New Collective Labour Agreement and Reward Policy at IKEA

HR managers share experiences about decoupling assessment and reward during a roundtable discussion at BexerHamstra (now Highberg). Discover the challenges and solutions for effective performance management.Strengthening company culture and encouraging employee development are the objectives of IKEA Netherlands' new remuneration policy. “We want to be able to reward development more easily, with a fair and competitive pay structure,” says country total rewards manager Jessica Samrén.

The old reward methodology left much to be desired, adds colleague Kim van der Hoeven. She is country employee experience manager at IKEA Netherlands. 'Some of it was performance-based, but in practice there was not enough differentiation in pay.' It started last year with a new job evaluation system, whose systematics are more transparent and explainable, according to colleagues. The next step will be to introduce three salary zones within one scale. Those zones are linked to the development and experience the employee brings to the position. 'We are now paving the way for more focus on skills,' Samrén said. Another nice thing is that the zones support growth within a scale, Van der Hoeven believes. 'The first step is the biggest in this regard, since the learning curve is steeper for people with less experience.'

The process was constructive, they note. Last year, a working group was formed with representatives from the business, the headquarters, and trade unions.
"The plans were quite complex," says Samrén, "but we were able to explain step-by-step how this new model really fits IKEA."

Involving the unions from the very beginning was innovative, says Van der Hoeven:
"We invested heavily in the relationship and mutual trust. We involved the unions in every idea. We really arrived at this outcome together. That takes courage, because these are sensitive topics. We’re proud of that co-creation."

While the new reward policy is a lasting change, wage increases are an annual topic—and this year’s increase drew attention too, and rightfully so. Employees of IKEA B.V. will receive a minimum 13% wage increase next year, with lower pay grades seeing an even higher percentage.

As of January 2023, the legal minimum wage will already rise by over 10%, and from March, IKEA B.V. will eliminate youth wage scales for employees aged 18 and over.

"From our fair wage perspective, we find that inequality unacceptable," says Van der Hoeven. "We want to fairly reward people for doing the same work." Samrén adds that even employees under 21 should be able to support themselves financially. The increase in the minimum wage, she says, rightly provides greater income security.

"So our new CLA is definitely not one-size-fits-all. The combination of different reward components leads to varied outcomes. We had to carefully assess internal balance within the pay structure."

IKEA is focusing primarily on base pay. "IKEA has strong values, that’s our strength," says Van der Hoeven. Fair wage is a key priority, meaning an income one can live on decently. "We want sustainable and fair compensation in all countries, which mainly means investing in base pay."

There are no individual bonus systems at IKEA. Only collective bonuses are awarded—and then everyone receives them, regardless of their role or pay grade.

From next year, the bonuses for evening and weekend work will be reduced.
"Such variable income is an uncertain factor for employees," says Samrén. "They experienced that during COVID, when those bonuses disappeared. Plus, you can’t buy a house with bonuses or build up a pension from them. To reduce dependency on that variable part, we’re now investing significantly in base s

The CLA negotiations involved more people than the working group for the new reward policy.
"So we had to align even more people on content, which was quite complex," says Van der Hoeven. Sidney Fiegen from Highberg, who also advised on the salary structure design, provided support. He managed to simplify the subject matter and make the technical aspects understandable for everyone at the table.

"The unions had a clear overview of the facts and figures thanks to him. That support was incredibly helpful. When an expert third party presents the numbers and provides explanations, it helps build trust among all parties," says Samrén.

According to the two colleagues, both the CLA agreements and the new reward policy are “very much IKEA.” Throughout the process, they worked closely with headquarters in Sweden. "Where possible, we follow global policy and then fine-tune it for local markets," Samrén explains. "With what we’ve developed now, we as an organisation can reward even better, in line with the development of our employees."