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Salary growth remains positive – pay increases vary by sector

Across all sectors, 2018 had predominantly resulted in pay increases that just tracked above inflation. A three per cent increase in pay awards is more common than it has been over the last decade, particularly for Construction (Civil Engineering and Building), Facilities Management (and Mechanical and Electrical) sector employers. The HR groups comprised of those in the top 30 largest employers in the sector and no one had frozen pay.

Whilst Associations and Institutes, which includes Chartered Institutes and Royal Colleges, experienced relatively flat pay inflation in the sector between 2014 and 2016, pay increased at a higher rate from 2016 onwards and has remained around 2.5% for 2018. Only one employer had frozen pay whilst IT (including Digital Marketing) and Technical roles in this sector often had the highest pay pressures.

The Property Management and Construction Consulting sector attracts some of the highest pay awards (typically between 2.5% and 4%) and 2018 has seen an increase since last year. When we excluded new starters and leavers, those left who worked in the same role showed a pay increase of 6% in the last 12 months, with Project Management, Quantity Surveyor and Building Surveyor roles showing the largest year-on-year increases. Attendees do expect the pressures to lessen next year. Similarly, after relatively limited pay increases between 2014 and 2016, pay in the Construction sector has increased up to 4% in the last 12 months (when new starters and leavers were excluded from the data), with commercial roles including Quantity Surveyors showing the largest year-on-year increases.

Facilities Management also reported higher pay settlements than last year based on year-on-year movements. Increases in the National Living Wage and pressures from customers to pay a higher award have contributed to levels reaching 4% over the last 12 months. Operations managers, specialist engineers and quantity surveyors showed the largest year-on-year increases.

Out of cycle pay and its impact on pay budgets

Anecdotally, we continue to receive reports that out of cycle increases are a prevalent practice in some sectors and their amount is not negligible. In the Property Consulting sector, employers tell us that out of cycle pay increases are high, which is hampering employers’ ability to manage their payroll costs. Similarly, Construction employers reported that out of cycle pay increases can add as much as 1% to 3% to the pay bill. Whilst out of cycle pay increases added 1% to 2.5% to the pay bill in the Facilities Management sector; promotions were a key driver for this. On the other hand, budget constraints mean that levels of out of cycle pay awards in Associations and Institutes are uncommon.

Awards champion high-performing individuals

Against the backdrop of a UK skills shortage which is particularly acute in the Construction, Facilities Management and Property Consulting sectors, employers strongly target high performing individuals in their reward strategies. Facilities Management and Construction then focused on areas that have scarce resources, whilst Property Consulting employers focused on key skills. The gender pay gap is also driving the focus on internal relativities for Facilities Management.

For some organisations, factors that drive the reward strategy can be historic. Awards for Associates and Institutes are largely driven by internal relativities (which is largely historic rather than being an effect of Gender Pay Reporting, especially as most organisations in this sector do not meet the threshold for reporting, having less than 250 employees) combined with a strong focus on the external market. Employers are increasingly looking at individual performance as they have to balance the commercial realities of paying the bills with servicing their members’ needs. Despite this, most organisations in the Associations and Institutes sector currently offer an across-the-board increase rather than differentiate by individual employee, which is generally much more common in the private sector.

Recruitment and retention remains a key focus

Significant recruitment and retention challenges were present in the Construction and Property Consulting sectors this year. Whilst Construction employers estimated that this will be marginally worse next year, a number of Property Consulting employers estimated that these challenges will reduce next year. One of the main reasons identified for this is Brexit. The uncertainty generated by the ongoing negotiations has encouraged people to ‘stay put’ for the time being, which is similar to the situation at the height of the recession.

Geographical considerations did feature in some sectors – particularly Associations and Institutes where many organisations are based in London. They are competing from a wider labour pool for both their support and their specialist roles. This increases the impetus on recruitment and retention in this sector. Overall, recruitment and retention difficulties for Associates and Institutes are relatively low, with some exceptions including those undergoing cultural changes including a re-brand which affects employee engagement.

A creative approach to benefits is key to recruitment and retention

Recognition schemes are increasingly seen as important, even in sectors where financial benefits have been valued for years – such as Construction and Property Consulting’s traditional emphasis on cash, base salary and allowances. Almost everyone in these sectors had reviewed their benefits. Whilst cars and car allowances are still a key benefit for some in the Construction sector, employers take different approaches. Some have stopped providing cars whilst others are expanding the car makes and models offered. All organisations agree that the graduates market remains very competitive and that they need to ensure their reward packages remain competitive.

Everyone in the Associations and Institutes sector had reviewed their benefits in the last 12 months, often looking for new and innovative benefits for their people at little cost to the organisation. The vast majority of employers in the Facilities Management sector had reviewed their benefits, though much of this has been to review their providers. Employers in this sector did raise the challenge they face in how to manage and reward employees’ travel time between different sites and how they judged the time it would take for employees to travel to the site from home.

Flexible benefits, covering recognition schemes, flexible working and financial wellbeing are current hot HR topics. Increased awareness around the importance of mental health has led to Mental Health First Aiders being trained, particularly for site-based staff in the Property Consulting sector. The whole reward package has increased in importance over the past few years with a trend towards flex-pots – giving employees a greater choice of reward package. This may be linked to the increasing number of generations that workforces have to cater for who all present their own engagement challenges.

The next round of gender reporting deadlines looms

All sectors agree that the gender pay gap will remain on companies’ agendas and discussed the government’s advice to employers on how to reduce their pay gap. Many employers are in the process of preparing and analysing their figures ahead of next April’s deadline. Published figures within the Facilities Management sector vary significantly due to the types of contract/work covered so whilst some organisations have high figures, others have negative figures. Overall, females are still in the minority for this sector, though perhaps unsurprisingly Facilities Management has a larger female representation (39%) than Mechanical and Engineering (8%) which is traditionally a male-dominated industry.

For the Property Consulting sector, female representation is still below a quarter. Representation is much higher in the most junior roles as a result of initiatives such as offering interviews to equal numbers of candidates based on their gender, to encourage more women to enter the sector. Though these initiatives will initially make employers’ Gender Pay figures worse, it will make a difference in the long term. The external scrutiny and fear of backlash from the publication of figures is actually driving some in this sector to publish their next set of figures early to avoid this.

Whilst many organisations in the Associations and Institutes sector are not subject to the Gender Pay Reporting legislation, employers are still looking at this due to the level of employee interest generated by media coverage. Employers are also conscious that they may be subject to the legislation in future if the threshold is lowered – there have been suggestions that organisations with 150 employees or more might have to report in the future. This suggests that the wider aims of the legislation to promote awareness around equality in the workplace is currently in motion. Maintaining momentum behind this initiative will be critical to the long-term diversity and inclusivity of organisations.

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