Out of cycle pay awards
We continue to track the impact of out of cycle pay awards on pay decisions. While organisations give an ‘official figure’ for their pay awards, we have reflected how out of cycle awards (ad hoc increases that specifically exclude increases in pay to accommodate promotions) can account for up to an additional one per cent of the pay bill. This undermines the integrity of the pay budgets set by remuneration committees and designed to uphold a fair system of pay.
These types of pay awards can be awarded when employers wish to bridge the gap between constrained pay awards and wider market pressures. They can also be awarded to retain top talent, as a retention tool. In our upcoming spring 2024 UK Reward Management Survey report, we will explore how employers are increasingly focusing on performance and productivity when making pay decisions, reflecting an emphasis on rewarding high performing employees. This will raise challenges around how these decisions will be reached in a consistent and objective way.
The pay review process
The emerging results of our spring 2024 UK Reward Management survey reveal that pay benchmarking and reviewing the whole process around making pay decisions will be crucial to attract and retain the right talent in organisations in the year ahead. Ensuring that pay parity operates across the structure of the organisation is crucial to taking pay off the table as an issue.
According to author Dan Pink, while money is not a motivator in itself, it can actively demotivate people if they feel affected by decisions that are unfair and ad hoc. By ensuring that an objective framework is being upheld and adhered to, employees can be assured that pay decisions are accurate and evidence-based, enabling them to focus on the wider value they derive from work.
Communication is key
While senior leadership sets the tone in communicating the drivers behind pay decisions and outlining the approach to pay and benefits for the year ahead, clear communication needs to be available from all leaders. From team leads to line managers, everyone must clearly understand the approach and the factors driving pay decisions across the organisation.
Where employers are being innovative in what they offer beyond pay – from values-led benefits including volunteering days, to greater opportunities for learning and development that enhance peoples’ experiences to career mapping, and visibility of how to progress – this needs to be clearly outlined to everyone. Opportunities at organisations excite and unite, so taking the time to explain this clearly and consistently can help to drive down employee turnover and increase buy-in behind the vision and future of the business.
Get in touch
Our spring 2024 UK Reward Management Survey will soon be closing. In return for 15 minutes of your time to complete the questions, we will send you a free copy of the report outlining the results, particularly around pay and bonus trends. Participate here.
While we understand that some of the information that we ask for may be confidential and commercially sensitive, we will never share this information with anyone else. The summary report of the results makes it impossible to identify answers, so have your say today.
