Centre name: ICS Learn

Candidate name: Rianne Lemaitre

CIPD Membership 55487180 ICS student 21046981
Number: number:
Qualification title: Level 7 Advanced Diploma in HR Management
Unit title(s): Reward Management Unit code(s): 7RWM

Assessment number 40572/35

*Online Class Date *Tutor Name Kathy

Daniels

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attended your Online Classroom – all details must be filled in above
before your work will be marked.
1st Submission Date 13/03/2023 Word Count 3295

2nd Submission Date 19/03/2023 Word Count 3240

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A strategic business report on the management of employee
strategies within Day Lewis PLC.

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Executive Summary

Day Lewis is the UK’s & Europe’s largest independent retail pharmacy chain, with a growing
wholesale business for internal distribution and external customers. The company started off as a
small family run business in 1975, and it has now grown into a national corporation with 280+
pharmacies across the UK, 3000 employees, 5 wholesale distribution units, and an annual turnover
over of £240 million. The head office is based in Croydon and currently has 150 employees, and
there is a small support office based in India. The CEO role is now split between the three children of
the late co-founder. The company consists of many long-standing employees, and people really
value the family culture and non-corporate working environment. The company’s core values are to
maintain a caring family culture, be different through innovation and remain independent whilst
continuing to grow. The reward strategies are derived from employee contributions in relation to
length of service, individual and organisational performance, and also employee wellbeing. The
strategies also factor in development-orientated rewards, these tend to be more individually
directed may be offered to recognise employee aspirations to receive learning and development
opportunities, and to gain acknowledgement of outstanding work and build feelings of
accomplishment (Perkins. S, 2016).

Critical Analysis

Reward management needs to match the criteria for judging an organisation as ‘effective’ (that is,
that it achieves a fit between the need for capabilities in co-ordinating and motivating behaviour
matched to economic market demands, on the one hand, and competencies that distinguish the
organisation from its competitors, on the other). Simultaneously, effectiveness implies that reward
management policies and processes are attuned to environmental conditions (contextual influences)
while also retaining a focus on enactment of a specific corporate strategy. In view of this I have
assessed the businesses external reward environment and the various changes likely to occur in the
future and the impact these changes will have on the pay and benefits of the employees, managers,
executives, and recommended internal reward structures that recognise the labour market and
equality restraints.

1. Gender Pay Gap

The continuing gender pay gap in the UK has a major impact on the regulation of reward strategies.
Gender pay refers to the difference between men’s and women’s pay as a percentage of men’s pay.
Walby and Olsen (2002) and Olsen and Walby (2004) identify several reasons for the gender pay gap.
These include: differences in the patterns of male and female employment (that is, differences in the
jobs they do); their previous employment histories; levels of qualifications; and unequal pay where it
exists (that is, the extent to which women are being treated unfairly, and not being paid the same
amount for the same, similar or equal-value jobs). The research identified the most important
factors behind the gender pay gap as discrimination and other factors associated with being female
(29% of the problem) and the years of full-time employment experience (26%). Interruptions to the
labour market owing to family care accounted for 15%, and occupational segregation (that is, the
different patterns of employment for men and women) for 13%.

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Managers

There is currently a gender pay gap concern in our organisation, specifically that women occupy 62%
of the highest paid jobs, but the gap in bonus and hourly pay is only a small percentage higher for
females. The ONS 2022 latest census revealed that the proportions of employees who were high
paid were highest for managerial and professional occupations (49.8% and 50.3% respectively), men
were more likely to be high paid than women (28.0% versus 19.4%) and full-time employees were
more likely to be high paid than part-time employees (27.6% versus 12.6%). Gender pay has an
impact on our maternity leave package, specifically with women returning from MAT leave an opting
to reduce their hours thus having an effect on their pay. Male colleagues in our organisation are
currently only offered 2 weeks statutory paternity leaving, which enables most of them to remain
full time. This issue also influences pay transparency and pay structures within the company. The
Equality Act 2010, states that it is a requirement for pay transparency, which means that it is now
unlawful for an employer to prevent employees discussing whether differences in their pay are due
to protected characteristics. Any employment contract that requires pay secrecy is now
unenforceable. It raises questions to how managers pay is determined and the effectiveness of our
current pay structure in place, as it should be equitable, fair, consistent, and transparent.

