For many who faced having their bonus cancelled over 2020, this was another income stream cancelled for the year. Even for those employees who still achieved the set criteria and targets to qualify for a bonus based on their 2019 performance, to be paid in 2020, they faced widespread cancellation. Predictions by Robert Walters in January reflected the impact of the third lockdown – just five per cent of the employees polled expected to get their bonus this year. 71 per cent of employers planned to determine their bonuses based on company profit and revenue.
For others, they are trying to identify how best to reward employees in sectors that have thrived over the pandemic. Ernst & Young are giving thousands of UK-based staff a share of its £20m bonus pot after its revenues rose during the pandemic and in recognition of the emotional toll on people during this period. Glencore has become a recent example of how pay packages must be equitable across the whole organisation, as it suffered a significant shareholder revolt over the pay and bonus package for its new chief executive. Critics have said it is excessive and over a quarter of shareholders voted against the remuneration policy.
Factors that will shape pay over 2021
1. Sector variations
The picture of pay will certainly be defined by the type of sector the organisation operates in. Some sectors have thrived whilst others have been relegated altogether in the cycles of lockdowns, particularly the hospitality and aviation sectors.
This will be a key factor shaping awards for this year. For those who received an award last year, these would have been on the upward trend and quite generous for some. For those who operated a pay freeze, employers will have to make the call as to whether they are happy to have two years of no increases being awarded. Where it is affordable, we expect employers will continue to recognise the economic uncertainty and tough conditions employees have faced over the past year of lockdowns.
2. Diversity and inclusion
With single parents more likely to have been furloughed than parents in couples (according to the Gingerbread charity), it is critical that diversity, equality and inclusion is at the forefront of priorities in the anticipated buoyant labour market as restrictions start to ease. The disproportionate impact on women during the pandemic has exacerbated the gender pay gap so the resumption of reporting due by October 2021 will help to refocus efforts on closing the gap.
3. Hybrid working
The remote working shift means that location may no longer be a key factor for certain roles. New technology and established virtual ways of working is benefitting workers who do not have to pay for their costly commute, enabling a greater work life balance. This may lead to long-term impacts on pay whereby pay premiums demanded by City-based roles are no longer required. An equilibrium between costs may be eventually reached between employers and employees which shapes pay awards.
4. Bridging the gap
Over the last couple of years, out of cycle pay awards are an average 1.5 per cent on top of pay review figures. Some organisations use these to supplement flat wage growth. Last year, out of cycle awards dipped to 0.5 per cent, the lowest average out of cycle pay figure recorded in recent years. Some of this is because employees have been less confident to negotiate with employers during the pandemic, in light of job security and widespread redundancies. Figures emerging from our spring UK Reward Management Survey , show that these figures have started to rebound, amounting to a one per cent additional increase for employees. This may well increase over the next six months, coinciding with an economic recovery.
Read more about the full pay outlook and labour statistics captured in our PAYstats May 2021 edition.
Get in touch
Call us to discuss any challenges you’re facing when it comes to setting the right level of remuneration and incentives across your business as the restrictions start to ease. How are you balancing pay between those who remain working from home and those in the workplce or is there no differentiation? We would love to hear your experience and how you are leading your workforce through the gradual easing of lockdown.
You could also contribute your views to our UK Reward Management Survey which is live until the end of the month. In return for 10-15 minutes of your time, we will send you a copy of the full report setting out the results and trends for HR in 2021.