Potential impact on employee rewards outlook for 2020
It is that time of the year when many organisations plan and budget for the coming year. Indeed, these plans reflect their perspective on the internal and external environment, the impact on their businesses and people, and how they plan to respond. Specifically, rewards or remuneration decisions are often made within a strong context of internal and external factors that impact business. Putting such a plan in place provides a sense of direction and a basis of measuring progress.
A report by KPMG, an audit, tax and advisory services firm, from an employee rewards perspective, distilled the outlook for Year 2020, with a view to empowering employers to take informed decisions that will support attainment of corporate objectives. The report underscores the need for Human Resource (HR)/ Rewards practitioners to stay abreast of local and global developments, to ensure they are providing holistic guidance to the business, while ensuring alignment with business imperatives.
The report focuses on economic, regulatory, global developments, market psyche and developments, and their potential impact on employee remuneration in 2020 and beyond. Based on the firm’s industry remuneration surveys, the 2020 Pay projections, which covered sectors, like Consumer Markets, projected 11% average pay increase in 2020; Telecomms, 11%; FCMG, 10%; Banking Industry, 7%; Oil and Gas (E&P), 10%; and Legal Services 11% .
The survey has an overall average pay increase of 10 percent.On inflation, the report said it increased from 11.24% in September to 11.61% in October 2019, and is expected to further increase with the rise in food prices occasioned by the border closure, increase in minimum wage, proposed increase Value Added Tax (VAT) from five to 7.5 per cent, and foreign exchange restrictions on food importation among others.It explained that based on the 2020 Federal Government’s budget proposal, inflation rate is expected to be slightly above single digit next year.
The report warned that employers, subject to affordability and sustainability may need to consider Cost-of-Living Adjustments (COLA), to cushion the eroding effect of inflation on employees’ purchasing power.The survey, which also focused on technology and talent, noted that growth in FinTech companies has the potential impact of driving up pay in the FinTech space, as competition heightens.
It said companies, which are heavily dependent on technology to deliver their products and services will need to be more strategic in developing a compelling employee value proposition and experience to enhance talent attraction, motivation and retention.It said: “Long term incentives that align interests of employees and shareholders, while offering the opportunity to share in the success of the business, can be strong retention tools.”
Furthermore, on emigration of talent, with Nigeria experiencing a high rate of talent emigration to Canada, the UK and other Western countries, in search of a better life, the KPMG report argued that the heightened war for talent that the emigration has created can potentially drive up wages. Although, it said issues driving up this trend transcend the workplace, as employers would have to focus on what they have control over in fostering a workforce that is physically, emotionally, and mentally healthy balanced. This includes a conducive work environment, equitable and competitive rewards, better medical cover, learning and career growth opportunities, and other relevant support systems.
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