Conclusion

The analysis presents the rising concerns of gender pay gap specifically effecting total reward
packages, pay transparency and reward structures. This is an important issue that our company must
look to resolve.

Recommendations

To help address these concerns, we should firstly consider introducing an enhanced shared parental
leave package. The entitlement would be 26 weeks full pay followed by 13 weeks statutory shared
parental pay. The current statutory entitlement is £156.66 per week or 90% of the relevant parents’
normal pay. This will allow those with partners in the company, which there are a good number of,
to give their female spouse the chance to continue working full time. This will also reduce the need
for reduction in hours upon return from MAT leave as the women will be able to share the leave
with their partner. As we are now approaching the new financial year this will have to be
implemented just before the commencing of the next financial year 2024. The second solution
recommended is to implement a broad-band pay structure, this is seen as more flexible in
comparison to other grades as it employees can continue to be rewarded for growth in their role
without necessarily having to be promoted into a higher grade. Such structures also provide
managers with both more flexibility in progressing individual employees through the career
structure and greater discretion in appointment salaries. They have been particularly useful where
performance- or competence-based progression has been adopted as they provide a wide range
within which individual contribution can be recognised (Perkins.S,2016).

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Analysis

2. Employee Financial Wellbeing

A broader view of employee wellbeing continues to rise up the corporate agenda, in particular since
the start of the COVID-19 pandemic. There is also growing interest in the more specific area of
financial wellbeing, but it still remains relatively neglected compared with other aspects of
wellbeing. Before the pandemic, money worries were already a major cause of stress for many
employees. But since the start of the pandemic, financial wellbeing has worsened for many, with
lockdowns negatively affecting many people’s financial security (Rickard.C,2022). Financial wellbeing
is an established area of research that is labelled in various ways, including ‘economic stress’,
‘economic hardship’, ‘economic strain’, ‘economic pressure’, ‘perceived financial wellbeing’,
‘financial satisfaction’ and ‘financial wellness’.

3. National Living Wage/National Minimum Wage

Another growing influence on reward management in the UK, at least for the lowest paid, is the
popularity of the ‘living wage’ concept. Originally a device to encourage employers to voluntarily
adopt rates of pay required to provide a minimum living standard, this campaign has recently seen
robust growth in the number of employers signing up as accredited employers. As the minimum
wage has been increased it has increasingly become the lowest grade rate in many sectors. While at
the start the level of the wage set affected only the very lowest-paid workers, it now has a major
influence on pay levels in many sectors. Many employers do not wish to be seen as minimum wage
employers and hence increase their minimum rates to stay just ahead of the statutory minimum
(Perkins. S, 2016). Asda has recently announced a 10% pay increase for store staff in what it said was
a record investment for the supermarket in its workers. The move will apply to 115,000 hourly-paid
workers, with rates rising to £11.00 per hour from April and £11.11 per hour from July. Asda stressed
the new rates exceeded national living wage and real living wage rates (Quinn.I,2023).

Employees

Day Lewis currently pay the statutory minimum wage and living wage to those eligible in most low-
level roles within the company, with some exceptions to individual cases. With the current financial
wellbeing issues, more employees will be demanding that their pay is increased to the living wage
and potentially higher to the real living wage. Although the employees pay will rise to the new rates
issued by the government taking effect from 1 April 2023, their pension contribution and NI
deductions will now be higher. With the focus of employee wellbeing moving to financial wellbeing,
staff will want to know how their current benefits will support financial well-being issues.

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Conclusion

The analysis shows the impact the living wage has on pay, and how it now ties in with the rising
financial wellbeing issues. It is important that we can tackle the issues within the reward
environment, specifically effecting low-skilled employees.

