What to do if Brexit and market volatility are impacting your rewards and talent

NOVEMBER 2016

What to do if Brexit and market volatility are impacting

your rewards and talent

© 2016 Willis Towers Watson. All rights reserved.

Richard Veal and Tamsin Sridhara

In July clients told us that talent issues had become more important

© 2016 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 2

Source: WTW Brexit Compass Survey (July 2016)

Don’t know and not applicable responses removed

Which people issues have become more a priority as a consequence of Brexit

(% of respondent companies)

Workforce & Talent

75%

Total Rewards

49%

Engagement &

Communications

49%

Clients’ exposure varies significantly by sector and by company


Source: Oxford Migration Watch based on ONS Labour Force Survey Q1-Q4 2014

Four of top 10 sectors by share of workforce, % migrant

ACCOMMODATION

27% 27%

FOOD &

BEVERAGE

22%

SCIENTIFIC

R&D

21%

COMPUTER

PROGRAMMING

Company’s choice

Since July its market volatility that is causing the immediate issues


UNKNOWN

₤

Limit movement orSterling

FTSE Protect freedom to

trade?

Business as usual

Change course

KNOWN

Market Volatility

Brexit terms

Question 1: Have Rewards issues become more pressing?


Source: WTW Brexit Compass Survey (July 2016)

Don’t know and not applicable responses removed

Which people issues have become more a priority as a consequence of Brexit (% of respondent companies)

Workforce & Talent

75%

Total Rewards

49%

Engagement &

Communications

49%

The immediate Rewards issues we are hearing


1. In-flight incentives 2. 2017 targets &

objectives

4. Pension funding 3. 2017 budget planning

Market

Volatility

Question 2: What are you doing about your 2016 and 2017 incentives?


2016 Bonus

Source: WTW 2016 Incentives Pulse Survey October 2016

50%

Results of WTW Incentives & Currency Flash Survey

50%

General Approach

Currency neutral

appropriate for all or

some financial

measures

27%

Management fully

accountable

for results (incl

currency)

Currency neutral

for at least one

significant financial

measure

27%

No adjustments

to measures, funding

or pay outs for

currency fluctuations

Talent issues


1. Expatriates

2. Mobility

4. Sourcing talent

3. Retaining critical

skill groups

Today

Tomorrow

Who are our EU nationals?

How critical are they?

What is our exposure - today and

tomorrow?

How do we mitigate?

Adjusting salary and COLA

Relocation, retention

& recruitment issues

Talent issues


Who are our EU nationals?

How critical are they?

What is our exposure - today and

tomorrow?

How do we mitigate?

Adjusting salary and COLA

Relocation and recruitment issues

Question 4: how far have you reached in answering these questions?

Question 3: how are you dealing

with expat/ non-UK issues?

Summary


Expatriates

Mobility

Sourcing talent

Retaining critical skill groups

Today Tomorrow

In-flight incentives

2017 targets & objectives

Pension funding

2017 budget planning

Employee Engagement and Communication

Pension funding


Increase in

pension costs

PENSION FUNDING COSTS

0% 30%+

DC only, or well-hedged

DB with no future serviceDB only, minimal hedging &

continued future accrual

Turning to Talent

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Scenario Politics Economics UK economic impact

1. Good Brexit /

Renegotiation

Swift Brexit or Brexit avoided

No political implications for UK

or Eurozone

Trade under EFTA type arrangement (or EU)

Near-term uncertainty reduces investment

Longer-term impact is minimal

Modest:

1.5% lower GDP over 5

years

2. Central Bumpy road to Brexit

Scottish referendum

Calls for EZ referenda

EUCU type trade deal struck after 5 years

Business investment, hiring and asset prices

weak

Monetary stimulus and fiscal “easing” helps

Moderate:

2.5% lower GDP over 5

years

3. Bad Brexit Swift but acrimonious Brexit

Scottish referendum to leave

Additional referenda in EZ

Trade with EU under WTO terms

Sharply lower investment and house prices

Unemployment undermines real income

growth

Fiscal and monetary stimuli ineffectual

Severe: 5% lower GDP

over 5 years

4. EZ break up Swift but acrimonious Brexit

Very high political contagion to

EZ

Key EZ member votes to leave

Very large investment and consumption

shock, more severe than GFC

Deep global recession, sharply higher

unemployment

Fiscal and monetary stimuli ineffectual

Extreme: 7.5% lower GDP

over 5 years

Willis Towers Watson Brexit Scenarios

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Speaker details

Richard VealUK Line of Business Leader, Talent and Rewards

Phone: +44 (0) 17 3727 4634

[email protected]

Tamsin SridharaDirector, Talent and Rewards

Phone: +44 (0) 20 7170 2914

[email protected]

What to do if Brexit and market volatility are impacting your rewards and talent

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