5 trends that will shape HR in 2022

23 November 2021
Research, Insights and Publications

Our autumn 2021 UK Reward Management Survey achieved an outstanding 184 responses from HR Professionals and Reward Specialists. The survey results reflect views drawn from across a variety of sectors, meaning the results are representative of practices that affect over half a million employees.

Here we outline the five key reward trends that you should consider incorporating into your HR strategy for 2022.

1. Communicate a clear plan around working arrangements

Since the summer we have seen the impact of the strong rollout of the vaccination programme in the avoidance of further lockdowns. Companies are increasingly defining how they will continue to be agile, but accommodate a return to the workplace. By the end of 2021, only one in three employees are expecting to return to the office. Even by August 2022, only half of the workforce is predicted to be back in the office. To date, the expectation for employees to be in the office is around one to two days a week, which is set to increase to two to three days by August 2022.

However, only 57 per cent have implemented a concrete ‘new way of working’ policy as a direct result of the pandemic. 15 per cent are still navigating what this will look like and have adopted a temporary policy to regulate employees making the return. As organisations define what works best for them and their people, keeping everyone across the business updated and aligned to the firm-wide vision will be important in uniting employees who are offered hybrid working. This guidance should also support the approach of line managers in how to best manage their teams and improve employee engagement.

2. Drive forward recovery in 2022

Respondents reported greater levels of business confidence in the months ahead and HR will have a direct role in facilitating the future by providing the right skillsets and driving employee satisfaction to deliver the company’s vision. The majority of respondents predicted better revenues, with 57 per cent projecting revenue increases in contrast to 18 per cent in autumn 2020. 53 per cent think that their order book will increase, in contrast to 22 per cent in autumn 2020. 50 per cent also expect profitability to increase, in contrast to just 17 per cent in autumn 2020. This is the clearest indication yet of employer confidence in the market post-pandemic.

We tracked the role of the furlough scheme in saving jobs over the course of the pandemic, as many chose to redeploy talent and avoided redundancies where possible. One in five said that the government furlough scheme directly saved them from making any redundancies and 22 per cent credited the scheme with reducing the number they needed to make. This demonstrates the key role the scheme had in stemming job losses and retaining key talent, strengthening the recovery and future success of organisations.

3. Tackle a rise in recruitment and retention issues

During 2020, only 22 per cent of respondents experienced retention problems, demonstrating the value of job security amidst the uncertainty of the length and impact of the pandemic. Over summer 2021, government figures show there has been a record number of vacancies. This coincides with greater business confidence – signalling an increasingly buoyant labour market. This has led to a marked increase in the number of employers experiencing and predicting recruitment and retention challenges over the next six months, with employee turnover looking set to increase. Two thirds of respondents have experienced retention difficulties and nearly three quarters have faced recruitment challenges over the last six months.

4. Consider how pay levels meet employee needs

Constrained pay levels that only just track inflation have been a common theme of our previous UK Reward Management Surveys. Even before the pandemic, we attributed constrained pay to uncertainty around Brexit. However, relatively flat wage growth is persisting – a trend that we have observed since 2008. Pay review budgets tracked gradually rising inflation at two per cent up until 2018, until the combination of economic pressure and rising living costs created an uplift to three per cent.

The most common pay award for 2021 continues to be quite evenly split between two and three per cent. 38 per cent are awarding up to two per cent, slightly less than the 46 per cent in spring 2021. However, there is a corresponding and significant ten per cent increase in the number of respondents awarding up to three per cent from 22 per cent in spring 2021 to 32 per cent in autumn 2021.

In addition to the upward pressure on pay, it is important to consider the role of out of cycle pay increases when it comes to the ‘official’ picture of pay. Traditionally used to adjust pay for those who had been promoted, these types of pay increases are increasingly used to bridge the gap between constrained pay awards and economic pressures facing employees.

The cumulative effect of incremental increases is that it undermines the budget certainty around the pay review process. 37 per cent already anticipate awarding an additional out of cycle increase of up to one per cent in 2022. Looking to next year, 47 per cent expect that their official pay review budget will reach up to three per cent – but if 37 per cent may grant another one per cent, this will skew ‘official’ pay review figures. Employers need to assess whether their pay review process and the resultant budget predictions are robust enough to meet employee needs.

5. Look at pay and benefits holistically

77 per cent operate a bonus scheme and levels seem relatively stable into 2022. Median on target bonuses for main board directors are the same as the Spring 2021 predictions at 41-45 per cent, however maximum bonuses have risen significantly from 46-50 per cent to 71-75 per cent. This shows a return to greater business confidence in rewarding main board directors, again following the uncertainty of the pandemic. However, actual or expected median bonuses for main board directors also increasing slightly from 26-30 per cent to 31-35 per cent may be tempered by the CEO pay reporting requirements.

Equally, employers are reviewing their benefits package to ensure it delivers value for money. Beyond the traditional gym membership and bike to work schemes to promote physical and mental health, employers are also supporting employees who want to play their part in creating a greener and more sustainable environment with electric vehicle salary sacrifices. Values-led benefits are increasingly important, with employees offered carer leave, flexible working rights from day one and health cash plans for the benefit of their wider family. This can help support a more diverse workforce by giving people greater flexibility. Access to financial advice was also a key benefit that employers felt a responsibility to provide.

Each element of the reward package is increasingly being scrutinised to ensure it provides value to the employee. The benefits that respondent employers say they are actively reviewing include the bike to work scheme (for 26 per cent); private medical insurance (for 26 per cent); and the types of discounts on high street products and services. These can be highlighted in Total Reward Statements to underline the value of investment by the employer in each individual, which becomes increasingly important at times of constrained pay. The non-financial and financial benefits can be captured in one place to show the value offered beyond pay.

However, only 29 per cent have committed to offering flexible benefits. Being able to tailor rewards packages to individual preferences can ensure that employees can cherry pick the ones that they value most. Whilst this can drive employee satisfaction from the reward package, it also drives cost savings for employers who can offer a ‘menu’ of options that can appeal to different demographics across the workforce.

Get in touch

We hope that highlighting these key trends helps you in planning your own approach to your HR strategy in 2022. Many employers are still defining what new ways of working will look like for them as we plan for 2022. If you have any questions at all, please get in touch. We’re on hand to help you manage your pay and reward practices to get the most out of your people and to cultivate a strategy that delivers real value to them. Register here to contribute your views to our next UK Reward Management Survey in spring 2022.

5 trends that will shape HR in 2022