Recommendations

To help address these concerns, we should firstly consider increasing all employees on minimum
wage to the living wage of £10.42 and those receiving the living wage to the voluntary real living
wage of £10.90 and if they are based in London then £11.95. The reason for this recommendation is
that we need to consider what will motivate the employee, and pay is an important factor for this
case. It was noted that more than 80% of employers believed that the living wage had increased the
quality of the work (Perkins.S,2016). When considering how to motivate employees, Bowey and
Thorpe (2000:81) suggest that to be effective, remuneration systems need to be based on a sound
understanding of how people at work are motivated. It was also argued that the low level of
understanding of how reward systems affect employee behaviour can be blamed on a combination
of factors: the degree of opposition between theoretical positions; conflicting real-life examples of
what seems to work; and poorly disseminated research findings. It is recommended that the rates
are increased before the next pay review in February 2024.

The second solution recommended is to invest in the skillsets of these employees, through further
qualifications and training programmes. The CIPD believes that the long-term answer to low pay is
the improvement of the skills of low-paid workers. It was reported that the lack of pay progression
for the low-paid identifies a number of reasons, including a lack of opportunities to improve skills,
but argues that: ‘Low-paid workers need opportunities to progress to a higher-paying job without
leaving their employer and HR has a role to play in delivering it (CIPD, 2014a). By investing in our
employees’ skills, we will be giving them the opportunity to be promoted to higher paid roles. This
solution also ties in with the human capital theory. The theory emphasizes how education increases
the productivity and efficiency of workers by increasing the level of cognitive stock of economically
productive human capability, which is a product of innate abilities and investment in human beings.
The provision of formal education is seen as an investment in human capital, which proponents of
the theory have considered as equally or even more worthwhile than that of physical capital
(Woodhall, 1997). The cost of this will vary depending on the department, for example a GPhC
accredited Dispensing assistant course for our Pharmacy assistants would cost £150 per individual.

Lastly, we should also consider introducing an employee share ownership scheme in the next
financial year tax year 2024. This will act a collective long-term reward, as the reward will take
longer than 12 months and will be based on organisational performance. The scheme will allow
employees to purchase shares in the company through their own funds. The advantages of such
schemes to employees listed by the CIPD (CIPD, 2007c) include the fact that, as shareholders,
employees will gain a better understanding of the company’s performance and directly benefit from
any success (especially where the shares are provided free). Such schemes also provide a tax-
efficient method of saving and an income from dividends or capital gains if the shares are sold.

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Analysis

4. Executive Pay – Executives

Executive pay is a topic regularly discussed in news outlets, usually with a claim that an executive has
been paid an excessive amount of money. It is argued that executives deserve high levels of pay
because of the type of work that they do and the responsibilities that are associated with this.
However, the financial crisis has put the issue of executive pay under the spotlight, bringing to
prominence the concern that executive compensation arrangements may have contributed to
excessive risk-taking. This sits alongside a longer-standing concern around the increase in the
remuneration of executives relative to other employees. (Lupton et al, 2015: 30). Executive
remuneration practices in these large companies can have a ripple effect across the whole economy,
since smaller companies often use them as a benchmark. When CEOs receive pay packages that the
public considers excessive and which organisations fail to justify, it can undermine trust in business.
Levels of executive pay that are seen as uncalled-for can also damage employee morale and
motivation. When considering approaches to directors’ and other executive-level rewards,
compared with other employee groups, is the relative impact on organisational performance
attributable to executives. Dive (2002) explains that, while all work in organisations will have an
‘operational’ side, towards the top of the hierarchy, the emphasis is on ‘strategic’ action; that is
where discretion over decision-taking and attendant resource allocation is such that attainment of
corporate purpose may be significantly influenced. At executive level the average time necessary to
complete the portfolio of tasks for which the individual is accountable is relatively greater than at
subordinate levels, providing a rationale for performance incentives similarly targeted over the
longer term (Perkins. S, 2016). Gabaix and Landier’s (2008) model is illustrative of the economic
perspective. One of the most predictable in the literature is the fact that firm size rather than
performance is the best predictor of executive pay (Tosi et al 2000). Justifying this link as
economically rational, Gabaix and Landier discussed that the marginal impact of a CEO’s talent
increases with the value of the firm under his or her control. It was argued that talent is worth more
in larger firms, so CEO talent and firm size become positively correlated.

