From Brexit to Reward Management: How Can HR Cope With Uncertainty?

With employers, EU citizens and many of us in the UK apparently wrestling with the 'what next?' question probed by writer and psychotherapist Susie Orbach in The Guardian, and Brexit guides apparently 'flying off the shelves'; now seems a most appropriate time to be launching such comprehensive and complete guidance in our new edition of Armstrong's Handbook of Reward Management Practice.

You might think, as the reward director of a large PLC put it to me at a recent conference we both spoke at, that such uncertainty - from no deal/crash-out-Brexit all the way through to no-Brexit - makes strategic HR and reward management planning impossible. The only viable option, he suggested, is to focus on the short-term business priorities, in effect to retreat to our pay-and-benefits-administration and reactive-technical-activity ‘bunkers’ until the proverbial dust settles and the future landscape for the economy, legislation and people management becomes a bit clearer. But will it ever?! If even Famers’ Weekly believes that ‘uncertainty is the new normal’ then maybe HR needs to accept, even embrace it too.

In our economically and legislatively-buffeting circumstances, these "dangerous cocktail" of conditions that the Chancellor recently admitted to, it is perhaps not surprising that many HR and reward professionals are focused on the short-term.

We describe current challenges, such as the ‘cost/talent’ crunch of continuing tight pay budget controls yet low unemployment and widespread skill shortages; still-rising pension deficits and financial risks; worries at the removal of at some of the tax benefits of pension contributions and flex plans; the National Living Wage adding to wage costs and serious fines and compulsory “naming and shaming” for transgressors; and boardroom and social and political pressure resulting from the recent gender pay reporting requirements (covered in a new section), with ethnicity pay reporting likely to follow. No wonder that many reward directors aren’t looking beyond 29th March and the Chancellor’s Budget in their planning; and focusing their attention on their pension-capped executives.

But HR and reward professionals need to be more broad-minded and ambitious if they are to realise their full potential and impact. The key message is that it is precisely because of this growth in uncertainty and disharmony that we have to be strategic and play a key role in the wider organisational and social context in which we operate. Pay and rewards are too simply too important not to – to our own and our kids’ standard of living; to our organisations’ ability to recruit and retain the talent they need to deliver their business strategies; to governments looking to achieve more positive social outcomes.

The last decade has been a tough one earnings-wise for the majority of the UK’s workforce, with the scale of real-pay cuts probably not experienced in this country for more than two hundred years. We conclude that perhaps too many employees have suffered from employers’ over-emphasis on a narrow, short-termist, wholly market and performance-driven’ agenda, with widespread and damaging effects on employee engagement, organisational and national productivity and society.

Over four million children are living in poverty in the UK according to the Joseph Rowntree Foundation, and the majority have parents in work. It’s hard to believe sometimes that this is 2019, not 1819. The current low incidence of financial wellbeing strategies is only evident in a tenth of employers according to research evidence we cite, and employee financial guidance (not provided by two-thirds of employers) has to and seems set to shift (it is now on the future HR agenda of more than half of employers surveyed). Gender and other pay gaps remain unacceptably wide and also need to keep on progressing up the reward management and HR agendas.

So, the core and most important message is that we need to grasp this potential impact and apply, in reality, these two ambitious concepts. Too often in the past, they have only existed in vapid boardroom papers or, worse, been a front for employment cost reduction and worker exploitation in the context of a growing gig economy. As Wharton professor Peter Cappelli puts it, we have seen a marked shift in the pay and benefits arena ‘from a paternalistic model, where the goal was to look after employees and to treat them more or less equally, toward a more market-based approach, where the purpose is to help the company improve its (short-term) financial performance.’

Now, our Handbook argues, we need to realise and practice reward management and total rewards ‘for real’, in the process rebalancing our HR and reward strategies back towards employee needs and social concerns. Business strategy is no longer about grandiose long-term plans set by executives and a few experts. In our knowledge economy, we need to be recruiting retaining and motivating people in ‘good jobs’, giving them the freedom and support to innovate, developing what Professor Lynda Grattan calls an evolving, values, meaning and commitment-based ‘living HR strategy’.

The reward strategies we demonstrate need to be driven by evidence-based ‘best fit’, not supposedly universal ‘best practice. But most important of all, they need to be developed and applied to play a vital role in engaging our employees to develop their potential to the full and thereby contribute to the most positive outcomes for all of our stakeholders.

The CIPD observed that ‘questions continue to loom large around the design and application of reward strategies, against a backdrop of economic uncertainty as Brexit unfolds’. Susie Orbach draws the conclusion that ‘history tells us that with mounting social and economic anxiety, people risk being captured by populist slogans. We need to ensure this doesn’t happen, and instead reknit the social fabric in ways that are equitable and just’.

Reward management is undoubtedly challenging in the current climate. But Michael Armstrong and I believe that this also presents opportunities to refashion employment and reward models in a way that becomes genuinely strategic and ‘totally rewarding’ in far more organisations. Hopefully, our Handbook, Armstrong's Handbook of Reward Management Practice, can help them and you to realise more of that potential.

As Gandhi put it at a time of similar social upheaval ‘ be the change you want to create’.