Employers are reviewing their reward policies to make them more strategic and performance related in the wake of the recession, the CIPD’s annual Reward Management survey has found.

Asked their priorities for the coming year, just over half (52 per cent) of the 800 reward professionals surveyed cited the need to align incentives with corporate strategy. Maintaining market competitiveness in reward (51 per cent) came second, while cutting salary costs (44 per cent) dropped down the list, perhaps indicating increased optimism.

Some respondents (53 per cent) predicted that salary spending would increase in 2010, while only 15 per cent expected it to fall.

A greater emphasis on performance-related pay was evident, as respondents predicted that bonuses for top talent would increase. Private-sector employers were most likely to dedicate more of their salary and bonus pots to high performers. Just over a fifth of service industry firms and 17 per cent of manufacturing companies were planning to increase the differential in bonuses between “normal” and “high-performing” employees.

“The results show a distinct shift in approach,” said Charles Cotton, reward adviser at the CIPD. “Employers seem more confident about the economy and, with that in mind, many are going back to the drawing board to revisit their reward strategies. They may be keen to link pay more to performance.”

He said that the rise in the number of firms increasing pay differentials confirmed their desire to ensure that whatever profits they make in 2010, a larger proportion should go to those people who add the most value.

The survey also found that recognition and non-cash incentive schemes had risen sharply in popularity. Just over 40 per cent of employers have recognition programmes such as "employee of the month" schemes – up from 31 per cent last year – while the proportion using non-cash incentives jumped from 17 per cent in 2009 to 30 per cent this year. This was a sign that employers had limited resources to reward staff, Cotton said.