Recommendations

The company should link Executive reward packages to fewer, but more meaningful performance
measures, such as how they manage their money, people, customers and the environment. Much of
the content in remuneration reports explains complex pay packages involving multiple components
each linked to a number of different performance targets. Stakeholders are understandably
interested in how and what Executives are paid, but this complexity makes it harder to discern what
material factors are taken into account when it comes to rewarding Executives and where they are
really adding value. For example, a performance-related cash payment awarded annually (executive
bonus plan), should act as an incentive to achieve short-term performance targets year on year. The
reward should be linked to simple and relevant performance measures within their division. Smaller,
simpler and more immediate bonuses could be both more motivational for Executives and easier to
understand for stakeholders.

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Critical Analysis

Day Lewis is currently going through growth and acquiring more pharmacies nationally, although
there are no plans yet to expand internationally, it is worth considering the impact these
recommendations would have on Expatriate workers on long-term assignment and the issues that
can potentially arise. Expatriate employees are those who work overseas for a significant period of
time. Their packages must reflect any increased costs of living and working overseas, and also
include an incentive to experience considerable disruption to life. The duration of the assignment
will have various implications for the worker. Short-term assignment terms are generally intended to
be less complex, and less expensive, than arrangements applied to long-term expatriation, although
there is evidence that militates against generalising in this regard (Festing and Perkins, 2008). While
those assigned for six months or less tend to receive reduced terms compared with long-term
assignees, for those abroad for between six months and a year (after which long-term assignment
terms generally apply), ‘services, incentives, hardship compensation, housing, transportation,
relocation allowances [and] trips home’ continue to be provided to assignees (ORC, 2006: 12).

We must explore how to best look after expatriates and their families. The move to another country
can present several challenges for expatriates and their families. Expats may experience stress from
separation from friends and family or through the relocation of their family and difficulties this might
cause whilst adjusting to a new country. Some of the other common challenges include finding
accommodation, learning new languages, changes to finances, organising childcare/enrolment into
schools, and arranging health care.

Nazir.T, et al. (2014) suggests another important type of premium is the cost-of-living allowance. It
facilitates the expats to keep up the same standard of living they experience in the home country.
Organisations tend to collect the information of COLA by archetypal customer spending prototype in
a “market basket of goods and services” and by scheming prices in the host country. If a substantial
difference of prices between the home country of expats and the destination country is observed,
companies review their allowances pay period or semi-annually.

A further concern is tax equalisation as it generally accompanies balance sheet expatriate

compensation. What this means is that the value of tax and social insurance contributions the
employee would hypothetically have paid at home is deducted from the home base pay to arrive at
a ‘net’ salary. Allowances and premiums are then added to that amount, and the organisation pays
any tax falling due within host jurisdiction on the compensation package total amount
(Perkin.S,2016). So, where the tax rate is lower than in the UK, in which case the saving is a nice
bonus for the expatriate. Moreover, if low tax means that certain items have to be paid for, the
employer will often reimburse such costs as well. Where the tax rate is higher than in the UK, in
which case the difference in tax paid is reimbursed by the company.

It was previously recommended to introduce a broad-band pay scale to help tackle the gender pay
concerns, but with Expats needing a higher reward package, how will this be justified to the
employees doing the same role at home but now earning less. Also, the recommendation to
introduce an enhanced paternity leave packages, how will we accommodate Expats with families
and spouses that may decide to stay at home whilst they complete the assignment? We must design
a reward package that gives employees an incentive to take on the assignment and shows that we
are accommodating potential issues that may arise.

