How do reward systems affect payroll proficiency?
In the simplest of payroll scenarios, you pay all your employees the same fixed salary every month, every year. But the reality is often very different as reward systems, including frequency of payment and flexible benefits, exist in many shapes and forms. Needless to say, the reward system an organisation offers heavily impacts its payroll tools, processes and procedures. It is therefore one of the 6 drivers in our 2022 Payroll Proficiency Index.
Scores by country
Extra rewards require extra work
By getting creative with rewards, you can optimise labour costs and personalise remuneration. This, in turn, opens the door to improved employee engagement. The downside: managing a multifaceted reward policy can impact your overall payroll proficiency, as we see in some countries like France and Belgium. After all, every reward component comes with rules and obligations. Companies in these countries therefore often turn to payroll partners for help. They outsource the administrative and legal hassle, and keep the advantages.
Hans Kroese, Managing Director Pointlogic at SD Worx
Reward in the heart of Europe
Ranked from most proficient to least proficient:
Over 45% of British companies claim the available forms of remuneration and their remuneration policy are making payroll (much) easier. Mainly mid-sized companies (250-3,000 employees) seem to praise the positive impact: 60.3%. No other country in our 2022 Payroll Proficiency Index comes close to these figures. Part of the reason is that labour unions don’t really have a firm grip in the UK, as opposed to Belgium and France.
One tricky part to keep in mind, however, are the minimum wage rules. After all deductions, employees have to receive a minimum amount of money, which still causes confusion.
Flexible reward schemes aren’t very popular in the Netherlands. Only 4% of Dutch companies offer a flexible salary to spend on vacation days, insurances, etc. The vast majority pays a fixed salary. That’s because there are hardly any tax benefits for companies wishing to think outside of the box. Their hands are tied. Even more, common perks like bicycle plans are in decline. It takes a reward expert to spot feasible opportunities.
Tip: be wary of the mandatory perks in collective bargaining agreements, such as additional pension funds and insurances for income security in case of illness or death.
Germany’s labour laws are designed to preserve employee rights. With these strict rules and guidelines for employers, employees know what to ask for when they apply for a position. And the package can include a wide variety of bonuses, profit-sharing and incentive schemes. Specific examples are end-of-year bonuses, car and travel allowances, and supplemental pays for weekend work, difficult working circumstances, etc.
Because German companies want maximum control over their payroll, but not always have the necessary in-house expertise, complex reward systems tend to impact payroll proficiency in a negative way.
Belgium has always been one of the countries with the highest salary costs in Europe. That means employers have little bargaining space for extra cash. It also explains why Belgium has that many employee benefits, from stock options to internet subscriptions. Managing them can drastically increase an HR team’s workload since every benefit comes with different rules regarding social contribution.
Over 30% of Belgian companies admit the number of available rewards makes payroll (much) more difficult. To illustrate, that’s more than double the figure in the UK.
As in most countries, bonuses and premiums are quite common, but the overly complex rules around them illustrate the sheer complexity of payroll in France perfectly. Depending on the nature of the sums paid, bonuses and premiums should or should not be taken into account to calculate the compensation for paid leave, sick leave, redundancy, etc. In combination with various other elements, this makes offering an extra to employees a grim prospect.
As is the case for Belgium, French companies heavily rely on payroll partners to figure out all the rules on remuneration in the Labour Code and collective bargaining agreements.