Managing time spent on administrative rewards tasks

Rewards management can be undoubtedly complex; often demanding administration of multiple pay plans with different modes of delivery for varying employee categories. In a bid to enhance the value proposition attached to pay, companies adopt different approaches to matching pay items to employee preferences. This varied approach potentially leaves the Rewards Manager with a bouquet of items to manage. The accompanying administrative tasks for monitoring, computing and delivering pay items as accurately as possible, according to each employee’s preference or entitlement, can be time-consuming. While there may be value in adopting a flexible approach to enhancing a company’s value proposition, the Rewards Manager, a strategic partner to the organization, needs to strike a balance. The Rewards Manager needs to consider the impact of the underlying administrative tasks that can limit the time intended for strategic support to the business.

In Nigeria, pay is typically split into numerous allowances, because of the historical need to take advantage of the various tax reliefs under the Personal Income Tax Act (PITA), Cap P8, Laws of the Federation of Nigeria, 2004. However, subsequent to the amendment of the PITA in 2011, most of the hitherto numerous reliefs available under the old law for different pay items have been rolled into a single consolidated relief, computed as a percentage of the total income.

Despite this amendment, there are still have multiple pay items due to the need to manage exposure to the mandatory pension, medical and national housing contribution requirements; deliver both monthly and lump sum payments; employees union and collective bargaining agreements; etc. All these, combined with the timing of making payments, benefits management and liaison with vendors, increase the administrative burden of managing rewards. This burden can indeed be enormous and may require, for effective management, large consuming modules on the Enterprise Resource Planning (ERP) Systems, thereby driving up HR cost.

In order to focus on more strategic contributions to the business and cut down on administrative tasks associated with managing myriads of rewards elements, the Rewards Manager can leverage on the following tips:

1. Adopting a Defined Pay Structure: It is difficult to efficiently administer a company’s compensation program, without a well-defined pay structure or if there is no harmonized approach to managing pay elements, including limiting the number of departments responsible for administration or delivery of different items. Adopting a pay structure that outlines pay ranges attributable to specific jobs / grades and the proportion of each element to total pay can contribute immensely to efficient pay management.

2. Adopt a Clean Wage System: Given that there is virtually no tax advantage in having multiplicity of allowances/pay items, reducing the fragmentation of pay can help minimize the time spent on negotiating pay. Also, a clean wage system can help reduce the time for review and administration of pay. However, the buy-in of employees, employees Union or subsisting collective bargaining agreement should be considered in the adoption of a clean wage system.

3. Adopt a Uniform Timing for Making All Lump Sum Payments: Lump sum payments, such as Leave Allowance, Car Allowance and 13^th Month Allowance enable employees plan and align major personal expenses with the underlying cash flow. However, some of these payments tend to be delivered in an individualized manner. For instance, paying leave allowance when the employee proceeds on leave or car allowance on the joining anniversary of employees. Such varied timing for payments can constitute additional administrative burden on the Rewards Manager, coupled with the volume of employee clarifications typically associated with the payments. To enhance efficiency, pay items can be delivered uniformly throughout the year, as much as possible. Leave Allowance, for example, can be paid to all employees once a year, regardless of the time when employees proceed on leave. Also, rather than tie payments like car allowance to employment anniversary, the company can choose specific times in the year for the payment.

4. Monetizing Benefits – Following the Federal Government’s adoption of the Automotive Policy and depreciation of the naira, the cost of providing benefits, such as status cars, generator sets, mobile telephones etc. has significantly escalated. As a result, many companies have adopted monetization of benefits as a way of limiting their exposure to the escalating cost, reducing the associated administrative burden and offering employees flexibility in choosing what to spend their money on. Such a company does not have to worry about disposing or recovering assets such as status cars or generating set, upon the exit of an employee. Also, monetizing benefits can help reduce the employer’s exposure to employee indebtedness which can be time consuming and difficult to track.

5. Leveraging a Robust ERP System – ERP systems are tools that allow organizations integrate various functions, processes, information, procedures and inter-relationships between functions in order to facilitate effective planning, control and reporting. ERP systems are attractive because of their role in automating repetitive and manual processes. Leveraging ERP can, therefore, potentially save the Rewards Manager material time to focus on his/her strategic functions. Overall, if well planned and utilized, the benefit of investing in ERP systems should far outweigh the associated costs.

6. Maintain a Frequently Asked Questions (FAQ) page on the Company’s Intranet – This can reduce the frequency of employees’ enquiries, since the FAQ page provides some vital information upfront for referencing anytime. However, for the FAQs to be effective, they must be carefully designed to address the typical questions and pain points of employees, and should constantly be updated to ensure they remain relevant and aligned with current programs and circumstances.

7. Develop policies for Administering Rewards Elements- Policies provide clear direction to the Rewards Manager and all stakeholders, and allow for consistency in decisions regarding pay administration. They can also promote transparency and fairness, as well as shield the company from unnecessary dispute/litigation. The Rewards Manager or his team is saved the need to clarify or provide information to different people at different times, if there is a clear policy on the underlying pay item or practice.

The suggestions outlined above are not exhaustive. However, they will greatly help the Rewards Manager to cut down on administrative tasks associated with managing myriads of reward elements; thereby providing the opportunity for the Rewards Manager to focus on more strategic matters affecting the business. It may also be advisable for the Rewards Manager to join a Compensation Club to benefit from the experience and insights that may be shared by other rewards professionals.

Rewards is a strategic lever for an organization seeking to attract, motivate and retain key talent for achieving business objectives. It is, therefore, important for the Rewards Manager to consciously balance the need to administer a bouquet of benefits that offer some flexibility, while focusing on strategic functions that deliver value to the business. Every organization needs to review their practices to identify areas that require improvement in administration and implementation to enhance efficiency, transparency and consistency.