After several years of low or no pay rises, employers are coming under pressure to offer more. Now is the time to rethink your reward strategy
The recession played havoc with employers’ carefully crafted reward schemes. Many organisations were forced to impose pay cuts and freezes and reduce working hours. Add to this rising inflation through 2010 and 2011 and the result last year was a 3.5 per cent drop in household earnings. According to the Institute of Fiscal Studies, the UK is experiencing the biggest drop in living standards for 30 years.
Employers should be concerned because this year they are likely to come under pressure to do something more. Figures from the Chartered Institute of Personnel and Development earlier this year showed that only 9 per cent of private sector employers planned a pay freeze in 2012 and 35 per cent intended to put pay up. A further 55 per cent had yet to decide.
There is little sign that employers will have more money to spend on higher pay. The government is predicting that the economy will grow by a meagre 0.8 per cent this year and the Euro crisis could throw those figures, as it did last year.
Business Reporter argues that it is therefore high time businesses started looking at pay and reward systems in the round. The biggest mistake senior managers often make when dealing with employee reward is the belief that it’s just a technical HR issue. It isn’t. As several of the articles in this supplement show, how you reward people – and who you reward – is central to any talent plan and should be a boardroom issue.
Reward is about much more than the pay cheque at the end of the month. As Nick Martindale shows on p8, employers could be managing their pay bill far more creatively to engage and motivate their people.
We also take the opportunity to explode some of the myths around pay. Stephen Overell takes a look at the global market for chief executives (page 9), which boards use as an excuse for hiking up their CEO’s pay. But does it really exist for most firms?
Meanwhile, don’t make the mistake of thinking your sales team are only interested in cash. They are the men and women who will (or perhaps won’t) keep the business going through the downturn but, as Marc Beishon writes (page 9), the evidence suggests that like many of us they want to feel valued as much as rewarded.
We also dig deeper into the government’s call for localised public sector pay (p11). The private sector should be wary of buying into the idea that a public sector pay premium is preventing them from competing for the best people.
But what shines out in all our articles, both through the businesses we have interviewed and the data we are quoting, is the issue of fairness in reward. Of course, we’d all like to earn an extra few hundred quid each month but most of all, it seems we want to feel that we have been rewarded fairly – whether that is related to individual performance, the success of the organisation, or the market. It is by ensuring their people feel fairly paid that firms will get the extra effort at a time when it really counts.