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Recommendations

To tackle the cost-of-living adjustments it is recommended to use the cafeteria approach. Tropman
(2000) remarks that in cafeteria plan employees have to choose between two or more incentives
(flexible benefits) comprised of qualified and cash benefits. This approach lets the permits the
expatriates to tailor their benefits as per their own requirements. From a group of available
allowances and benefits such as accommodation, transport, displacement, relocation and education,
insurance, pet management, security, etc. expatriates can be asked to select any permissible
number of benefits like 5 out of given 10 or 8 out of 10 etc. which are useful for them.

It is also recommended that the Expatriates have access to the Employee Assistance Programme
whilst overseas. This benefit is currently available to our home-based employees, and provides a
24/7 confidential professional counselling via telephone, email or online chat. This will provide
support to those employees that are separated from their families or experiencing difficulties
settling into the new environment etc.

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References

BOWEY, A. and THORPE, R. (2000)

Motivation and reward. In: THORPE, R. and HOMAN, G. (eds) Strategic Reward Systems. London: FT-
Prentice Hall.

CIPD (2007c)
Employee Share Ownership. Factsheet.
London: Chartered Institute of Personnel and Development.

CIPD (2014b)
Tackling Low Pay: A CIPD member consultation. March.
London: Chartered Institute of Personnel and Development.

CIPD, 2021
Financial Wellbeing An evidence review, What is financial wellbeing.
London: Chartered Institute of Personnel and Development.

DIVE, B. (2002)
The Healthy Organization: A revolutionary approach to people and management. London: Kogan
Page.

GABAIX, X. and LANDIER, A.(2008)

Why has CEO pay increased so much?
Quarterly Journal of Economics, Vol 123, No 1.pp49–100.

LUPTON, B., ROWE, A. and WHITTLE, R. (2015)

Show me the money! The behavioural science of reward. Research Report.
London: Chartered Institute of Personnel and Development.

Nazir, T.; Shah, S.F.H.; Zaman, K. (2012).

Literature review on total rewards, An international perspective.
African Journal of Business Management

OLSEN, W.K. and WALBY, S. (2004)

Modelling Gender Pay Gaps. Manchester: Equal Opportunities Commission.

Perkins, S. (2016).
Reward Management. 3rd edition
Chapter 1, Introducing the Reward Management System, 1.1 Locating Ideas and Practices Around
Reward Management

Perkins, S. (2016).
Reward Management. 3rd edition
Chapter 1, Introducing the Reward Management System, 1.2 Reward and the Employer-Employee
Relationship

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Perkins, S. (2016).
Reward Management. 3rd edition
Chapter 3 The Legal, Employment Relations and Marker Context, 3.4.2 The National Minimum Wage

Perkins, S. (2016).
Reward Management. 3rd edition
Chapter 11 International Reward Management, 11.10 Accounting For Expatriation Reward
Management

Psacharopoulos, G. & Woodhall, M. (1997)

Education for Development: An Analysis of Investment Choice.
New York: Oxford University Press.

Quinn,I. (2023)
The Grocer
Asda moves from bottom of supermarket pay league with 10% increase
https://www.thegrocer.co.uk/asda/asda-moves-from-bottom-to-top-of-supermarket-pay-league-
with-10-increase/676467.article#:~:text=Asda%20has%20announced%20a%2010,of
%20%C2%A310.10%20per%20hour.
Last accessed: 17 March 2023

Rickard, C. (2022)
Employee financial wellbeing: A practical guide. London: Chartered Institute of Personnel and
Development. 2. What is employee financial well-bein

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The Compensation Solution: How to Develop an Employee-Driven Rewards System

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https://www.cipd.co.uk/news-views/viewpoint/executive-pay#gref
Last accessed: 18th March 2023

CIPD,2019
Executive pay in the FTSE 100
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Perkins, S. (2016).
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Cambridge University Press.

Appendix

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 SWOT Analysis

Strength

NLW and NMW rising, giving low-skilled employees a higher rate.

Weakness

There is currently a gender pay gap within the company.

Opportunity

The opportunity to explore other executive reward structures to justify pay.

Threat

Employee financial well-being issues rising due to the current cost of living concerns.

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