From ESG reporting demands to crypto-payments and some major tech moves, there will be no shortage of things keeping HR leaders on their toes in the year ahead. KPMG in the UK’s Tim Payne, Partner, FS People Consulting, and Eloise Knapton, Partner, Employer Reward Services, make some predictions about what is to come – which they will return to and see what they get right as the year unfolds.
Diversity and Inclusion (D&I) reporting will be in demand
Tim: Eloise, shall we dive right in? I think the topic at the top of the CHRO’s inbox in 2022 will be D&I. I can see regulators such as the FCA and investors across many sectors turning up the heat on the ‘S’ in ESG. This means we’ll see increased expectations on HR functions in D&I. A small number of UK-listed businesses have already set targets for Black Heritage leaders, although there is no consistent basis for these targets through which they can be compared. Pressure will increase to report on Inclusion Culture, wage rates throughout the supply chain, and overall employee spend. How businesses choose to interpret and operationalise Inclusion Culture will be a lively boardroom topic.
Eloise: I agree. I think we will see a suite of reporting measures appear, getting at ‘Are you a responsible employer?’, particularly to do with fair pay. The question to ask will be, ‘How comfortable are you that you’re paying your workforce appropriately?’ Many organisations are reporting on various metrics such as wage rates across their employee populations, enhanced gender pay reporting, ethnicity pay gaps and, for the first time, social class pay gaps. I predict that this year, unfortunately, ethnicity pay gap reporting still won’t get the attention that it should, with no draft regulations becoming available.
Climate measures will hit the C-Suite
Tim: Moving onto our next prediction, I think that one thing is for sure – after COP 26, the pressure on businesses to play a role in the journey to Net Zero is huge. A key way to change organisational behaviour to be more climate focused is to incentivise your CEO. This means climate-related incentives are something that we will start to see even more of in 2022.
In fact, I predict that there will be at least one significant vote (at least 20 percent against) on CEO pay because the carbon reduction incentive criteria proposed are not sufficiently robust.
Eloise: Yes, climate is heading in a similar direction to D&I in terms of growing expectations from investors, regulators, auditors and other stakeholders when it comes to activity and reporting. KPMG research around the FTSE 100 and FTSE 250 shows an increased number of firms incorporating very specific ESG measures into bonus plans and LTIPS.
Beyond the C-Suite, HR leaders will increasingly need to support the company’s move towards Net Zero, in particular, making the workplace more attractive to employees interested in climate issues. They can look at the benefits that they offer, considering factors such as green company car fleets, or incentivising cycling to work, as well as broader cultural, communication and engagement programme opportunities.
Supply chain governance will be scrutinised
Eloise: A third part of the ESG agenda is the ‘G’, governance, and HR will have more responsibility to understand the conditions of people in the organisation, but also throughout their supply chain.
In 2022, HR will need a closer understanding of how outsourcing arrangements work in practice and have appropriate governance frameworks over those, especially if you're working with multiple complex labour supply chains.
HR will need to know what is happening at each step of that supply chain, and not only that it meets compliance regulations, but also that it aligns with the company’s corporate principles. A tricky ask, especially if outsourcing arrangements have typically been managed outside of the HR function.
Scrutiny on this will continue to grow, increased by the government call for evidence on the role of umbrella companies in the labour market, high profile press coverage of working conditions throughout supply chains, and increased employee whistle blowing.
I predict an increase in HR’s remit over individuals working further down the labour supply chain and an expansion of ‘obligations’ to this workforce.
Cryptocurrency will be paid as an alternative to equity
Tim: The world seemed to go crazy for crypto in 2021, and I’m wondering how this will affect compensation strategies. There are already some limited examples of compensating workers in cryptocurrency, although mostly in areas such as sport.
In 2022, I’m sticking my neck out and predicting that we will see a major organisation in the UK offer cryptocurrency as an alternative to equity for long-term incentivisation.
Eloise: Well, we’ll see about that – I’m not so sure. It’s obviously a hugely complicated area, with both upside and downside risks. Are you ready to be paid in Bitcoin this year?