10 November 2022

Why getting pay and reward right is more important than ever

8 minute read


Jo Faragher

Jo Faragher

Jo Faragher is a writer and editor, specialising in HR and employment issues. She is a regular contributor to Personnel Today, People Management, First Voice (Federation of Small Businesses magazine) and Times Higher Education. She was awarded the Towers Watson HR Journalist of the Year prize in 2015 and was Highly Commended for the same award in 2019.


Employee experience Pay benefits and reward


At a time of rising living costs, it’s more critical than ever that employers support workers with accurate, timely, pay. Is your technology up to the task?

Pay is the one area of the people function where there are rarely prizes for getting it right, but you’ll soon hear about it if things go wrong. “There are no grey areas like there are in HR. It’s right or it’s wrong and employees expect 100% accuracy. There are not many roles where that’s an expectation,” says Amanda Barnden, payroll sales manager at Ciphr. Furthermore, it might not just be a case of an administrative error meaning an employee earns a little less one month – noncompliance with wage legislation can lead to investigations by HM Revenue & Customs (HMRC) and huge fines.

Getting the basics correct in payroll has become more complex over the last decade or so, however. Payroll departments must now ensure they provide data to HMRC in real time each time they pay employees, that eligible employees are auto-enrolled into a pension, and keep staff up to date with an increased variety of benefits. If a business expands globally, they need to get to grips with international currency and tax issues, while domestically they may be dealing with the complexities of seasonal, contractor and freelance contracts. And, during the pandemic, payroll experts had to step up and become experts on furlough, ensuring there was tight integration of HR and pay data at a time when most organisations were in a state of flux. “It can feel like herding cats sometimes,” adds Barnden. “You’re dealing with lots of different data sources, they all need to be accurate, authorised, compliant with your terms and conditions, and compliant with legislation.” The ‘glue’ in the middle is likely to be your central HR system, which gathers the data and creates a single source of the truth from entering new starter data to running payroll.

The past two years have also shone a light on pay – showing it to be not just part of a transaction between employers and employees for work done, but how salary factors into employees’ wellbeing and ability to function well at work. A recent reward survey by the CIPD found that 68% of organisations felt employees’ financial wellbeing had suffered due to the pandemic, although almost half of employers did not have a financial wellbeing policy in place. Even before Covid struck, the proportion of employees in the UK living ‘payday to payday’ with no emergency savings was 40%, according to Willis Towers Watson, and living costs are expected to rise further in 2022 and beyond as inflation reaches levels not seen for 30 years. Worrying about whether their salary will be able to cover living expenses or an unexpected bill can have a negative impact on productivity, explains David Williams, head of group risk at Towergate Health and Protection. “If someone has a big bill coming up, their mind can go off the job, there are mistakes in emails or the production line. If more people become distracted things start to grind to a halt,” he says.

One of the key factors in boosting employees’ confidence in their finances is making sure they know what’s available to them, not just in terms of salary but wider benefits and nonfinancial incentives, too. Employees who pay into a pension, for instance, may struggle to visualise the funds they need for retirement when that is decades away. Many organisations take a ‘total reward’ approach to how they offer and communicate benefits, where they offer a ‘menu’ of options each year – such as gym membership or cycle-to-work schemes – and employees can view a statement of what they receive. This visibility is crucial in terms of communicating the value of benefits beyond net pay, adds Williams. “There’s a perception that with insurance, for example, the only time you get it is when you’re dead,” he says. “But many suppliers offer extra benefits such as bereavement support or an employee assistance programme. In the current labour market, employees are starting to take in what wider benefits are on offer and once they know what they’ve got, they’re less likely to walk away for a bit more salary.”

For HR and payroll teams, however, all of this adds to the growing complexity of the role and the underlying technology that supports it. “This is not just payroll systems but other systems that form part of HR data workflows such as expenses and benefits platforms,” adds Barnden. Jeff Fox, principal at Aon, says this is because there has been a gradual broadening out of what constitutes reward. “We are seeing a minor revolution in how pay and reward is defined. It is more complex but potentially more meaningful,” he explains. “This could be recognition, wellness, sustainability – the list is long. It challenges the notion of the original definition and makes the reward manager or director’s role more holistic. To communicate the true value of what it means to work at a particular employer, pay and reward teams need to consider elements that are potentially part of the wider employee value proposition.” And with the growing number of apps and systems available in the pay and reward space to help them do this, it’s even more crucial that they integrate tightly with each other to ensure accuracy.

