Provider trends By Christopher Clark, assistant director, PwC Corporate
Finance
When the pyramids were built, the legions of workers responsible for one of
the seven great wonders of the world were remunerated with garlic, on the
grounds of its perceived medicinal properties.
While this may not be sufficient to motivate and retain staff in today’s
economy, it illustrates a widely acknowledged fact that cash is not the only
option for companies seeking to nurture a committed, successful workforce.
Traditionally, HR departments have worked in tandem with third-party
providers when formulating pay and reward schemes, with a number of consultants
being brought in to advise on specific areas of expertise: lawyers for legal
employee issues; tax advisers for general tax-related matters; and specific
advisers such as pensions specialists. But in today’s rapidly changing business
climate, the optimum structure for an employee reward scheme cuts across these
previously distinct areas, and HR professionals need the services of
multi-skilled teams that can advise on implementing entire new pay and reward
structures.
The cyclical nature of most industries has led to far greater flux within
the job market, and people want reward packages that are not only attractive,
but flexible and even transferable. The traditional carrot – the defined
pension scheme – is disappearing, while perks such as company cars are less
appealing due to increased taxation. Meanwhile, higher National Insurance
contributions mean there are benefits to the employer if workers sacrifice
salary for alternative benefits. Simple non-cash programmes – be they the
provision of childcare, remote working or free gym membership – can have a huge
impact on motivation and retention at a very low cost.
This step change has already spawned mergers and acquisitions (M&A)
activity among pay and reward consultants, and I believe more is to follow.
The most notable example of this trend is DLA, a traditional law firm which
saw the need for a broader skill-set and acquired MCG Consulting, which
specialises in pay and reward issues. Others include PwC, which acquired the
Monks Partnership, UK’s leading consultancy in executive and management pay;
and Hewitt and Bacon Woodrow, which merged to create a resource for HR
consulting and delivery solutions.
The time is ripe for a rewards systems appraisal. M&A activity has the
benefit of bringing niche services to the larger consultancy firms, which can
use their resources and economies of scale to bring the latest thinking into
the mainstream. Organisations that can draw on the consultants with the most
creative approach to motivating staff above and beyond the pay packet, will
reap the rewards.
