the 12 months to October 2015, according to The Global State of Information Security Survey 2016.

But there are a few simple things employers can do to reduce their exposure to cyber criminals. If you have firewalls, encryption and passwords for worth telling your staff what you’d like them to do. For instance, “Don’t click on an email attachment if you’re not 100 per cent certain that the source is trustworthy.” Criminals often gain access because an employee, albeit unintentionally, lets them in or shares sensitive information too freely on social media. Cyber security consultants are worth the effort to reduce your organisation’s liability.

Get set for the gig economy

It seemed to be the buzz-phrase for 2015, prompted by the rise of online platforms such as car-sharing app Uber and TaskRabbit, on which people buy and sell services and jobs. But while there isn’t anything particularly new about contract work and temporary employment, the ‘connected work’ market is set to grow significantly over the next five years.

The challenge for HR in 2016 will be how to manage this ‘new’ type of workforce and how existing HR policies will fare in the ‘gig economy’. Alex Wood, Research Associate in the Department of Sociology at the University of Cambridge, warns that rising job insecurity brought about by uncertainty over the availability of working hours is having a clear impact on mental health. He recommends that employers fit work around individual needs rather than changing people’s hours to match demand, while at the same time handing more control to staff to manage their own schedules.

Industry 4.0: The future of productivity and growth in manufacturing industries

The fourth industrial revolution was the focus of this year’s World Economic Forum meeting in Davos. BCG shows how connectivity and interaction among parts, machines and humans will make production systems as much as 30 per cent faster and 25 per cent more efficient. This will require a revamp of HR and pay policies, strategies and systems.

Structurally high unemployment/ underemployment

This risk has been identified by IRMSA as one of the most important risks South Africa faces today. The trend of structurally high unemployment/ underemployment will continue for the foreseeable future, especially whilst the South African school education system is in tatters. Mitigating this risk will require new and bold leadership which can show serious thought leadership and commitment to our education system.

In the meantime, HR needs to consider diverting CSI spend in this direction, increase the training and development spend and consider educating “beyond their gates”.

Time to take stress seriously

For the sixth consecutive year, employers questioned in the CIPD’s 2015 absence management survey reported an increase in stress-related absence and mental ill-health in their organisation. Ben Willmott, head of public policy at the CIPD, says a continued lack of adequate manager training – a stressed employee’s first point of call is their boss – is contributing to the ongoing issue.

Meanwhile, the report pointed fingers at growing workloads and 24-hour access to technology, causing staff to increasingly feel unable to switch off. With fewer people at work to pick up the load, and more job insecurity coming out of the recession, it is no wonder employees feel unable to expose vulnerability to their line managers, says Sir Cary Cooper, Professor of Organisational Psychology and Health at Manchester Business School.

The problem is proving costly to the UK: the Health and Safety Executive estimates that 9.9 million days were lost to work-related stress, depression or anxiety in 2014-15. Perhaps 2016 will be the year HR cracks it – with more mental health initiatives catered for in organisational wellbeing packages, and corporate cultures that provide plenty of tailored support from HR for line managers, as well as signposts for employees to access appropriate help.

Cost control

With pedestrian economic growth, pilfering at a grand scale and job cuts coming – managing costs effectively might be the most important trend of all. HR and Reward executives can definitely earn their seat at the boardroom table this year by coming up with innovative cost saving plans that do not lose jobs. You will get the CEO’s attention.

 Conclusion

The challenges for 2016 are immense and not for the faint hearted. They need to be tackled with political will, CEO commitment and HR executive guts. I wish you good luck and hope the 2017 predictions will be easier to manage. 

Written by:

Dr Mark Bussin

Dr. Bussin is the Executive Chairperson at 21st Century Pay Solutions Group,  a Professor at University of Johannesburg, Professor Extraordinaire at North West University, Chairperson and member of various boards and remuneration committees, immediate past President and EXCO member of SARA, and a former Commissioner in the Office of the Presidency.