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PwC Breakfast SessionHR Disruptions: Revving your game with Strategic Rewards

November 2016

PwC

November 2016

What is your greatest value proposition as an employer?

1. Your brand name and market reputation

2. Your employee cash pay

3. Your employee benefits

4. Your organisation culture (including leadership culture)

5. We have not clearly defined our employer value proposition

6. Two or more of the above

Let’s get the conversation started…

2PwC Breakfast Session

6 Strategic Reward: Benchmarking for Success

PwC

November 2016

Today’s workforce… HR Capabilities…

Workforce of the future… HR Challenges…

The world of work as we know it is changing



Want to be part of

something

bigger than

profit making

64% of

20-35 year olds

want to work flexibly

Just 34% of

CEOs think HR is prepared for the challenges

ahead

Only 0.5% of

available data is analysed to

generate insights

75% of the

workforce will be millennials

by 2025

64% of 20-35

year olds do not expect to work at one place for up to 9 years?

63% of CEOs

are concerned about

availability of

Key skills

2 billion of the jobs that exist today will disappear by

2020

PwC

November 2016

Disruptions are here and HR needs to change its game


1 Disruptions are here and HR needs to change its game

PwC

November 2016

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Some global trends disrupting the HR space…


Digital Technology

& Data Analytics

Rise of the Extended Workforce

(GIG Economy)

Global Talent

Mobility

Economic Instability

& Shrinking markets

Scarcity of Specialist

skills due to changing business models

Demographic and Social Changes

Increased adoption of Workforce

Automation (Smart

machines)

PwC

November 2016

Implications for HR• Shrinking organisational budgets and appetite

for HR spending

• Increased demand for strong business cases on initiatives

• Heightened employee reward expectations

• Increased public scrutiny and demand for more corporate accountability

• Increased demand for specialist and new skills

• Increased talent mobility (cross-carpeting, lower tenures)

• Widening communication and engagement gaps between organisations and their staff

• Increased demand for technology-savvy functional skills including HR

• Increased demand for online, real time insight for decision making

Closer home, some major disruptions with critical implications for business and HR are happening…


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BUSINESS NEWSTHURSDAY 10 NOVEMBER 2016

Disruption everywhere!

What is our economic policy?

CBN in damage control on forex: Low access to forex for businesses

Inadequate government funding

Mobile operators grow subscriber base - Increasing access to telecoms-driven services

$41bn oil revenues at stake: As export revenue and reserves decline

Partial liberalisation of sectors

Growing adoption of social media

Digitisation of services & growth of e-commerce

PwC

November 2016

The Way Forward: Priorities for Action


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Digitise work and the workplace

Create digital talent exchanges

Rebuild trust and redefine employer purpose

Prepare for the workforce of the future

Rethink skill development and capacity building

Embed Human Capital Analytics

Rethink and redesign your compensation / reward models

PwC

November 2016

Rethinking Strategic Reward


3 Rethinking Strategic Reward

PwC

November 2016

4 Insert Banner

Redefining Strategic Reward - What makes your reward model strategic?


Business Purpose, Aims and Values

Business Strategy

HR Strategy

Reward StrategyTalent Management

Strategy

Pay Levels Reward Structure

Benefit Plans

Leadership Development

L&DInitiatives

Succession Planning

Talent Acquisition

Performance Management

Non-Cash Rewards

Recognition

PwC

November 2016

Traditional reward practices are no longer attractive…


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Rewarding real value

Rewarding Outcomes

Ensuring fairness &

transparency

Providing flexibility

• Getting rewarded for the value they bring and not just monetary results

• Recognising contribution to the delivery of business aims / goals

• Aligning reward more closely with value creation

• Providing clarity on the basis for evaluation and reward

• Demonstrating objectivity

• Adopting a globally consistent evaluation framework/ process across all roles

• Providing enhanced choice & opportunity to structure own benefits bouquet

What do employees value? What really makes a difference?

PwC

November 2016

What should HR do differently to ensure an effective reward strategy?


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Lead the way in establishing a reward culture that is

transparent and which promotes the sustainability of the organisation and society

Guide leadership to establish the right relationship between pay and performance management without eroding the quality /

losing the value of meaningful performance discussions

Rewarding:

• Individual performance

• Short-term results

Rewarding:

• Team performance

• Long-term results

Managing High

Performers

Negative impacts on

Development

Rewarding High

Performers

Negative impact on Retention

Define the right links between

PwC

November 2016

Tax Efficient Reward


5 Tax Efficient Reward

PwC

November 2016

Strategic rewards and tax

All bets are off – playing it safe on pay

Only a minority (28%) of executives would choose to gamble on a potentially higher bonus versus fixed pay if they had a choice.

