Seven Year-end Rewards Priorities

I totally mchecklistissed September, it flew by so fast! Here’s a re-hash of a popular post from last year.

The last few months you’ve made progress on your KPI’s but now planning season is upon you. When the months start to end in “-ber” a few things start to happen for companies on a calendar year fiscal year. They may not all apply, but I’ll bet most of these priorities apply to you:

Seven Comp & Ben Priorities

  1. 2015 Salary Budgeting–You must deliver salary increase budgets for each country. Good sources: Mercer, TowersWatson, Hay Group, AONHewitt and WorldatWork. Don’t stop there! These days you also need to determine what countries are increasing their minimum wages, if it affects your industry. Google on “Malaysia minimum wage”, etc. Government Ministry of Labor websites will have current minimum wages, and future increases that are already passed into law. But they will not speculate. For speculation, you need to search the net for media stories, politician speeches, etc.
  2. 2015 Benefits Budgeting–You need to provide finance an inflation rate on your insured benefit premiums. Locations with aging workforces will see higher premium increases. Developing locations are seeking to improve safety nets, for example, China is requiring both local and foreign employees to participate in China Social Insurance, so be sure to capture those in your budgets.
  3. Annual Market Analysis–Your compensation surveys are being published in the next several weeks, with some coming out in September. Don’t wait til the last minute! It’s tempting to wait til late October when all your surveys have been published (by Hay, TW, Mercer, McLagan, etc.) but remember you need to confirm your matching, check the year-over-year market movement by job, to see if there are jobs where the market moved up more the expected, or perhaps moved downward, in which case you have to decide whether to accept the new market value or stick to the current market value (and see if it goes down again next year).
  4. Annual Pay Cycle Planning–Do you know who is running the annual merit/increment process? Who is responsible globally, regionally, by country? Who is working with the software vendor (if you use 3rd party software) for modifications and configuration? What are the milestone dates? How will Chinese New Year (31 January 2014) impact milestone dates, manager deadlines, performance rating calibration and approval, etc.?
  5. 2014 Incentive Accrual–One thing I recommend doing now is updating your forecast for 2013 incentive payouts. Finance needs to maintain their accrual on the balance sheet for the bonus payment liability. If incentive-related business performance has been low, payouts may be lower than budgeted, depending on your plan design and funding formula (if any). If so, it’s bad news for employees, but good news for finance, who can make plans to earmark potential surplus incentive budgets for other needs. However, if business performance has been good, your incentive accrual may be insufficient and finance may have to increase that accrual to avoid a year-end cash flow crisis.
  6. 2015 Incentive Design–Again, don’t procrastinate! You think September is busy, it gets worse each month now through next March, so do yourself a favor and get some things out of the way now. For next year’s incentive plans, ask some business leaders if they have any input/feedback on the current plan design, likely payouts, etc. Update your accruals (see step 5) and have an informal chat with your head of HR and head of Finance and see if they have any sense about the richness of payouts, who’s getting low (or no) payouts, who’s getting bigger payouts, etc. Is the incentive plan doing what it is supposed to do? Will it help attract, motivate and retain the best performing individuals? Is it rewarding the best performing teams, units, regions, etc.?  If you can confirm that the plan is working well, then you can plan on a lighter incentive design process for 2014. If you get feedback that says something needs to change, then you should start more detailed planning now and make sure planning doesn’t get swept aside by merit and bonus planning, or other priorities in December and January. Ideally, new incentive plans/schemes should be issued in the first month of the new year, but no later than March, in most organisations.
  7. Finish your KPIs–it’s time to get realistic about what you can accomplish on your own time. What can you delegate? What do you need help with? If you (or your boss) have unspent consulting dollars, now is the time to get someone to help you get your KPI’s across the finish line. The only thing more tragic than not spending your consulting budget is not spending it AND failing to complete your KPIs!

One more priority applies only if you’re in the Philippines: it’s time to put up Christmas decorations!

I have been through these processes more times than I care to remember. I feel your pain! Here’s wishing you a strong finish to 2014 and solid preparations for a successful 2015.

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