And, as employers in a number of sectors face skills shortages, this ‘employment deal’ becomes increasingly important for attraction, he adds. Reward has become a central part of what it means to work at a particular company, so communications need to be both more transparent and more coordinated. “The employment deal is no longer just pay – it now constitutes an arrangement where the employee can be part of something that makes a difference,” adds Fox. “To avoid fragmentation in the proposition, a reward approach that is integrated can coordinate key messaging, organise communications and deploy relevant technologies to broadcast a clear and joined up story of the employment deal. The current age is defined by volatility – and total reward can take a lead role in helping manage this complexity,” he says. Jeppe Rindom, CEO and co-founder of expense management platform Pleo, sees this taking the form of more autonomy for employees over their entitlements – for example, the ability to invest in equipment for home working without a drawn-out approval process. He says: “If we can foster this kind of autonomy and transparency as the default, we’ll see fewer employees worrying about where they stand or having to dip into their own pockets for work expenses, and therefore far lower levels of stress within the workforce.”

Being able to access pay more flexibly, rather than waiting until the end of the month, is one option for reducing employee stress. This is reflected in the growing use of early wage access apps such as Wagestream, which allow employees access to a proportion of their earned salary before their usual pay date. Employers can set a ceiling percentage for how much staff can access and can also set controls around how often cash can be accessed early. The apps link to companies’ central HR and payroll systems, which can show how many hours have been worked, set how much the employee can draw out early, and ‘balance the books’ in time for the monthly payroll. “Early access to earned wages can stop people getting into debt during pay cycles,” says Peter Briffett, CEO of Wagestream. “There’s a dichotomy that if you’re a low-paid worker you can be seen as high risk by credit card companies, so financial products can end up costing you more than someone who earns a lot.” A study by the company found that stress decreases for 77% of employees who have access to flexible pay options, and budgeting improves for 55%.

If employers want to fully support staff through earned wage access, it’s crucial to offer this as part of broader financial support and education. Looking at usage data anonymously can show trends among particular workers or teams, too, says Ian Hogg, CEO and co-founder of fastPAYE, which offers early wage access to hourly paid workers. “If someone always takes the maximum they can every month, that could highlight a potential financial wellbeing issue,” he says. A number of early wage access tools have links to debt advice charities where employers can fund counselling or access to government benefits calculators, so workers can check if they or a family member could be entitled to state support. “The aim is to spark a conversation, so an employee could talk to a manager about getting more hours or be passed on to an external professional if it’s a difficult issue. Access to money advice articles, budget advice calculators and savings calculators are also useful, although often the people who end up using these tend to be financially savvy already and therefore aren’t the ones who need this support the most.”

Reflecting this, the CIPD’s reward survey found that just over a third (35%) of employers that were making changes to benefits in the past year had adapted their reward strategies to include financial wellbeing. This included alerting employees to financial scams, financial allowances for staff working from home, and early pay access. “This reward strategy also supports an employer’s mission, vision and values, which come together to create the workforce’s resilience and agility,” the research explains. But it also sounds a note caution: “The challenge is that making quick amendments to employee benefits in response to a sudden upheaval in the business environment can potentially weaken workplace culture if these amendments are not appropriately designed or implemented – in which case employers may be put off from making negative changes (such as a benefit cut) unless there is no alternative.”

One of the benefits of early wage access systems is they can show a visible link between wages earned and the work itself, as most tend to offer real-time earnings tracking via an app on employees’ phones. Briffet adds: “This is highly valuable because employees have not typically had access to earnings information in the palm of their hands before. It means they can start making decisions. If they’re likely to go overdrawn they can do an additional shift or decide not to spend that money.” Rindom from Pleo agrees – if employees can avoid having to refer to outdated paper-based processes, contacting shift managers or logging in to multiple systems, this can ease stress and allow them to concentrate on their work. “Employees can track their spending in real time, without worrying about all the hoops they’ll need to jump through to get reimbursements they need for their own financial commitments,” he adds. “It comes down to putting the employee first by empowering their spending experience.”

In the longer term, the engines powering pay and reward in the background will become ever more sophisticated and subject to automation, says Barnden. “The big advances will be oriented towards automation and bulk processing,” she predicts. “This won’t be obvious to employees because they just want to get paid, but we’ll see huge savings in terms of time, money and reduced variation.”


Five key takeaways

  • Remember that the ‘employment deal’ is more than salary: it covers all aspects of benefits and how they align to company values
  • Payroll has become increasingly complex in the past decade or so, meaning systems integration and data cleanliness are crucial
  • Consider early wage access for employees as a way to reduce stress about unexpected expenses
  • Use data from pay and reward systems to inform how to tailor benefits communications and invest in new offerings
  • Financial wellbeing has become a central part of organisations’ overall wellbeing strategies, so ensure employees have access to resources


This is an extract from Good Work, Great Technology: Enabling strategic success through digital tools, published by leading UK HR software provider Ciphr. For more insight into how technology can change work for the better, download the complete book for free, now.