28%

5



PwC

November 2016

• Employees want higher pay now rather than later

• Employers are interested in delivering maximum value of reward to employees in the most cost and tax efficient manner

• Reward strategies need to take advantage of the tax planning opportunities that exist within the tax laws to increase the net reward delivered to employees

• Planning needs to be a balancing act

Strategic rewards and tax



Employer Employee

Attracting and retaining value

PwC

November 2016

Short term benefits



Employee benefitImpact on ETR

Employer considerations

Lower tax

19% versus

1%

Pension,

ITF, NHFAdministrative

burden

Tax

optimisation

BIK v Cash

Redistribute income

Relocation, Basic,

Housing, TransportReimbursements

Tax impacts project costs and shareholder value.

PwC

November 2016

Long term benefits - Share schemes

•Recognise superior performance

•Aid retention

• Align employees to long-term business goals and shareholder interests

• Tax advantages. Also consider tax leakages

• Maintain competitive advantage for recruitment

• Increase engagement between employee and company

‘When employees are able to own shares in their own companies, they are clearly more interested in the way the business works and are more committed to its long term success.’

Lord Marshall, Chairman, British Airways



PwC

November 2016

2012

Employee

Grant vs exercise

Employee benefit – circa 20%

Dividends – 0%, 10%, or 20%

Capital Gains – 0%

What if shares vested early?

Shares exercised in a different jurisdiction – Double tax?

Employer

When is IFRS 2 charge deductible?

Social security contributions?

Recharge

• Foreign exchange issues

• Withholding tax

• Excess dividend tax

Share schemes - illustration

2004 2013

Grant date

17

PwC Breakfast Session


Recharge datewhen is tax

payable?

Service Period

Exercise period

ExpiryDate

Vesting Period– the period between the grant date and the date when the share-based payment is released

Service Period – the period over which the employees are giving service. Often also the period over which the performance criteria must be satisfied.

Vesting date

Considerations

PwC

November 2016

Taxable or Exempt?

One month in lieu of notice

Gratuity

Golden handshake

Compensation for loss of office

Terminal benefits



Can we structure these better?

PwC

November 2016

- Cost of compliance

- Manage risk through payroll processes

- Avoid missed deadlines

- Penalties and interest

- Planning considerations

- Structure rewards: Long versus short term

- Employee: Higher disposable income, low tax ETR, long term benefits

- Employer: Pension, Gratuity cost, Social security contributions,

Strategic rewards and tax – In summary



Employment Compliance

Cost Reduction

Process Efficiency

Manage Risk

PwC

November 2016

Strategic Reward: Benchmarking for Success



PwC

November 2016

REMchannel…a 24/7 Salary Survey System that delivers high quality results



Value Proposition

Industry Comparison

Executive Pay

General Staff

Job Based

Grade Based

Percentile Comparison

Trends in Salary & Wage

Movement

Survey Scope

• Unfettered Access – interactive web-based survey too

• Flexibility - choice in defining comparator market, submitting data & generating customized reports

• Stringent job matching and data validation process and regular audit to maintain data quality

• Access to more than one survey results

• Current benchmark data to design competitive compensation strategy

PwC

November 2016

REMeasure…our Job Evaluation System



REMeasure

Value PropositionScope

All jobs including executive jobs

Can be used for large multi-national organisations

Various industries

Access anywhere, anytime –24/7/365

Results can be correlated to other JE Systems

Objective and accurate sizing of positions

Series of balanced questions for evaluating all jobs

Access to market benchmark data (REMchannel)

Free up HR time to pursue strategy

PwC

November 2016

• Access to large range of rewards

• Customised (Industry, benefit type, employee levels)

• Qualitative Assessment to understand psychological principles underlying each benefit.

• Trends

• Ready access to mode of policy implementation – How does it work elsewhere

• Best Practice Guide

REMbenefit Survey



Data collationDec 2016

Launch dateFeb 2017

Effective administration + management buy-in.

Thank you.

This publication has been prepared for general guidance on matters of interest only, and does

not constitute professional advice. You should not act upon the information contained in this

publication without obtaining specific professional advice. No representation or warranty

(express or implied) is given as to the accuracy or completeness of the information contained

in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, its members,

employees and agents do not accept or assume any liability, responsibility or duty of care for

any consequences of you or anyone else acting, or refraining to act, in reliance on the

information contained in this publication or for any decision based on it.

© 2016 PricewaterhouseCoopers Limited. All rights reserved. In this document, “PwC” refers

to PricewaterhouseCoopers Limited (a Nigerian limited liability company), which is a member

firm of PricewaterhouseCoopers International Limited, each member firm of which is a

separate legal entity. Please see www.pwc.com/structure for further details.

http://www.pwc.com/structure

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PwC Breakfast Session HR Disruptions: Revving your … · PwC Breakfast Session HR Disruptions: Revving your ... 20-35 year olds ... reward to employees in the most